Flour Power

How Cottage Food Entrepreneurs Are Using Their Home Kitchens to Become Their Own Bosses

December 2017

Executive Summary

All across the country, thousands of Americans are making food at home to sell in their communities. Together, they form a small but growing industry—the homemade food, or “cottage food,” industry. Cottage foods fit within a larger trend, as consumers take greater interest in where their food comes from and who makes it.

In response to the growing interest in cottage foods, most states have adopted laws—“cottage food laws”—that allow the sale of homemade foods, subject to regulation. Some state cottage food laws are more restrictive than others, and it seems likely that at least some of these laws are hindering entrepreneurship. For example, some states dictate the types and quantities of foods that may be sold, where they may be sold, or even who may sell them. At the same time, there appears to be no rational link between many restrictions on cottage food sales and any legitimate government concern for public health and safety.

Despite the attention cottage foods have garnered from policymakers and the public, startlingly little is known about the people who make cottage foods or their businesses.

This study aims to change that. It surveyed 775 registered cottage food producers across 22 states, asking them who they are, what their businesses mean to them, and how they view their states’ cottage food laws. Key findings include:

  • Cottage foods provide an attractive avenue to entrepreneurship for women, particularly in rural areas. Producers are overwhelmingly female, are likely to reside in rural areas, and have below-average incomes.
  • Cottage food businesses are important to their owners. Producers report that they value the flexibility and financial support offered by their businesses. They also report enjoying the opportunity their businesses afford them to be creative while being their own bosses.
  • Some states’ cottage food laws may be hindering entrepreneurship. Producers are less likely to plan to expand their businesses if the government prohibits them from selling certain types of foods that they would otherwise like to sell.

Cottage food businesses enhance the financial and personal well-being of their owners while also providing in-demand products to willing customers. Given these benefits, as well as the lack of evidence that cottage foods pose a threat to the public in states where they are lightly regulated, many state cottage food laws are senselessly restrictive. States can and should take steps to encourage entrepreneurship by easing restrictions on cottage food producers.

Introduction

Kriss Marion owns a small farm and bed-and-breakfast in Blanchardville, Wisconsin. She makes bread and muffins to serve to her guests and to sell alongside her farm-grown vegetables at the local farmers’ market, which she co-founded. But until recently, it was against the law in Wisconsin for Kriss to sell even one homemade muffin—even though it was perfectly legal for her to serve those very same muffins to her bed-and-breakfast guests. When Kriss had muffins left over, she had to give them away or feed them to her pigs and chickens. That changed after Kriss joined with two other Wisconsin home bakers—Lisa Kivirist and Dela Ends—and the Institute for Justice (IJ) to challenge the home-baked good ban in court. They won when the trial court judge ruled the ban unconstitutional in May 2017.1

Kriss is just one of thousands of people across the country who make food at home to sell in their communities. Together, they form a small but growing industry—the “cottage food” industry.

Most states regulate this industry by way of “cottage food laws.” These are laws that make it legal for people to make food at home to sell at certain venues. State cottage food laws typically limit the types of foods that may be sold to those they deem “non-potentially hazardous,” which generally means foods that do not require refrigeration. Such items may include baked goods, “high-acid” canned goods (such as jams and pickles),2 popcorn, chocolates, syrups, honeys, dried herbs and a variety of other foods.

However, state cottage food laws are not all created equal: Some grant more freedom to cottage food producers than others. Some states allow the sale of all foods considered non-potentially hazardous, while other states allow the sale of only some such foods. For example, before Wisconsin’s home-baked good ban was overturned, people in the state could sell homemade jams, pickles, popcorn, maple syrup and raw apple cider, but not cookies or cakes.3 Yet home-baked goods are as safe as, or even safer than, these other items4 and can be sold legally in all but one other state. 5 State cottage food laws may also place limits on where or how much (in dollars or in units) people can sell. These laws may also impose other restrictions, such as barring non-farmers from selling cottage foods. And New Jersey, which has the most restrictive state cottage food laws in the nation, completely bans the sale of any homemade food (see “When It Comes to Holding Back Home Bakers, New Jersey Takes the Cake to read about how New Jersey’s home-baked good ban harms real people).6

Legal restrictions on cottage food sales likely hinder entrepreneurship in the industry, particularly when they impinge on the types of foods people can sell. However, to date it has been impossible to say with any certainty how such restrictions may be shaping this industry because very little is known about producers or their businesses.

This study aims to change that. It is the first comprehensive look at cottage food producers in the United States. Up to now, little systematic research has focused on the cottage food industry. This dearth of research likely stems from a lack of data, though the government collects information on home-based businesses more generally.7

The absence of data about the cottage food industry is not for lack of interest on the part of policymakers or the public. Several states have recently legalized cottage foods or liberalized their cottage food laws.8 And two states, North Dakota and Wyoming, have gone even further, adopting “food freedom laws,” which allow the virtually unrestricted sale of nearly all types of homemade foods directly to the consumer.9

At the same time, anecdotal evidence suggests the cottage food industry is growing. After Texas legalized cottage foods in 2011, producers formed at least 1,400 new businesses in one year alone. Similarly, California’s 2013 law legalizing cottage foods led to the creation of over 1,200 new businesses in just its first year. And since Minnesota eased its restrictive cottage food laws in 2015, more than 3,000 cottage food businesses have registered with the state.10

One possible reason for the cottage food industry’s apparent growth is that producers are responding to increasing consumer interest in where our food comes from and who makes it. As Wisconsin baker and pickler, and co-plaintiff in IJ’s challenge to Wisconsin’s ban on home-baked goods, Lisa Kivirist put it, “Making something and selling it to your neighbors is the oldest newest thing. … In our increasingly industrialized food world, when we don’t know where our food comes from, [purchasing cottage foods is] the ultimate opportunity to meet the producer.”11

And as states liberalize their cottage food laws, more of these home-based businesses are able to flourish. But—without a systematic look at the industry—policymakers are making laws governing this growing industry armed with little to no knowledge about the people and businesses that make it up.

Reported here are the results of a first-of-its-kind survey that asked cottage food producers a series of questions about who they are, what their businesses mean to them, and how they view their state’s cottage food laws. Key findings include:

  • Cottage food producers are overwhelmingly female, are likely to reside in rural areas, and have below-average incomes.
  • Cottage food producers value the flexibility and financial support offered by their businesses. They also enjoy the opportunity to be creative while being their own bosses.
  • Cottage food producers are less likely to plan to expand their businesses if the government prohibits them from selling certain types of foods that they would otherwise like to sell.

These findings suggest that cottage food businesses provide their owners with independence, as well as supplemental income. They also indicate that some restrictions on cottage foods may be stifling entrepreneurship.

The Legal Landscape of the Cottage Food Industry

Nearly every state allows cottage food businesses to operate by exempting certain homemade food operations from state laws that regulate commercial food establishments more generally. However, laws governing the cottage food industry vary widely. Cottage food regulations include, but are not limited to, caps on the dollar amount of cottage foods that may be sold, restrictions on the types of cottage foods that may be sold, restrictions on where cottage foods may be sold, and restrictions on who may sell cottage foods or on what ingredients producers may use to make them.

See Tables 1 and 2 for an analysis of the cottage food laws of all 50 states and the District of Columbia. This analysis was informed by Forrager.com—an online community of cottage food enthusiasts dedicated to helping people start their own cottage food businesses. (Unless stated otherwise, all sources for the legal analysis are Forrager.com.)12

Sales Caps

Twenty-seven states cap how much cottage food producers can sell. These caps range from as little as $5,000 for some producers in South Dakota and Wisconsin to $50,000 in several other states (see Table 1). Some states’ sales caps apply only in certain circumstances. For example, South Dakota’s $5,000 sales cap applies only to producers who sell baked goods directly from home.13 Those who instead sell from venues such as farmers’ markets or events face no sales cap but must submit each of their products for safety testing.14

Food Restrictions

Most states allow the sale of only “non-potentially hazardous” cottage foods like cookies, cakes, high-acid canned goods (e.g., jams and pickles), and other items that do not require refrigeration (see Table 1). However, some states also allow the sale of cottage foods that do require refrigeration, such as cheesecakes and cream-filled desserts, under certain conditions.

For instance, Iowa, Ohio, Oregon and Virginia have multi-tiered regulatory schemes that allow home-based producers to sell some perishable goods provided they follow more stringent regulations. In Iowa, producers can sell as much non-potentially hazardous cottage food as they would like out of their homes and at farmers’ markets with few restrictions. But if they want to sell perishable baked goods, they must obtain a “home food establishment” license from the government, undergo annual inspections and limit their sales to $20,000 per year.15 Ohio, Oregon and Virginia allow producers to sell some perishable products with no sales cap and at any venue if they submit to licensing and inspections; Virginia also requires food safety training in some cases.16

Such multi-tiered schemes give cottage food producers the option of jumping through additional regulatory hoops in exchange for more freedom in the kinds of foods they can sell. At the same time, they provide less onerous regulatory options for those who just want to sell certain cottage foods that do not need refrigeration.

North Dakota and Wyoming—the states with the freest homemade food laws—have legalized the home production and sale of nearly all foods (except for some meat products) without any sort of government license or inspection.17 North Dakota’s food freedom law is more restrictive than Wyoming’s in that it, among other things, prohibits online and phone sales.

Farmers Only

A few states place restrictions on who may sell cottage foods or on what ingredients they may use to make them. Kentucky, for example, allows people to sell cottage foods only if they are a farmer or else personally grew the main ingredients in the food.18 Rhode Island also limits the sale of cottage foods to farmers and requires that the main ingredients for jams, preserves, fruit pies and syrup be locally grown or harvested.19 In Ohio, if a person wants to sell homemade syrup or honey, 75 percent of the syrup or honey must have come from their own trees or hives.20

Venue Restrictions

Nearly every state allows people to sell cottage foods at farmers’ markets, and the majority of states also allow sales at roadside stands, community events and right from producers’ homes (see Table 2). And some states allow producers who submit to stricter requirements to sell from more venues, such as at retail stores or over the internet. However, Illinois, Maryland and Nebraska allow producers to sell their goods only at farmers’ markets, limiting opportunities to interact with customers.21 In places with particularly cold winters or where farmers’ markets otherwise operate only seasonally, such restrictions may mean that producers are effectively allowed to sell their goods only a few months out of the year. And bans on sales from the home effectively prohibit producers from taking custom orders for things like wedding or birthday cakes.

Other Regulations

Many states require cottage food producers to pay a fee and obtain a license or permit from the government or, barring that, register with the state, county or local department that regulates food production. A number of states also require producers to complete food handlers’ training.

Some states also require periodic health inspections of the home similar to those that restaurants must undergo or testing of the products themselves. Individual product testing, as South Dakota requires, could become costly for producers who make a wide variety of goods.22

Hawaii has no cottage food laws, which means that the sale of homemade food is not statutorily allowed in the Aloha State. However, it appears that the health department is currently allowing the limited sale of cottage foods through a temporary permitting scheme.23

In August 2017, Maine adopted a first-of-its-kind “food sovereignty law” that allows municipalities to regulate local food distribution as they see fit.24 Generally, food regulation is a top-down affair, with state governments setting standards by statute or regulation.

Why Restrict Cottage Foods?

Most food that is sold to the public is subject to extensive commercial licensing laws like those faced by restaurants and food wholesalers. Among other things, these laws require that food be prepared in a commercial-grade kitchen. Cottage food laws essentially create an exception for foods made in residential kitchens. Restrictions on homemade food sales may be driven by fear that homemade food could cause outbreaks of foodborne illness. 25

However, there appears to be little—if any—evidence to suggest that the types of cottage foods commonly deemed “non-potentially hazardous” pose health and safety risks to the public. Furthermore, the high degree of variation observed across states suggests that many cottage food regulations lack a rational link to public health and calls into question the need for regulating the industry so strictly.

There may be another motivation for some restrictions on cottage food sales: protectionism. In New Jersey and Wisconsin, for example, powerful lawmakers have fought to maintain barriers to cottage food entrepreneurship in order to shield brick-and-mortar bakeries and others from competition.

In New Jersey, the chair of the Senate Health, Human Services and Senior Citizens Committee has for years refused to bring legislation legalizing home baking up for a vote, even though the legislation enjoys bipartisan support and passed the Assembly unanimously.26 He argues that home baking sales would come “out of the bottom line of a small baker.”27

And before Wisconsin’s home-baked good ban was overturned, the state Assembly speaker repeatedly blocked legislation legalizing home baking, even though it was popular in the state and passed the Senate three times unanimously.28 The speaker told CBS Sunday Morning that he feared legalizing home baking would create an “unequal playing field and undermine” other small businesses.29 The speaker, who owns a commercial food business,30 has received the “Friend of Grocers” Award from the Wisconsin Grocers Association,31 which opposed the legislation.32

Also opposing the legislation was the Wisconsin Bakers Association (WBA). Even though the WBA sells over 400,000 homemade cream puffs—a food requiring refrigeration—at the state fair every year without a license under a non-profit exemption to the state’s food licensing laws, it argued that the home-baked good ban was necessary to protect the public.33

In IJ’s case on behalf of Wisconsin home bakers Kriss Marion, Lisa Kivirist and Dela Ends, the judge remarked on the unseemliness of the WBA’s behavior, observing that the Association can “use a carved out exemption to profit, and then use those profits to support efforts not to change [the state’s Food] Code.” This, he said, “speaks loudly to the level of special interests at play here. It gives great credence to the claims by the Plaintiffs of the force of economic protectionism at play here.”34

The judge went on to hold the baked-good ban unconstitutional. Of the judgment, IJ client Lisa said, “This is more than a win for us home-based bakers, it’s recognition for all small businesses that we have the right to earn an honest living and will not be stymied because of industry influence.”35 (See “Wisconsin Home Bakers Are Finally Free to Bake Their Cakes and Sell Them, Too” to read more about IJ’s fight to overturn Wisconsin’s home-baked good ban.)

It is not surprising that protectionism is at play in the cottage food industry given that a body of research into regulation more generally has found that economic regulation is often motivated by anticompetitive impulses. For example, legislatures often restrict entry into various professions by way of occupational licensing laws, which are frequently enacted at the request of industry insiders and their respective trade associations.36 With reduced competition, these insiders are able to charge more for their services.37

Table 1: Sales caps, allowed foods and farming requirements, by state

State Sales Capa Non-Refrigerated Baked Goods Other Non-Refrigerated Goods Refrigerated Goods Farmers Only
Alabama $20,000 Yes Yes No No
Alaska $25,000 Yes Yes No No
Arizona* None Yes Yes No No
Arkansas None Yes Yes No No
California – Type A* $50,000 Yes Yes No No
California – Type B* $50,000 Yes Yes No No
Colorado $10,000 per product Yes Yes No No
Connecticut $25,000 Yes Yes No No
Delaware* $25,000 Yes Yes No No
District of Columbia $25,000 Yes Yes No No
Florida $50,000 Yes Yes No No
Georgia* None Yes Yes No No
Hawaii No cottage food laws, although some sales appear to be permitted temporarily
Idaho None Yes Yes No No
Illinois* $36,000 Yes Yes No No
Indiana None Yes Yes No No
Iowa None Yes Yes No No
Iowa – Home Food Establishment* $20,000 Yes Yes Yes No
Kansas None Yes Yes No No
Kentucky* None Yes Yes No Yes
Kentucky – Microprocessors $35,000 No Yes No Yes
Louisiana $20,000 Yes Yes No No
Maine* None Yes Yes No No
Maryland $25,000 Yes Yes No No
Massachusetts* None Yes Yes No No
Michigan $20,000 Yes Yes No No
Minnesota* $18,000 Yes Yes No No
Mississippi $20,000 Yes Yes No No
Missouri $50,000 Yes Yes No No
Montana* None Yes Yes No No
Nebraska None Yes Yes No No
Nevada* $35,000 Yes Yes No No
New Hampshire $20,000 Yes Yes No No
New Hampshire – Homestead License* None Yes Yes No No
New Jersey Total ban on the sale of cottage foods
New Mexico None Yes Yes No No
New York* None Yes Yes No No
North Carolina* None Yes Yes No No
North Dakota None Yes Yes Yes No
Ohio None Yes Yes No No
Ohio – Home Bakery License* None Yes Yes Yes No
Oklahoma $20,000 Yes No No No
Oregon $20,000 Yes No No No
Oregon – Domestic Kitchen Bakeries* None Yes No Yes No
Oregon – Domestic Kitchen Processors* None Yes Yes Yes No
Pennsylvania* None Yes Yes No No
Rhode Island* None Yes Yes No Yes
South Carolina $15,000 Yes Yes No No
South Dakota None Yes Yes No No
South Dakota – Home Sales $5,000 Yes No No No
Tennessee None Yes Yes No No
Tennessee – Domestic Kitchen* 100 units of sale per week Yes Yes No No
Texas $50,000 Yes Yes No No
Utah* None Yes Yes No No
Vermont – Home Bakeries* None Yes No No No
Virginia None Yes Yes No No
Virginia – Home Food Processing Operations* None Yes Yes Yes No
Washington* $25,000 Yes Yes No No
West Virginia* None Yes Yes No No
Wisconsin – Baked Goods None Yes No No No
Wisconsin – Canned Goods $5,000 No Yes No No
Wyoming None Yes Yes No No
Wyoming – Food Freedom None Yes Yes Yes No
* Indicates that producers from this state and under this regulatory regime were included in the survey.
a Annual dollar amount, except where otherwise noted.
Note: Except where otherwise noted, this analysis was current as of October 2017. For additional information about the intricacies of states’ cottage food laws, see Appendix A.

 

Table 2: Venues where cottage foods may be sold, by state

State Farmers’ Markets Roadside Stands Community Events Home Online Restaurants Retail Stores
Alabama Yes Yes Yes Yes No No No
Alaska Yes Yes Yes Yes No No No
Arizona* Yes Yes Yes Yes Yes Yes Yes
Arkansas Yes No Yes Yes No No No
California – Type A* Yes Yes Yes Yes Yes No No
California – Type B* Yes Yes Yes Yes Yes Yes Yes
Colorado Yes Yes Yes Yes Yes No No
Connecticut Yes Yes Yes Yes No No No
Delaware* Yes Yes Yes Yes No No No
District of Columbia Yes No Yes No No No No
Florida Yes Yes Yes Yes Yes No No
Georgia* Yes Yes Yes Yes Yes No No
Hawaii No cottage food laws, although some sales appear to be permitted temporarily
Idaho Yes Yes Yes Yes Yes No No
Illinois* Yes No No No No No No
Indiana Yes Yes No No Yes No No
Iowa Yes No No Yes No No No
Iowa – Home Food Establishment* Yes Yes Yes Yes Yes Yes Yes
Kansas Yes Yes Yes No No No No
Kentucky* Yes Yes No Yes No No No
Kentucky – Microprocessors Yes Yes No Yes No No No
Louisiana Yes Yes Yes Yes Yes Yes Yes
Maine* Yes Yes Yes Yes Yes Yes Yes
Maryland Yes No No No No No No
Massachusetts* Yes Yes Yes Yes Yes Yes Yes
Michigan Yes Yes Yes Yes No No No
Minnesota* Yes No Yes Yes Yes No No
Mississippi Yes Yes Yes Yes No No No
Missouri Yes Yes Yes Yes Yes No No
Montana* Yes Yes Yes Yes No No No
Nebraska Yes No No No No No No
Nevada* Yes Yes Yes Yes No No No
New Hampshire Yes Yes No Yes No No No
New Hampshire – Homestead License* Yes Yes Yes Yes Yes Yes Yes
New Jersey Total ban on the sale of cottage foods
New Mexico Yes Yes Yes No No No No
New York* Yes Yes Yes No No No No
North Carolina* Yes Yes Yes Yes Yes Yes Yes
North Dakota Yes Yes Yes Yes No No No
Ohio Yes No Yes Yes Yes Yes Yes
Ohio – Home Bakery License* Yes Yes Yes Yes Yes Yes Yes
Oklahoma No No No Yes No No No
Oregon Yes Yes Yes Yes No No No
Oregon – Domestic Kitchen Bakeries* Yes Yes Yes Yes Yes Yes Yes
Oregon – Domestic Kitchen Processors* Yes Yes Yes Yes Yes Yes Yes
Pennsylvania* Yes Yes Yes Yes Yes Yes Yes
Rhode Island* Yes Yes Yes Yes No No Yes
South Carolina Yes Yes Yes Yes No No No
South Dakota Yes Yes Yes No Yes No No
South Dakota – Home Sales No No No Yes Yes No No
Tennessee Yes No Yes Yes No No No
Tennessee – Domestic Kitchen* Yes Yes Yes Yes Yes Yes Yes
Texas Yes Yes Yes Yes No No No
Utah* Yes Yes Yes Yes Yes Yes Yes
Vermont – Home Bakeries* Yes Yes Yes Yes Yes No No
Virginia Yes No No Yes No No No
Virginia – Home Food Processing Operations* Yes Yes Yes Yes Yes Yes Yes
Washington* Yes Yes Yes Yes No No No
West Virginia* Yes No Yes No No No No
Wisconsin – Baked Goods Yes Yes Yes Yes No No No
Wisconsin – Canned Goods Yes No Yes No No No No
Wyoming Yes Yes Yes Yes No No No
Wyoming – Food Freedom Yes Yes Yes Yes Yes No No
* Indicates that producers from this state and under this regulatory regime were included in the survey.
Note: Except where otherwise noted, this analysis was current as of October 2017. .For additional information about the intricacies of states’ cottage food laws, see Appendix A.

 

Methods

Survey

To better understand cottage food producers and the legal and regulatory hurdles they face across the country, I conducted an original survey of cottage food producers. I looked at cottage food producers across 25 states that require some form of registration with state, local or county government, because that registration enabled me to obtain the producer contact information required to conduct the survey (see Figure 1).38

Some of the states in the sample have multi-tiered regulatory schemes that do not require registration of producers who sell limited types or quantities of cottage foods or who sell at limited venues. In such cases, I examined only those producers who elected to operate in a tier requiring registration.

The results of this survey are therefore applicable only to cottage food producers residing in states with some form of registration requirement and, in states with multi-tiered schemes, only to producers operating in a registration-required tier (regimes under which producers in this study were registered are marked with an asterisk in Tables 1 and 2). Put differently, results do not apply to cottage food producers who are not required to register. They may have different demographic characteristics or business practices than indicated by this survey’s results.

WPA Intelligence was contracted to survey registered cottage food producers using a population of over 25,000 producers across 25 states. The result was a final sample of 775 producers in 22 states. The survey questioned producers about their background, what their cottage food business means to them and their finances, and how their states’ cottage food laws impact their businesses.

Legal Analysis

I also analyzed state cottage food laws to determine what kinds of regulatory burdens cottage food producers face and what effect those burdens might have on their businesses. To do this, I compiled and categorized states’ cottage food regulations, as displayed in Tables 1 and 2.

The legal analysis of state cottage food laws included the following categories:39

  • Caps on sales by cottage food businesses.
  • Foods allowed for sale, disaggregated across eight categories used by Forrager.com:
    • Baked goods that do not require refrigeration.
    • Confectionary goods, such as candies and chocolates.
    • Condiments, such as salsas, sauces, honey, syrups, pickles and relishes.
    • Dry goods, such as spices, herbs and teas.
    • Pastries that do not require refrigeration.
    • Preserves, jams and jellies.
    • Snacks, such as trail mix, granola and popcorn.
    • Foods that require refrigeration.
  • Venues where cottage foods may be sold, disaggregated across seven categories used by Forrager.com:
    • Farmers’ markets.
    • Roadside or produce stands.
    • Community events.
    • Directly from home.
    • Restaurants.
    • Retail stores.
    • Online or by phone.
  • Limitations on who may produce and sell cottage foods (e.g., farmers only).

To supplement the Forrager.com analysis, and to account for regulatory variation within states across counties or municipalities, producers were also surveyed on whether they encountered the following regulatory requirements:

  • Required food handlers’ training or other specialized training.
  • Home kitchen inspections.
  • Fees required to operate.

Statistical Analyses

I conducted statistical analyses to examine 1) the potential effect of various regulations on cottage food businesses’ annual sales and their owners’ annual incomes and 2) what effect those regulations might have on entrepreneurship, as measured by whether or not a producer reported plans to expand their business in the near future. To isolate the effects of regulations from other confounding factors, I controlled for numerous producer, business and legal characteristics, such as the types of food made and where food is sold, all of the previously mentioned legal and regulatory components, and personal details such as age, race, gender and education. For a full list of these variables, full details of the analyses, and complete results, see the Appendixes.

Results

This first-of-its-kind survey presents a clearer picture of who registered cottage food entrepreneurs are and what their businesses mean to them. The results also provide insight into how cottage food laws in the states surveyed can help these entrepreneurs achieve their business goals—or hinder them from realizing their potential.

Who are cottage food producers?

Cottage food producers are primarily women who live in rural areas, have below-average incomes, and operate their businesses as a supplemental occupation or hobby. These findings are consistent with prior research suggesting that home-based businesses in the rural Midwest are predominantly female-owned sole proprietorships.40

The cottage food industry provides an attractive avenue to entrepreneurship for women. While business ownership overall—and even home-based business ownership specifically—remains a male-dominated activity,41 cottage food producers are overwhelmingly female (see Figure 2).

Cottage food producers are more likely to live in rural communities, while the vast majority of Americans today live in urban or suburban neighborhoods (see Figure 3).42 One possible explanation for why cottage food producers are concentrated in rural areas is that farmers find cottage foods to be a natural complement to running a family farm. Alternatively, perhaps there is a greater need for locally produced foods in rural communities where there are fewer accessible brick-and-mortar bakeries and other food stores. Whatever the reason, this disproportionate rate is notable, as rural communities tend to fare worse than the rest of the nation on indicators of socioeconomic well-being.43

Cottage food producers report household incomes that are considerably lower than the national median.44 Likewise, producers who are retired report incomes lower than the median for people aged 65 and older.45 (See Figures 4 and 5.) Even a small amount of extra income from a cottage food business can be helpful to a lower-income household. At the very least, these businesses can serve as a self-sustaining hobby or creative outlet for people who would not otherwise have the disposable income to expend on such a pursuit.

Indeed, most cottage food producers do not run their businesses full time, but rather treat cottage foods as a supplementary occupation or hobby (see Figure 6). Producers tend to work full or part time at other jobs, be retired, or identify as homemakers (see Figure 7).

What do cottage food businesses look like?

Most cottage food businesses can be considered micro-enterprises. Producers do not employ anyone else, even part time, and they run their cottage food businesses when they are not working their main jobs or caring for their families. On average, producers spend 15 hours per week working on their businesses.

Typical earnings are quite small: median sales of $2,000 and median profits of just $500 in 2016. And these businesses require very little startup capital—a median of just $500—which more than 70 percent finance through personal savings.

But while the typical cottage food business is understandably quite modest, some cottage food businesses do develop into fairly sizable operations. As seen in Table 3, some producers do tens of thousands of dollars in annual sales. For these producers, caps on allowed annual sales may be real barriers to success. And in a few cases, producers may be unaware of or choose not to heed their states’ sales caps, risking fines or other penalties.

Table 3: Minimum and Maximum Dollar Amount Sold in 2016

State Minimum Sales Maximum Salesa Sales Capb
Arizona $0 $36,000 None
California $0 $49,000 $50,000
Georgia $0 $15,000 None
Iowa $0 $40,000 $20,000
Illinois $0 $15,000 $36,000
Kentucky $0 $25,000 None
Massachusetts $0 $40,000 None
Maine $0 $60,000 None
Minnesota $0 $60,000 $18,000
North Carolina $0 $55,000 None
New Hampshire $8,000 $30,000 None
Nevada $200 $4,000 $35,000
New York $0 $50,000 None
Ohio $200 $65,000 None
Oregon $0 $65,000 None
Pennsylvania $0 $43,000 None
Tennessee $0 $12,000 Nonec
Utah $0 $16,000 None
Virginia $0 $30,000 None
Vermont $0 $45,000 None
Washington $300 $16,000 $25,000
a This column does not display outliers who report having sold over one-half standard deviation more than the mean annual sales in the sample.
b In the case of states that have multi-tiered regulatory systems, the sales cap listed here applies to those producers who are required to register with the government and who are therefore captured in this survey.
c Tennessee does have a sales cap, but it is a limit on the number of units that may be sold each week—not on the dollar amount that may be sold. For this reason, no cap is reflected in this table.
Note: The sole respondent from West Virginia declined to answer the survey question regarding annual sales, so that state is not included in this table.

 

Most cottage food producers make baked goods and sell them at farmers’ markets (see Figures 8 and 9). This may be because every state in the sample allows home-baked goods that do not require refrigeration to be sold at farmers’ markets, even if they place other restrictions on cottage food sales.

What do cottage food businesses mean to their owners?

Despite the modest size of most cottage food businesses, these enterprises are nonetheless important to their owners. Cottage food production gives people the chance to be their own boss, as shown in Figure 10. It also provides them with flexibility and control over their schedules and, in many cases, financial independence.

These results fit with the research on home-based businesses more generally. For example, one study found that female home-based business operators’ primary motivation for going into business for themselves was to be their own boss. That same study also found that female home-based business operators’ primary reasons for running their business out of their home were the lower operational costs and the ability to “balance work and family.”46  The same is likely true for many cottage food producers given the value they place on flexibility.

And for some cottage food producers, running a business from home may be their only option. For example, Jane Astramecki, a home baker whom IJ represented in a successful challenge to Minnesota’s restrictions on the sale of cottage foods, started her home-based Jane Dough Bakery after sustaining a serious injury that made work outside the home impractical. Selling her homemade scones, cookies, cakes and jams became a way for her to earn money for her family while staying home with her kids.47

Indeed, although the earnings of most cottage food businesses are small, they are nevertheless important to the financial well-being of their owners’ households. The statistical analysis suggests that as annual cottage food sales increase, household income also increases.48 Many producers use their earnings to cover necessary household expenses, such as bills, food and clothing, and other essential spending, such as health care or housing (see Figure 11).

And the same appears to be true for home-based businesses more broadly, especially in the rural communities where most cottage food producers live. Research suggests that in lean economic times, home-based businesses can become an important way to supplement income.49 In recent years, rural communities have struggled to attract and retain well-paying jobs,50 despite the recent uptick in the national economy.51 The Wall Street Journal has gone so far as to declare America’s rural communities the new “inner city,” as poverty and crime rates continue to increase in these areas.52 In such an environment, the ability to use one’s own home to generate income by starting a business can be particularly valuable.

Beyond the flexibility and financial benefits they offer their owners, cottage food businesses can also offer other less tangible, but no less important, benefits. Cottage food producers also report being motivated to start their businesses by a desire to do something enjoyable with their spare time, to do something creative, to be their own bosses and to fulfill personal dreams.

Interestingly, given that many retirees are on fixed incomes and might be expected to particularly value the extra income, retirees appear to be less interested than non-retirees in the financial benefits of a cottage food business. Instead, retirees value filling their spare time with something enjoyable and creative and pursuing a cottage food business as a hobby. (See Figure 12.) By contrast, far fewer non-retirees see cottage food production as a hobby. For most non-retirees, cottage foods are a real business enterprise, whether a main occupation or a supplementary one.

What are cottage food producers’ plans for their businesses, and what factors might influence those plans?

More than a third of cottage food producers plan to expand their businesses in the near future. Some plan to open a brick-and-mortar business, but others plan to grow their businesses while continuing to operate them from the home (see Figure 13).

Several factors may influence whether cottage food producers plan to expand their businesses in the near future. For example, perhaps somewhat counterintuitively, hobbyists are more interested in expansion than those who consider cottage foods a supplemental occupation.53 Hobbyists also experience lower annual sales.54 These findings suggest that some producers who start out as hobbyists come to recognize the financial potential of their businesses and hope that expansion will make cottage foods a greater source of income for their households.

Other factors that may make a producer more likely to expand their business include:

  • Using a greater amount of startup capital.55
  • Planning to sell cottage foods further into the future. 56
  • Considering the cottage food business important to the household’s financial well-being. 57
  • Having a higher level of education. 58
  • Having children living at home. 59
  • Living in an urban or suburban area. 60

How do cottage food laws affect entrepreneurship?

Some cottage food regulations impose real restrictions on producers, while others appear to be less burdensome. Nearly half of cottage food producers want to sell some types of foods that their states prohibit, and of those people, most want to sell items that require refrigeration (see Figure 14). Most states prohibit the sale of such items, with the few exceptions being states like Iowa, Ohio, Oregon and Virginia, which have multi-tiered regulatory schemes, and North Dakota and Wyoming, which have broader food freedom laws.61

Laws restricting the types of foods producers may sell could be stifling entrepreneurship. Producers who want to sell prohibited foods are less likely to plan to expand their businesses,62 while producers who already sell foods that require refrigeration are more likely to plan to expand theirs.63

One possible explanation for this trend is that the ability to diversify product range is an important factor for the growth of a cottage food business. Another is that home-based businesses serve as an effective laboratory in which to test a business idea before investing in the commercial space and equipment necessary to run a brick-and-mortar business. Perhaps cottage food producers who are unable to pilot foods requiring refrigeration are unable to engage in the type of experimentation that encourages entrepreneurship.

Other cottage food regulations appear less burdensome in that they have little effect on plans to expand. Simple food safety training requirements do not appear to have a significant impact on cottage food businesses. The same is true of home inspections. Where required, they do not appear to affect a producer’s income or a business’s annual sales, nor do they appear to be a barrier to planning to expand a cottage food business. However, it is possible that restrictions on cottage foods have other effects that I was not able to measure, such as discouraging would-be entrepreneurs from starting a cottage food business in the first place.

Recommendations

The stark disparities in cottage food laws and the lack of evidence of threats to public safety in lightly regulated states suggest many of these regulations are unnecessary. At the same time, cottage food businesses promote greater financial well-being and independence for their owners. Legislatures could spur greater entrepreneurial activity if they would simply get out of the way. They can do so without sacrificing public safety in the following ways.

Expand the types of foods that producers can sell

Results presented here suggest a link between entrepreneurial activity and the freedom to produce different types of foods. To expand this freedom—and promote entrepreneurship—states should allow the virtually unrestricted sale of all non-potentially hazardous cottage foods, including baked goods, high-acid canned goods like jams and pickles, popcorn, chocolates, syrups, and honeys.

States should also consider allowing the sale of homemade foods requiring refrigeration. One approach is to adopt a multi-tiered regulatory scheme. Under such a scheme, producers could sell a wider variety of foods provided they complete food safety training or agree to home sanitation inspections—two regulations this study has found are not particularly burdensome for cottage food producers. A multi-tiered scheme can help assuage any concerns over food safety without overly burdening producers whose products pose less of a risk. Such schemes are already in use in Iowa, Ohio, Oregon and Virginia,64 and so far there appear to be no reports of foodborne illness outbreaks.

Another approach to expanding the types of homemade foods that people can sell is to adopt food freedom laws, which allow virtually all kinds of homemade foods to be sold directly to consumers, with relatively few restrictions. In recent years, both North Dakota and Wyoming have done just that, and so far there is no indication that these laws have had an ill effect on public health.65

Expand the types of venues where cottage foods can be sold

Some states limit cottage food producers to selling from farmers’ markets or prevent them from selling out of their homes. Not only is it unclear what legitimate government interest is served by such venue restrictions, but venue restrictions can be very burdensome for producers. Farmers’ markets require set days and hours of sale, cutting into the flexibility and convenience that inspire so many cottage food producers to go into business in the first place. In addition, fees to rent space at farmers’ markets and other community events can quickly add up, making it difficult for some producers to turn a profit. Not allowing producers to sell from home also effectively prevents producers from taking custom orders for things like wedding or birthday cakes. Allowing cottage foods to be sold directly out of the home can open up entrepreneurial opportunities to those of modest means while also providing the flexibility that home-based business owners value.66 States should allow producers to sell their products directly to consumers at any location they choose.

Remove restrictions that limit cottage food production to farmers or others able to grow the main ingredients in their products

Some states require cottage food producers to be farmers or to have grown the main ingredients in the foods they sell. Such restrictions serve no discernable purpose while leaving aspiring entrepreneurs unable to make a living. Take home baker Jennifer Lopez, for example. While living in Missouri, she sold homemade cakes to make ends meet. Just like many of the cottage food producers in this survey, she used the money to take care of her children and cover necessary household expenses. But when she moved across the border to Kentucky, her business became illegal because she is not a farmer. Lopez now risks landing herself in jail for selling cakes that are perfectly legal in Missouri, and that would be legal in Kentucky if she were a farmer.67

Lift or eliminate sales caps

While the majority of cottage food businesses are micro-enterprises, some do grow into sizable businesses generating tens of thousands of dollars in annual sales. States with sales caps should lift or eliminate them to allow these businesses more freedom to grow.

Conclusion

As consumers continue to take greater interest in where their food comes from and how it was made, and as more states begin to open up their cottage food laws, the cottage food industry continues to grow. The cottage food producers in this survey are part of that growth. Many of them said they plan to expand their businesses by adding new foods to their repertoire or by selling at new points of sale. Several even have plans to open brick-and-mortar stores. These businesses are important to the financial and personal well-being of their owners. They also bring value to their customers who want to buy tasty treats from their neighbors. States can, and should, take steps to encourage entrepreneurship by easing restrictions on cottage food producers.

Read the Appendixes.


    JOIN THE FIGHT!   Sign up for newsletters:

    JOIN THE FIGHT!