Forbes: California Legalized Selling Food Made At Home And Created Over A Thousand Local Businesses
A government official appears at a man’s door. The man has been breaking the law: He has sold bread baked at home.
This isn’t a page from Kafka—it happened to Mark Stambler in Los Angeles.
For decades, Stambler has followed traditional methods to bake loaves of French bread. The ingredients are simple: distilled water, sea salt, wild yeast and organic grains. Stambler even mills the grain himself. To make it easier to steam loaves, he built a wood-fired oven in his own backyard. Stambler’s loaves came in first place at the Los Angeles County Fair and the California State Fair.
Soon after that, Stambler got the idea to expand his hobby into a home business, which became Pagnol Boulanger. Word of mouth spread. In June 2011, The Los Angeles Times profiled Stambler and his bread in a full-page feature.
Mark Stambler (Photo by Dustin Hughes.)
Unlike his bread, that profile was bittersweet. He was busted the very next day. As he described it, the health department “descended like a ton of bricks on the two stores that were selling my bread…they could no longer sell my bread.”
An inspector from the health department even showed up at his doorstep to make sure “no bread baking was taking place.” For the next 18 months, Pagnol Boulanger was forced to go on hiatus.
That’s when he “became an activist,” Stambler said in an email interview.
He started researching other states’ cottage food laws, which allow homemade food to be sold. To qualify as a cottage food, it must be designated by the state as “non-potentially hazardous,” meaning it has a low risk of spreading bacteria.
Out of the blue, he got a call from his Assemblyman, Mike Gatto, who read The Los Angeles Times profile, and wanted to help him and other small businesses.
Stambler helped Assemblyman Gatto draft the California Homemade Food Act (AB 1616) to legalize cottage food. AB 1616 was overwhelmingly popular with lawmakers, passing the California State Assembly 60 to 16 and unanimously passing the state Senate in August 2012. Upon signing the bill, Gov. Jerry Brown praised AB 1616 as a way to “make it easier for people to do business in California.”
In January 2013, just a few days after the law went into effect, Stambler became the first person in Los Angeles County to sell homemade food legally. Since he’s re-started his business, he hasn’t received a single complaint from consumers.
More home bakers have followed. In Los Angeles County, there are almost 270 cottage food businesses. Statewide, over 1,200 homemade food businesses have been approved.
Under the California Homemade Food Act, local governments cannot ban cottage food businesses based in private homes. Instead, home-based entrepreneurs can sell their goods after passing a “food processor course” (which can be done online), properly labeling their goods and practicing common-sense sanitation when cooking and baking. Those who want to start their own cottage food business legally need only register or obtain a permit, as either a Class A or Class B operation.
The two permits distinguish between the types of cottage food business an entrepreneur may want to run. Class A businesses are exempt from routine inspections, but can only engage in “direct sales,” i.e., straight to the customer. That includes farmers’ markets, bake sales and from the home business itself. Meanwhile, Class B operations require inspections, but also allow “indirect sales” to third-party retailers, like restaurants, bakeries, delis, groceries and food trucks.
Both Class A and B businesses can directly sell throughout the entire state. Yet indirect sales are still limited to the county where the Class B operation is based.
Stambler predicts the act will help boost his sales in the long-run. “As of now, though, they’re not back to where they were before I was busted,” he said.
In California, bread, biscuits, candy, chocolates, churros, coffee, cookies, cupcakes, dried pasta, tortillas, trail mix, popcorn, vinegar, tea, nut butters, mustard, dried fruits and some jams and jellies all qualify as cottage food. But selling homemade food that contains meat, seafood or dairy is still verboten.
So far, cottage food businesses appear to be safe. A dozen county public health departments report they have yet to receive a single complaint about them. Nor did these departments have to revoke any permits. (Other county departments of public health either do not track that information or did not return comment.)
Not only can cottage food laws free entrepreneurs from Kafkaesque government inspections, using their own kitchens to bake means they no longer have to rent out commercial kitchens, which can be expensive and not available in every city.
Take Patricia Kline. Her “ipies,” mini fruit pies about the size of a cupcake, have been featured in O magazine and The Wall Street Journal. Yet before AB 1616 was enacted, Patricia was forced to pay $25 an hour to rent space from a commercial kitchen to bake them.
“The biggest barrier to starting a food business is finding and keeping a commercial kitchen,” she remarked. “And once you do have a kitchen, you have to compete with other food producers who also want to use the space.” In the middle of her busiest season, Kline once lost her spot at four different commercial kitchens.
But thanks to the cottage food law, she can instead use her own kitchen at her apartment in San Francisco, slashing her costs. She’s also gained “flexibility in baking:” “The law has enabled me to take advantage of last minute orders.”
In addition to whipping out ipies and cookies, Kline offers baking classes, helps guide other budding food artisans on legal compliance and donates a portion of her proceeds each year to the Alzheimer’s Association, since Alzheimer’s afflicted her mother.
Baylen Linnekin, executive director of the nonprofit Keep Food Legal, praised the law as a “tremendous success” for “unshackling small food entrepreneurs.” But other small business owners feel left out by the law.
One such owner is Debra Baretta, who runs a baking company, Mama Baretta, in Penngrove. She bakes gluten-free and organic cookies, breads and pastries and uses sites like the Non-GMO Project to source her ingredients. But California caps how much people can earn as a cottage food business. So by the time the law went into effect, Mama Baretta had already passed the sales cap. The law is “good if you don’t want to ever grow into a larger company,” she said in an interview.
In 2013, the cap was set at $35,000 in annual gross sales but rose to $45,000 for 2014. From 2015 onward, that number will rise and then top out at $50,000.
Since the cottage food law does not apply to Baretta, she still has to rent out a professional kitchen. Even though she bakes just two nights a week at a kitchen owned by a nonprofit, her rent is $2,200 a month. Baretta earned over $100,000 in revenue in last year but now growth has “pretty much stalled.”
So she recommends scrapping the cap entirely. According to a report by the Harvard Food Law & Policy Clinic, 20 states have no sales cap whatsoever on selling homemade food. That’s almost half of all states that have a cottage food law.
Then there are other reforms homemade food entrepreneurs want enacted. Kline would like to see the state expand indirect sales for the entire state (as direct sales currently are) and permit third-party delivery of cottage food products. Stambler has called for expanding the list of “non-potentially hazardous” approved foods. He also cannot use his backyard oven to bake bread he wants to sell, since the state law only applies to kitchens.
But as that Harvard study makes clear, California is still one of the better states for homemade food producers. On the opposite spectrum for cottage food freedom are states like Minnesota. The Land of 10,000 Lakes has one of the lowest sales caps on cottage food in the nation, banning people from selling more than $5,000 in a year. That’s less than $100 a week.
In addition, cottage food entrepreneurs in Minnesota can only sell at farmers’ markets and special events. Unlike California, online orders and indirect sales are banned. That greatly limits their growth. Renegade bakers can face fines of up to $7,500 or three months in jail.
Minnesota’s law is so restrictive, it triggered litigation. Last November, two home bakers in Minnesota teamed up with the Institute for Justice to sue their state for its “arbitrary and unreasonable” cottage food law.
“If you have a recipe and an oven, you should be able to start a business,” quipped Katelynn McBride, IJ attorney and lead counsel on the case.
The contrast between the two states is striking. By liberalizing its food regulations, California has fostered a cottage industry of cottage food.