Starting a Baking Business – It’s Not a Cakewalk

At least once a week we receive email here at TasteTO from someone wanting us to cover some small local food business. The majority of these appear to be bakery-type businesses selling cupcakes, cookies or custom-made cakes. The emails are often referrals from friends or customers, and sometimes come in the form of professionally-written press releases from the business owners themselves.

As we’re always looking to support local independent food artisans, we always check out these leads, and often find professionally-designed websites, gorgeous photos of even more beautiful products, and what appears to be really skillful bakers and artisans wanting to take their hobby to the next level. Unfortunately what we also almost always find is that these businesses are operating illegally out of a home kitchen.

That’s right, I said “illegally”. People who make food at home and sell it to the public are breaking the law, because it is completely and utterly illegal to sell food to the public that has been prepared in a home kitchen.

Things such as school bake sales, or one-off events for charity often fly under the radar of various government officials. Some people even get away with the occasional bout of holiday baking to sell to friends or co-workers. But once someone decides that they want to take this hobby to the next level and become a business – even a part-time one – the next step is not to order business cards, photograph the pretty cupcakes, or make a fancy website complete with order forms. No, the next step is to look into the various requirements necessary to run a business, and specifically a food business, because they are many, complicated, and potentially expensive.

The first step is to register the business name with the province and to get a provincial sales tax number. Some prepared foods require the charge and collection of provincial sales tax that the province will expect to be remitted on probably a quarterly basis. PST registration also allows small businesses to be exempt from paying sales tax on equipment and supplies, so it’s a smart thing to do right from the beginning.

Federal GST registration is not required for businesses with total annual revenues of under $30,000, but registering also allows small businesses to recoup some of the GST paid out on equipment and supplies against GST charged.

Food preparation businesses in Toronto, regardless of where the prep facility is owned or rented, are also required to be registered with the city.

When it comes to the business facilities, some food prep businesses can be run from a person’s home, but only if it is a space that is completely separate from the kitchen where the family’s meals are prepared. Local zoning by-laws may also apply in some cases, as well as leases and rental or condo agreements. This space needs to meet local guidelines regarding food storage facilities, entrances, appropriate sinks for handwashing and dishwashing as well as appropriate material for floors, counters, etc. These spaces must be registered with the City to allow health officials to regularly inspect the premises.

Why is the City so adamant about food for sale not being prepared in a personal/family kitchen? Home kitchens have pets and people who are not part of the business wandering through at regular intervals. As an example, with two dogs and a cat, I can be pretty sure that I’m eating some pet hair every day, despite doing my best to keep my kitchen spotlessly clean. That’s (sort of) okay if it’s your own pet, but it’s really not cool (or sanitary) to expect someone to spend a lot of money on custom-made cupcakes only to find cat hair  – or worse if you happen to let Whiskers up on the counters – in the frosting.

A better choice than spending thousands of dollars to renovate a space in an existing home into an industrial kitchen is to rent industrial kitchen space. There are a variety of these available in the city at various price points. Foodshare’s Toronto Kitchen Incubator offers industrial kitchen space in their location at Bloor and Dufferin, and even offers workshops on how to start a food business. The Toronto Food Business Incubator in North York goes even further and offers not just kitchen facilities but support in creating business plans and principles, shared liability insurance and more. For food businesses ready to start cooking right away, The Friendly Kitchen rents their space by the hour.

Next up (oh, we’re not done yet!),the City of Toronto requires all food preparation businesses to have at least one person on site who has completed the Food Handler’s Certification course. This is a basic one-day safety and sanitation course with a written exam at the end of the day and applies to everyone, even the smallest one-person business, who prepares and sells food.

Finally, insurance. Businesses based out of a home should check with their insurance issuers – most home insurance plans are based on a standard amount of usage for kitchen facilities. Adding a business-specific food prep workspace (or even illegally cooking for profit from a family kitchen) may void many insurance policies. Some insurance policies may even become void simply by having business materials or stock in a private home (back when I ran a record label, I had a terrible time getting tenant’s insurance because the insurance companies didn’t want to cover my merchandise). And of course, liability insurance for a food prep business is just basic common sense.

There are plenty of resources available for people looking to start up a small food-based business. Enterprise Toronto is a great place to start, as they clearly list all the necessary registrations and licenses required. The Canada-Ontario Business Service Centre also has info on federal and provincial by-laws.

Yeah, I know, I’ve completely sucked all the fun and enjoyment out of baking and selling those lovely cupcakes and cookies. But a home based business is a business first and foremost and must adhere to the standards of the region in which it exists.

So before you start designing websites or planning marketing initiatives or (OMG what are you thinking???) soliciting customers via Craigslist or your personal but widely-read blog, and definitely before you start sending press releases to media outlets asking for coverage, make sure that you’ve got all your bases covered and that you’re running your business in an honest and legal manner. At which point, please do send us a press release or a link to your website. Once we know we’re not going to get some small home-based business busted by accidentally sending the health inspectors to your door, we’re happy to write about your indie food business here on our site.