Hi,
I could really use some advise from home bakers who sell to retail.
Here is the scoop....i don't have a business yet and have only been making cupcakes for friends and family on the side as a hobby. I don't even have any standard recipes yet. A good friend connected me with a well know and growing cookie place (they also do the decorating workshops for kids for parties and stuff). Anyways, they contacted me and are interested in building a cupcake division by having some cupcakes displayed/sold at their store and perhaps even add cupcakes to the childrens Bday decorating parties.
So, this is BIG stuff and as I said, I don't have a biz, no servesafe class or inspection and know that would be important to do first.
What should I be asking the owner in terms of how this arrangment would work and what I should require, and does this sound like a good thing to get in to? I would want to start small and slow and he is receptive to that. Please help guide me if you can!!

Well, the first thing that I would do is contact the Health Dept. Are home bakeries legal in your state? You would probably have to take a safeserv class. But you would need to get your kitchen inspected. Probably get your business name and business license.

It might be worth it to see if the cookie owner would let you use his kitchen. You would still need to get your own insurance. But it might be the easiest way, depending on your state laws regarding home bakeries.

Good luck! Keep working on those recipes!

All I can tell you is that is EXACTLY how I got caught by the HD without the proper license. (I had a license but not the correct one. The correct one required renovations to the kitchen.) The HD WILL, absolutely WILL want to know where those cupcakes came from.

Selling to the consumer is actually different that selling to someone who will resell. The consumer knows what they're getting. The shop's customer has every right to expect the food was made in an, inspected, licensed and (insured) kitchen.

I would be thinking this cookie shop has all the tools to make cupcakes, why are they contacting me. I could see them getting with you, at first having you supply the cupcakes, but they will eventually find out its cheaper to make them theirselves. See if they would be interested is renting you kitchen time to do the cupcakes, if thats the case get a contract.

Thanks for replying! They have been slammed with the cookie side of the house and haven't been able to focus on the cupcakes, so I think that is why they want to outsource it, but I need to find out more....Is it unreasonable to talk about hiring me as an employee to do the cupcakes there a few days per week as opposed to doing it from my home as my own business. This would be a great way to ease into the whole 'starting my own cupcake business' thing.

I don't know what the laws are where you live, but I agree you should make sure you have the correct license.

Where I am, I don't need a license to sell home prepared baked goods to consumers. But if I were to sell them to a business that would resell them, I would be considered a food processing plant, therefore requiring a license and inspected kitchen.

In my state, you can get licensed to sell from home, but only to direct consumers, not for resale. Make sure you check that with your HD, too. It sounds like working from their kitchen or as an employee might be a better way to go. Good luck with whatever you decide.

All the above statements are true about the HD. But you might also want to look into insurance and forming some sort of LLC. Several years back I had the same proposition (long story..didn't work out thankfully). Even if they allowed you to bake them in their shop you will still need all of these as protection. Setting up your cupcake business as a separate entity would protect your personal assets in the event that something went bonkers with the cookie people.

I talked to them and they are very open to any arrangement. Said I could put on consignment at their retail location or pay them comission for what sells or even use their facility as they have the equipment. I have NO idea what the best route would be. They also said they have all the licenses/HD stuff covered so I could probably be covered by them, but I live in a different town so not sure if I would still need to do anything?

As the others have recommended, I would still call the HD and verify that the cookie bakery has all of the licenses that are needed. It never hurts to double check. Also, definitely look into getting insurnace. I can't really help with what to do with the agreement, but I would go with whatever you feel most comfortable with. If you don't feel comfortable with any of it, I would see if you could do something else that would be comfortable to you. Best of luck to you, keep us updated!

They'll let you sell on consignment? Yes, I'll bet they will. What a fabulous arrangement for them and what a not-so-fabulous arrangement for you.

If you're selling on consignment then
1. You'd buy all the ingredients
2. do all the work
3. turn over all the product for them to sell

They would
1. sell the product
2. hopefully account for it properly
3. not eat the cupcakes themselves
4. or give away free samples
5. pay you a % of the sale
6. throw out the stales

They have complete access to your product, you have no control over sales, loss, or staling.

You're going to have to price really high to make this work.

Consignment selling works quite well for hard goods, as there are no free samples of clothing or eating by staff. I supposed that theft is always a possibility, as is shoddy accounting.

The problem with a consignment arrangement is that YOU take ALL the expense and risk, with only a HOPE of return.

If you're using their facility, and if they ever tell you what to make, how much to make or when to come in to make the cupcakes, you're an employee.

Sorry, but this has red flags all over it.

If they are open to any arrangement, then become an employee.

Keep in mind that even after you have your license you will be selling at a lower cost as your cupcakes will be selling for resale. I had the same experience not to long ago. A local retailer wanted my cakes; however, he wanted to buy them for nearly nothing. For me it wasn't worth it. I would have to travel quite a bit to deliver my cakes. The revenue wouldn't even cover for all of the expenses to make the cake or travel.... I understand this is normal for resale but if you are looking to make money it may be difficult for someone just starting out. HTH's and good luck. Let us know what you decide.

Thanks for your input; this is helpful! They said that after things progress, that they would certainly consider the 'being an employee' an option. Is there any other way to do this arrangement that is better than consignement if not an employee??

A straight resale arrangment would be better. That way, they share the risk.

Seriously, consignment is the WORST option for you.

get yourself licensed to work from home if it's possible and then sell the cupcakes to them at a regular price that you would sell to anyone else that orders and let them hike up the cost if they want to, that way.......if they buy 2 dozen on Monday and only sell 3 by Friday and have to throw all the rest away, they've made the investment NOT you! You still got paid for your work, if they really think the cupcakes will sell then there should be no problem right?

Maybe if they have a "standing order" of a certain number of cupcakes being made for them each week, then maybe you could offer them a "discounted price" based on the fact that they will always have an order with you each week.

Other than that, I would stick to my regular prices and let them adjust the price for resale!

I can't go to Sam's and tell them I'd like to only pay $10 for a bucket of icing vs. $30 because I'm "reselling" the icing.....I pay their price and then adjust MY prices to reflect that cost and still give ME a profit. That's what this place should be doing.

You sell them cupcakes for $1.00 each.....they sell them for $1.50 each.....everyone's happy!

Make sure you're legal to sell FIRST though!

I should clarify...the retail location is more for the decorating parties for kids and for people who pop in to place orders, so although they may want some to display onsite, it isn't like a walk in bakery...it would be to more market the cupcakes for the parties as well as for people placing orders for cupcake favors etc....so guaranteed orders for me pretty much. Does that change anything? Thanks guys for all your help and input...this is all totally new to me and I want to do it right