Thread: Food Business - Family Recipe

My mom has a food (bread product) that she always makes around the holidays. Everyone loves it, and people look forward to it every year because she gives it as gifts.

This is a family recipe and completely unique product that, to my knowledge, is not known by anyone outside of our family.

My question is, how would she go about turning this into a business venture?

My suggestion to her was to start selling it at Fresh Market Grocery Store (they have a local vendor program) and the Farmer's Market. She could continue to prepare and package the food as she has (out of her house) for this.

Long-term, I think she could sell this product to grocery stores as well as restaurants.

I don't know anything about the food distribution process, so I don't know what would come next. Any thoughts???

I don't know a whole lot from first hand experience but I would start by baking some and bring it to anybody that would purchase bread. Go to all of the restaurants, sandwhich shops, wholesale food distributors, and anybody else you can think of. Give them samples and see if they like it. I would also figure out your exact cost of productions as the food business has very tight margins and you want to make sure it can be profitable. Also I would try and figure out what your production capacity is to avoild signing a contract beyond your current capacity. If a large contract does fall into your lap you can always scale up but you do not want to grow to fast and compromise quality and consistentcy etc.

Also in order to be sold in grocery stores you are going to have to recieve government approval and meet their diatary lable requirments. I know this process can costs several thousand and take months to accomplish but is denfenitly doable.

Thanks Pete.

My next question was actually about government requirements... glad to see you started to address that.

I realize that to get in a grocery store would require dietary labels, etc. We would obviously hold off on this until we knew we had a marketable product.

Would there be any government requirements for me to sell to a restaurant?

I wonder if one is better than the other for scale, profit margins, etc, as far as restaurant vs grocery store/retail?

This product is something that you eat other food with - excellent with soup or sauce dishes. So, restaurants would be adding a small quantity to other food dishes. In grocery stores, it would be similar to a bag of chips - a much bigger quantity than you would expect to eat in 1 sitting.

I am not 100% and I will see if I can talk to a few people (one actually owns a commercial bakery) to find a deffinite answer.

I think there would be more scale in grocery stores but the magnitude would be better in a restaurant. Grocery stores will purchase in larger volume and can grow faster as they are often chaines that have large distribution networks capable of moving a lot of product. However, they opporate on a thin margin, have to deal with spoilage, and often have their own bakeries. To sell your bread to a grocer I would imagin it would have to have a shelf life beyond regular fresh baked bread as well as a good brand. Things like all organic or a great story or strong local following could be enough to tip the hat in your favor. Also you have to have labeling etc.

With restaurants, especially fine dining, there is a much higher emphasis on quality and freshness. This will often mean a restaurant will spend more money for a higher quality product demanding the best. More frequent deliveries and less necessity to have a large inventory also means you will not have to focus on shelf life in order to sell your product. I also believe it will be easier to get started delivering to restaurants. You will be able to sell to a restaurant easier as they do not have beurocratic purchasing structures, less gaurdians to pass through. Have less risk and cost associated with trying a new product. You will be better able to slowly grow the business until you reach a larger level. A grocery store could easily ask you for 1000 loaves delevered tomorrow and if you cannot meet that production requirment you are going to be introuble.

For restauarants I believe you will have to get some kind of food distribution license. In some states you can use your home kitchen as long as it passes health inspection and is up to code. If not look to lease and existing commercial kitchen during their off hours.

I will let you know if I think of anything else I forgot about

Thanks Pete - very helpful.

Does anyone know if you can patent a recipe? We could trade mark the name no problem, but it would be nice if we could have some legal protection over the recipe as well... Only my extended family knows the recipe, but would still be a nice form of insurance.

Also, with this being a unique product, I'm wondering if a restaurant might want to get exclusive rights.... Might be worth it if I could get it into a very successful local restaurant (which my area is known for).

Or what about licensing a recipe to a company? Does that happen?

So it turns out that the recipe was in a local recipe book, and is not quite the "family recipe" that I believed it was...

I had planned to copyright the name, but it was used before in this recipe book, so could I still copyright it???

Should I change the name instead?

I owned a commercial bakery that sold to all the largest foodservice distributors such as Sysco and US Foodservice-(6yr/$120million contract) and large retailers such as Kroger(2nd to walmart). I was in more upscale products w/ higher price points and margins. There is plenty of regulation in the food biz. Your state Department of Agriculture would be your regulator for your bakery. If you handle meat, then you'd fall under USDA(even more stringent).

You cannot patent a recipe but you can trademark a unique look of a product, and obviously brand names. That's why Coke and KFC hides their recipes

Before going forward, go to specialty local retail stores that might be interested. Ask them for 5 min of their time and tell them you have the best bread in the world. Bring a few loaves for the decision maker. Ask them their advice on getting into the business and how you might approach them and similar customers. They'll tell you about price points and margins. In-store bakeries generally run a 30-50% margin, meaning they'll double or triple your wholesale price and it has to be competitive. So go look at similar products and reverse the math. Remember that price is delivered to them and includes some marketing/promotional money so you'd have to back that cost out to see what you net.

Another great resource for you are food brokers, they are manufacturers reps. They represent all kinds of lines of food and call on all kinds of customers. Call one up and pick their brain about the business. They love to talk about what they do and you get free info.

I'd probably start at local farmers markets and build up a reputation for awesome bread, that could translate to getting into retail sales as you build up demand. Local high end restaurants even shop at farmers markets. Contact a local chapter of chef association, they often let people sponsor and donate products for their monthly meetings. Starting small will keep you more off the radar of regulators as well. Large retailers require much certification (independent inspections such as AIB and require HACCP plans) and programs (due to liability) in place so they are prohibitive as well.

One way to do it is approach a local commercial bakery to produce the product for you. Contract manufacturing is done all the time. There are plenty of bakeries that have capacity and everything in place, they are looking for business, even contract business to pay the light bill. If you are good at branding, unique good product ideas and aggressive w/ sales, you will command their attention.

Another overlooked segment that is easier to get into are caterers. They do corporate lunches/dinners, weddings, various events etc...So they can drive some volume out of the gate and buy direct from you.

Wowza, glad you found this thread commoncents! Thanks for all of your input, Speed+++.

In order to get into the local farmer's market, they have to come inspect your kitchen and give you a thumbs up, essentially. From what I hear it's pretty simple - just making sure it's sanitary. Booths are also pretty inexpensive, so I think this will be a good place to start out testing packaging, sizing, and prices.

This product would essentially replace a piece of bread that comes with a meal for certain types of dishes in restaurants. So I'm assuming they would expect the cost to be similar to what they would pay for that piece of bread - hopefully with a bit of a premium for the uniqueness.

Grocery stores run on pretty small margins, from what I hear, so I'm thinking that they would expect 20-25% gross margins.

Go door to door to find stores that are willing to carry your product. This will be the hardest part.

Watch a few episodes of "How I made my millions", they can all be found online. Quite a few food entrepreneurs in there.

As far as fastlane, bread is tough because it limits your distribution area because of perishable factor. I did all flash frozen stuff in spiral blast freezers and CO2 tunnels so I had plenty of shelf life and could ship nationally/internationally.

What you don't want to do long term is get into distributing yourself, that is a total bear and is notoriously low margin. But short term, its what I did to get started since distributors didn't take my product on right away, I built demand up first then handed off customers to a distributor.

Maybe look at par baked frozen gourmet breads where the customer could finish it off for a few minutes for the fresh baked appeal. That could be more scalable for you.

Other good accounts would be cruise boats/gambling boats and land casinos. I assume you have those in New Orleans. They are large enough accounts to buy direct from you. Good luck!