How to Start a Food Business – Turning Your Family Recipe Into Profits

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Have you created a cupcake that has other moms staring in amazement? Maybe you make a gluten-free banana bread that’s out of this world? Whether it’s a decadent dessert, a delicious jam made from your grandma’s best recipe or a healthy casserole for busy families, perhaps you’ve thought about creating your own food business.

If you’re daunted by the prospect, take some time to find out what’s required. As an entrepreneur who processes food, you must fulfill obligations and responsibilities governed by federal and provincial acts, statutes and regulations, as well as local by-laws.
Your business should be properly insured as well, so that any future problems, such as food-borne illness, don’t put you out of business. Consult the Insurance Bureau of Canada’s website for information on risk management.

Requirements for Food Premises

Check with your local health inspector for food premises requirements. For example, the Simcoe Muskoka District Health Unit carries out routine inspections of food premises in the Simcoe Muskoka area. Contact your city or town administration for local by-law requirements too.  Keep in mind that you cannot use your own home kitchen to make food products that you plan to sell to the public.  Food must be prepared in a separate inspected kitchen.

Local guidelines for food premises will outline requirements for hand-washing and utensil-washing sinks and commercial dishwashers. They will require adequate refrigeration and freezer space with accurate thermometers, as well as adequate dry food storage space and food containers. They will also outline lighting, wall-covering and flooring requirements. Look for guidelines about cleaning equipment, exhaust venting, bathrooms and storage space as well.

Draft a floor plan and layout of the proposed premises and submit it to the health inspector for review. Once your kitchen is ready, schedule an opening inspection with the health inspector.

Food Safety & Labelling Requirements

Food safety is top priority during all aspects of the manufacturing process. In addition to the design of your production facility, you must consider how you handle and store raw materials, ingredients, packaging and waste. Other considerations include proper use of equipment, training of employees, pest control, potential recalls and packing and label requirements.

Health Canada assesses and controls the nutritional value, quality and safety of food under the authority of the Food and Drugs Act. Nutritional labelling is now mandatory for most packaged foods. See the regulations here.  You can pay for nutritional testing for your food products through George Brown College or Guelph University.  The results of the testing can then be used included on the food label.

Because many foods contain ingredients or substances that can cause adverse or allergic reactions in some people, most prepackaged food must have a complete and accurate listing of ingredients. For information on food allergies and your responsibilities as a processor, see the Canadian Food Inspection Agency’s website.

Start Small

Once your product has been formulated and tested, provide product samples to friends and acquaintances to get word-of-mouth business going. Take your product to farmers’ markets to get more consumer feedback. Be aware that most farmers’ markets require vendors to be responsible for meeting health regulations. Bring your product to industry trade shows. Although they can be expensive, trade shows offer potential to establish a presence in the marketplace and generate sales.

Price it Right

Production costs shouldn’t be your only consideration when coming up with a price for your product. Use “target pricing.” Study the competition and your customers to identify a competitive price point. Then decide on a desired profit. Work backward to calculate the costs at which you must produce your product. Take into account the target profit margin, price reductions for retailers, costs of promotion and future distribution costs.

For detailed information about food manufacturing requirements in Canada, see this handy guide. It includes advice on selecting ingredients, labelling and packaging, promoting and pricing. Visit Canadian Manufacturing’s food pages for daily news related to the food industry.

The Small Business Enterprise Centre can help too! Contact us today.