Starting a Home-Based Food Business in Iowa - ISU ...
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Starting a Home-Based
Food Business in Iowa
If you enjoy working with food and Conduct your own market research.
are known among family and friends Prepare samples and ask family,
for a special food item, starting a friends, neighbors, and strangers if
home-based food business may be they would purchase your product,
right for you. how much they would be willing to
pay for it, and how frequently they
Succeeding in business requires a would purchase it.
combination of having the right
product at the right time in the Contact a local restaurant or grocery
right place—plus hard work, good store to assess their interest and find
decision making, and a willingness out what requirements they have
to work with people. for vendors.
Good business skills also are Potential buyers of your product(s)
needed: ability to plan, organize, may require any or all of the
control, manage, and market. An following:
understanding of state licensing
requirements, zoning laws, insurance • product liability insurance
protection, income tax implications, (in case someone becomes ill
and other legal issues also is critical. from the product)
This publication provides basic • personal liability insurance
information about getting started (in case you are negligent)
and how to address essential
elements of a business plan. • automobile insurance (if your
vehicle is used to make deliveries)
Action Step 1:
Assess the Market • workers’ compensation (if you
The product you sell should fill a hire employees)
need (perhaps yet not identified as
a need). Look for gaps in product Determine your unique competitive
lines and consider ways you can fill advantage.
them. For example, could your • Are you selling a quality specialty
home-baked kringla be sold through food item (such as kringla)?
a local restaurant or grocery store?
• Is your product made from
Once you determine a possible only the highest quality premium
product, be sure you can consistently ingredients (such as seasonal pies
Start with the basics produce the same quality each time it made from fresh fruits)?
1. Assess the market is prepared. Standardized recipes are
2. Review regulations critical to ensure this consistency and • Is your product uniquely presented
to maintain cost control. (such as lattice pie crusts or extra
3. Estimate costs and revenue
large cookies)?
4. Market and merchandize
PM 1294 Revised February 2010
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Action Step 2: Exceptions to Home Food
Review Regulations Establishment License Requirements
Based on the type of food prepared, • Residences where food is prepared
food businesses in the home are subject to be used or sold by churches,
to various licensing and inspection fraternal societies, or charitable, civic
standards. Licenses are required for or nonprofit organizations are not
each of the different types of home- included.
based food businesses: • Residences which prepare or
• Home food establishment distribute honey, shell eggs, or
• Food service establishment (catering) nonhazardous baked goods are not
required to be licensed as home food
Making Salsa or • Retail food establishment
establishments.
BBQ Sauce? • Food processing plant
Processing of low-acid foods A food service establishment is
by retort canning or processing A home food establishment means a defined as an operation that stores,
of acidified foods is not allowed business on the premises of a residence prepares, packages, serves, and
by a home food establishment. in which prepared foods (bakery items provides food for human consumption.
only) are created for sale and the food Catering operations are considered a
These products must be is consumed off the premises. food service establishment.
commercially processed to
achieve and maintain Prepared food means soft pies, bakery • License fees are based upon the
commercial sterility under products with a custard or cream filling, annual gross food and beverage
conditions of non-refrigerated or any other potentially hazardous baked sales of the food establishment. For
storage and distribution. goods (requires refrigeration to 41°F or example, the current license fee for a
below after preparation). Prepared food food service establishment where food
Processing of these food does not mean nonhazardous baked is prepared or served for individual
products without the appropriate goods, including but not limited to breads, portions, intended for consumption
license is a violation of state fruit pies, cakes, or other nonhazardous on the premises, and with gross sales
law and the Federal Food, pastries. (See www.iowafoodsafety.org or of under $50,000 annually is $67.50.
Drug, and Cosmetic Act. www.dia.iowa.gov for more information.)
A food processing plant license A retail food establishment or a food
from the state is needed. • Annual gross sales of these products processing plant license is needed
cannot exceed $20,000. for home-based food businesses that
All processed foods sold to exceed $20,000 in sales annually.
restaurants, grocery stores, or • The license holder must maintain Both require a separate, self-contained
institutions (for example, salsa a record of sales and must make this food preparation area.
or BBQ sauce) must be processed record available when requested
in a state licensed food processing by the Department of Inspections • A retail food establishment sells
plant. See box on page 4 about and Appeals Food Safety Bureau food or food products intended for
meat and poultry products. representatives. preparation or consumption off the
premises. The majority of sales are
For more information, contact • The current license fee is $33.75 to consumers—not to other stores
the Department of Inspections annually and is renewable each year. or restaurants. A license fee for an
and Appeals: Any license not renewed after 60 days establishment with annual gross sales
of expiration will be posted closed of $20,000-$250,000 is currently
www.dia.iowa.gov and not reopened until a new license $101.25 annually.
(Click on inspections.) application is submitted and approved.
License fees are the same for an initial • A food processing plant is
license and a renewal license. a commercial operation that
manufactures, packages, and labels
• A home food establishment license food for human consumption but
is not transferable; if your operation does not provide food directly to
changes location, a new license is a consumer. The license fee for an
needed.
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establishment with annual gross sales products. (For more information,
of less than $50,000 is currently see “Buying Local Foods for Retail
$67.50 annually. Foodservices” PM 2047.)
Product Labeling Requirements • All food products and ingredients
Labeling helps establish your business should be stored in original
name and product recognition containers, or in a labeled container
as well as providing information that protects the integrity of the food.
about product ingredients. This is
particularly important for those who • Foods should be stored in protected
have food allergies. Labels on food areas at the correct temperatures
products sold in Iowa must include (less than 41°F for refrigerated foods Meat and Poultry
these facts: or above 135°F for hot foods away Products
• The common name of the product from contaminants). (For more
The production of meat and
information, see “Thermometer Use
poultry products offered for
• All ingredients in the food product, in Retail Food-service Establishments”
sale—or businesses that offer
listed in order or predominance by PM 2083.)
services such as custom
net weight
• The food preparation area should processing of livestock or
• The quantity of the package be self contained and separate from poultry—cannot be conducted
contents in terms of weight, measure, the family kitchen with no access by as home-based businesses.
or numerical count pets or other animals. A pest control Meat and poultry must be
program should be in place. processed and produced at
• The name and address of the
either a federally inspected
person(s) preparing the food • All facilities must have hot and
(USDA/FSIS) or state inspected
cold potable water plus restroom
• The use of common allergens (milk, (Iowa Department of Agriculture
facilities complete with hand washing
eggs, peanuts, tree nuts—almonds, and Land Stewardship [IDALS])
equipment and supplies.
pecans, walnuts), seafood, soybeans establishment or a retail facility
(not refined soybean oil), and wheat. • Separate sinks must be designated licensed by Iowa Department of
for hand washing, food preparation, Inspections and Appeals.
More stringent requirements must and cleaning purposes. This is not
be met for establishments involved Processing of meat and poultry
a requirement for operations with
in interstate commerce and if certain products without the appropriate
a home food establishment type
“health” or “nutrient content” claims license is a violation of state law
of license.
(such as low-fat) are made. and the Federal Wholesome
• All food utensils and equipment Meat Act and the Federal Poultry
Equipment and Training used in food preparation must be Products Inspection Act. A grant
Requirements cleaned and sanitized regularly of inspection from USDA/FSIS or
• Brand new kitchen equipment is not and properly. IDALS and/or a license from the
needed, but all food contact surfaces state is needed.
and equipment should be of material • All those who work with food
that is non-porous, easily cleaned, (preparation or service) must be free For more information on this
and approved for food contact (this from communicable diseases and type of business, contact the Meat
avoids any contamination or toxicity). keep themselves and their clothing and Poultry Bureau of the Iowa
clean. Hair should be restrained Department of Agriculture and
• All ingredients used in the food and hands washed frequently (For Land Stewardship (IDALS):
products must come from a licensed more information, see “SafeFood is
515-281-3338
or approved source except most YOUR Job—Health and Hygiene
www.iowaagriculture.gov/
fresh fruits and vegetables and honey. Tips for Food Handlers,” PM 1419
meatAndPoultryInspection.asp
Whole, uncut fruits and vegetables and “Glove Use in Retail Foodservice
and honey do not have licensing Establishments, PM 2070.)
requirements for vendors of these
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Action Step 3: Another consideration is sales volume. For More Information
Estimate Costs and Revenue Unless you are operating on an as- …about business management
No business succeeds without ordered basis, how likely is that you and marketing
balancing costs and revenue. Figuring will sell all of the prepared product?
both on the basis of unit of sales (for Obviously, this is an important Iowa Small Business
example one dozen cookies) is a consideration for perishable foods. Development Centers
useful method. www.iowasbdc.org
Action Step 4:
Iowa State University Extension
Costs include Market and Merchandize
Distribution Center
• food ingredients A market plan includes many
www.extension.iastate.edu/
elements, including promotion of
• labor costs (time invested in store
your products.
purchasing ingredients and in (Under Topic List, first select
preparing, packaging, and • Attractive merchandizing is “Community Economic Development”
important because many purchasing then select “Retail/Trade”)
delivering product)
decisions are based on the senses. Iowa State University
• liability protection An appealing appearance (package Pappajohn Center for
and display) and aroma (who can Entrepreneurship
• employment taxes and benefits
resist the smell of fresh baked bread?) www.isupjcenter.org
(if provided)
are powerful.
• equipment and facility investments …about food production and
• Letting people know about your food safety
• marketing and merchandising product can be as simple as telling a Iowa State University Extension
friend who tells a friend. Or, it can Food Safety Project
• delivery vehicle insurance and be a more sophisticated application www.iowafoodsafety.org
maintenance of the same concept. For example,
one restaurant owner targeted a soft Iowa State University Hotel
• utility costs Restaurant and Institution
opening to the hair stylists in his
town; they spread the word to their Management Extension
As an owner, you may be willing to
client base. Publicity also can involve www.extension.iastate.
invest in your business by not working
advertising through formal channels, edu/HRIM
for full pay. However, it is important to
truly assess all costs or inputs required such as paid newspaper ads and radio
to produce the product in order to or TV announcements. …about licensing requirements
ensure an adequate price point is set. Dept. of Inspections and Appeals
• For home-based businesses tapping
Food Bureau, Lucas Bldg.
Revenue estimates are based on into a niche market, one key feature is to
State Capitol, Des Moines, IA
product price and number of units tell your story. Distributing free samples
50319
sold. Pricing products is a critical with a business card to potential buyers
515/281-6538
step. Pricing too low means you may is another strategy. Work with economic
www.dia.iowa.gov
not recover all true production costs; development groups in your region
pricing too high may mean losing or other organizations that promote (Also check local city and
your market. small businesses. The important thing county offices)
is to decide what works best for your
One way to start is by investigating product and for you.
prices on comparable products. Will … and justice for all
Revised by Catherine Strohbehn, PhD, RD, CP-FS, The U.S. Department of Agriculture (USDA) prohibits
a similar price for your product cover HRIM extension specialist and Amy Casselman, FLM discrimination in all its programs and activities on the
your costs? If not, can you justify graduate student. Reviewed by Judy Harrison, Food and
Consumer Bureau Chief; Bob Haxton, Program Manager,
basis of race, color, national origin, gender, religion, age,
disability, political beliefs, sexual orientation, and marital
the premium value of your product Iowa Department of Inspections and Appeals; and Janis or family status. (Not all prohibited bases apply to all
Hochstetler, MS, HACCP and Labeling Coordinator Iowa programs.) Many materials can be made available in
so potential buyers are willing to Meat and Poultry Inspection, IDALS. Originally prepared alternative formats for ADA clients. To file a complaint of
pay more? For example, preliminary by Jim Huss, former extension specialist in hotel, discrimination, write USDA, Office of Civil Rights, Room
restaurant, institution management, and Robert Haxton, 326-W, Whitten Building, 14th and Independence Avenue,
research has found people will program manager, Iowa Department of Inspections and SW, Washington, DC 20250-9410 or call 202-720-5964
Appeals.
pay more for a known source of Issued in furtherance of Cooperative Extension work,
Acts of May 8 and June 30, 1914 in cooperation with the
ingredients, production practices and Support for this educational message is provided by U.S. Department of Agriculture. Jack M. Payne, director,
the Iowa Food Safety Task Force and the Iowa State Cooperative Extension Service, Iowa State University of
location, or as part of an experience. University Food Safety Project. Science and Technology, Ames, Iowa.
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