Starting a Home Cake-Decorating Business
Whether you want to supplement your income by decorating and selling cakes in your spare time or plan on making it into a career, starting a home cake business is a great way to use your skills and creativity to make some money. Historically, it has been difficult for people to legally sell food out of their home kitchens, but in recent years many states have worked to change the laws to accommodate home food businesses. While laws vary by locality, this guide can give you the information to help you get started making money off your cake-decorating hobby.
Table of Contents
- Laws and Permits
- Trademark and Copyright Law
- Products and Pricing
- Marketing and Networking
Laws and Permits
Until recently, any food that was to be sold to the public had to be made in a commercial kitchen, with no exceptions. This led to many people decorating cakes and selling them 'under the table', which provided no legal protections to the baker or the consumer. Luckily, most states now have what are called cottage food laws, which allow people to produce certain food items for sale in their home kitchens, often without licensing or inspections. Currently every state except for Hawaii and New Jersey has cottage food laws, though some states are more restrictive than others, with Wisconsin and Oklahoma having very tight restrictions on what is allowed.1
Because each state's requirements and restrictions for cottage food sales vary, you will need to do your research when considering starting a home cake decorating business to see what your local laws are. You might encounter some of these common laws:
- Most cottage food laws will specify what types of food you can make, usually determined by the risk level associated with the food type. For example, items that require refrigeration are less likely to be allowed.
- Cottage food laws will also tell you where you can sell your wares. Most states do not allow wholesale sales to retailers or restaurants, but they may or may not allow sales directly from your home, at a flea market or farmer's market, or online.
- Some states require that any home producing the food be pet-free. Others may only require that pets are not allowed in the kitchen.
- You may be required to complete a food handling course
- Your kitchen may need to be inspected, or your food may need to be sent to a lab for testing.
- Some states do not require any registration at all, but in those that do, a registration fee may be charged.
- All cottage food laws require a disclaimer somewhere on the labeling that the item was made in a home kitchen.
- Cottage food laws are only applicable to businesses that make under a certain amount of money, an amount that varies by state between $15,000 and $50,000 a year. Be sure to know what your state's limit is so you can know when you need to begin planning for a commercial kitchen.2
Another option, if you have the capital for it, is to build a commercial kitchen onto your home. This will, of course, cost more than using your home kitchen, but can open up options for larger-scale production. It can also enable you to get your business started in states where cottage food laws are non-existent or are too restrictive to allow you to work out of your existing kitchen.
Whether you will be taking advantage of cottage food laws or building a commercial kitchen onto your home to start your home bakery business, zoning will need to be considered in your planning. Contact your local zoning board to see if you are legally allowed to start a home business where you live. If you rent, you may encounter an added layer of difficulty, as your landlord will need to approve your plans to begin making and selling food out of the property they own, as well as any alterations you may need to make to the property.
Once you have a plan for how you will produce your cakes, you will need to register your business, which will usually require filing for a 'Doing Business As' (DBA) name, as well as a retail sales tax license. Sales tax laws can vary not only by state, but by county and city, so contact your local Department of Revenue or similar regulatory agency to ask where to start.
As with any business, you must consider how you will protect your assets from damage and yourself from litigation. While your kitchen appliances may be covered by your homeowner's insurance, you may wish to cover them with additional property insurance that can be adjusted to cover the pieces at their current or replacement value. If you will deliver products to your customers or transport items to and from markets, you may want to consider inland marine insurance, in addition to the insurance you already have on your vehicle. Inland marine insurance covers the cost of goods and property in transit, which may include the food itself, cake stands, displays, tables, and signage.
General liability insurance is arguably the most important kind of policy to have when starting your business. This type of policy can protect you and your business if a customer files a liability lawsuit against you, and will usually cover attorney's fees, court costs, and any damages awarded. These expenses can add up quickly and can easily bankrupt a small business, which means liability insurance is one of the best investments you can make.3
It may seem odd to think about labeling when discussing cakes, but in some instances it is required to stay on the right side of the law. Federal law exempts most home bakery owners from worrying about labels – the FDA requires no labels from businesses with fewer than 100 employees and fewer than 100,000 sales a year.4 However, labeling regulations under cottage food laws are often more strict and it is important to know the laws for your area to avoid running afoul of your local health department.
All cottage food laws require a disclaimer on the final product that states that it was made in a home kitchen. However, if you are selling at a market, some states allow you to post a single notice at your booth or table instead. Additionally, if you make any nutritional claims about your product (such as 'sugar-free' or 'low fat'), a label will be required by federal law. The FDA Food Labeling Guide can help you determine what your label should include if one is required.
Trademark and Copyright Law
First and foremost, recipes are not protected by copyright law.5 This means that if your business is built on a secret family recipe, be sure to keep it secret, as there are no legal protections in place to prevent your competition from using the same recipe if they can get their hands on it. This also means that you are not obligated to alter any recipes you find online to make them 'your own', though, of course, you may feel free to do so.
A sticky legal problem that nearly every cake business owner will run into eventually is the use of trademarked or copyrighted characters. Trademarked characters are popular on children's birthday cakes, but these characters cannot legally be put on a cake unless you have permission from the company that owns the rights to that character. It can be tempting to ignore these laws, but the fines if you are caught range from $750 to $150,000, not to mention the expensive lawsuits that could be filed by the company. In most cases, you can use toys or cake toppers on a cake, giving you a way to design and sell cakes incorporating these characters without breaking any trademark or copyright laws.
Products and Pricing
Even if you have been making cakes for family and friends for years, developing a menu to offer to the public can be a difficult task. While you may be creating a cake decorating business, an important aspect of that is the cake itself – a beautifully decorated product isn't going to sell well if the cake inside is dry or bland. While in some baking circles there is a stigma attached to using a boxed cake mix, many bakers save time by developing their own recipes using box mixes. Experiment with different recipes and flavors until you have a list of cakes you are confident in offering to your customers.
If you have been decorating for years, you may not require classes or feel like you need certifications, but brushing up on your skills is never a bad thing. Companies such as Wilton offer cake decorating classes for all levels, and online tutorials are a great way to learn new techniques and develop your skills further. Even before you start offering your cakes for sale, it is a good idea to take photos of every cake you make, even practice cakes, to ensure you have a good portfolio for when you are ready to start selling.
Once you have decided what types of cake to offer, you're ready for your next big hurdle: pricing. Unfortunately, there is no industry-standard for pricing and you will need to do some research in your area to see what custom-made cakes sell for. It is important to not take grocery store cakes into consideration when comparing prices; those are mass-produced, while yours are made individually for each customer. Call local independent bakeries to see what they charge for several standard-sized cakes, and consider your target demographic when setting your prices. Cake prices are often determined by how many servings the cake will provide, but another option is to charge the base price of your ingredients plus a certain amount. Depending on the amount of time each takes you, you may also wish to have separate pricing schemes for fondant and buttercream cakes. If you will deliver your cakes, you will need to decide if the price for that service will be built into each cake price, or if there will be a separate charge for those services.
Whether you end up working out of your home kitchen or building a commercial kitchen onto your home, you will need some basic supplies to bake and decorate cakes. Having the right supplies can make baking and decorating easier, as well as help you stay on the right side of your local cottage food laws.
- Storage containers allow you to store ingredients while keeping them easily accessible. Some ingredient bins meant for dry ingredients come on casters and have scoops to make removing product easy, and some have a first-in-first-out barrier to help you keep your ingredients fresh. Some cottage food laws require you to store ingredients for your business separate from your personal ingredients, which is something to keep in mind when planning your food storage.
- Anti-fatigue mats can make the long hours you spend standing in your kitchen a little more comfortable, while helping prevent back and leg pain.
- Finding the right mixer can make your prep work go smoothly.
- Have a selection of cake pan sizes and shapes at your disposal to help you fulfill customer requests.
- Mixing bowls, measuring cups, sifters, and whisks are all basic tools you should have ready before baking.
- Pastry tubes and bags are a necessity for any professionally-decorated cake. Find a set of cake decorating tips that will cover the basics, or put together your own custom set by buying individual pieces.
- Prevent burns with heat-resistant oven mitts.
- Food prep gloves can help you follow all food handling regulations and keep your customers safe.
- An apron will help protect your clothing and keep messes to a minimum.
- Cake stands can provide a way for you to display and transport your finished products.
Marketing and Networking
While many home cake decorators rely mainly on word of mouth, marketing can really help you establish a foothold in your community. Make use of social media and consider advertising in local newspapers or magazines. If your local cottage food laws allow it, you may also want to consider selling small cakes and cupcakes at farmer's markets and flea markets, to supplement your income and help introduce your products to more people in the community.
As a cake decorator, you are also entering an industry that benefits greatly from networking. Party planners, wedding coordinators, florists, photographers, and anyone else who works in the event industry are great people to get to know and work with. Offer display cakes to photographers for photoshoots – this results in publicity for you and better photographs for them. Getting to know these professionals can result in referrals and help you know whom to recommend to your customers as well.
1. Cottage Food Laws. Forrager Cottage Food Community. Accessed February 2016.
2. Cottage Food Laws in the United States. Harvard Blogs. Accessed February 2016.
3. Key Insurance Coverage for Home-Based Baking Businesses. Insureon. Accessed February 2016.
4. Small Business Nutrition Labeling Exemption. FDA. Accessed February 2016.
5. Recipes. United States Copyright Office. Accessed February 2016.