If you plan on selling hot sauce in stores or on a large commercial scale than there are several things you need to know in order to follow the proper recipe protection, health guidelines and marketing tactics, without the threat of operations getting shut down or the possibility of fines. You do not need a team of costly lawyers and accountants but there are three very important processes to understand about the legal aspects of selling hot sauce.
If you want to sell your brand of hot sauce there are several common principles that need to be followed to ensure you are making, selling and marketing your hot sauce without running into legal issues that could shut down business. There are many ways to Make and Grow Money…and the hot sauce business is a HOT one!
Protect your recipe with a trade secret, find a commercial kitchen to make sauce or register a manufacturing facility with the FDA and label sauce without any misconception or mislabeling. This will require local regulations and inspection in the state and county that you live in to obtain a license to sell sauce across the country.
Make a great hot sauce (product) and protect it
The only thing “legal” you need to understand about making hot sauce is if you are using someone else’s recipe (there is no copyright law to protect recipes) and what you are going to do with it. You can steal it…but don’t. It is unethical and their sauce will most likely be better than yours if they are a successful manufacturer of sauce. If you have a recipe from another hot sauce manufacturer (they are kind of publicly known) you shouldn’t use it to sell your own sauce. Your sauce should be original. If you own a great recipe…its time to sell and increase profit with THE REVENUE TRACKER! but also make you are protecting the recipe. Need a recipe? Get 50 great Hot Sauce Recipes here!
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4 Steps To Becoming A Hot Sauce Entrepreneur…The future of hot sauce depends on you!
Be original, invent your own hot sauce recipe. It’s the process that is just as important as the ingredients and recipe. This process is called a “Trade Secret” and it will hold up better in court than not having one if your hot sauce recipe is being used by a competitor. Manufacturers of hot sauce that use complex process like fermentation, formulas or processes will precisely document the process and will usually have any employees sign off on their secrecy, literally. These files are then kept under a lock and key so the “secret” is not exposed. If you are still experimenting with hot sauce recipes get the Hot Sauce Recipe Workbook that includes a Trade Secret Checklist.
Document your hot sauce recipe
If you have a special sauce…document everything. If you have a sauce that you make from a recipe you have held onto in your head document it as your Trade Secret on an electronic file, PDF, Excel spreadsheet or Word doc. A trade secret will hold up in court as a legal document only if you precisely log the process your hot sauce undergoes during production. According to nolo.com the Trade Secret needs to follow two principles:
- The manner in which the hot sauce is made gives it a competitive advantage.
- The process or information used to make the hot sauce is done in secrecy.
You may think that doing this will give someone a better chance of getting hold of the recipe and duplicating it but it is this documented process that verifies it is yours. Take these important steps when you have finally perfected your sauce and find a great establishment to mass produce it.
The United States Patented and Trademark Office (USPTO) has lots of additional information of protecting a Trade Secret. This office will also handle the registration of a Trademark but that is not necessarily related to your recipe. A Trademark protects your logo or phase used in marketing. Search the Trademark Electronic Search System (TESS) to find if your logo is unique.
There is another process of protecting your hot sauce recipe and that is with a patent. It could be difficult, time consuming and costly to patent a recipe but it can be done. Read 3 Ways To Protect a Hot Sauce Recipe. Once you have legally protected your hot sauce recipe it is now time to find a location to produce it.
Keep track of you hot sauce creations
Creating hot sauce in the kitchen can be a science and if you don’t carefully document your creations…a great hot sauce recipe can be lost and forgotten forever. I am always experimenting with different recipes to create an original hot sauce and often fail to log what I have done. Now! I have created and use the Hot Sauce Recipe Worksheet to record and file all of my recipes. Download the Hot Sauce Recipe Worksheet for FREE. Now that you have managed all your great hot sauce recipes it’s time to mass produce them.
Update! 7/14/21! Now a fillable PDF!
Find a kitchen to make sauce on a commercial or semi commercial scale
The difficulties of understanding the legal implications of registering a kitchen, either in your home or commercially, are that laws, regulations and inspections by the department of health are different from state to state. These policies may also be different between counties within the state and will certainly be different between each country. Working from home is convenient and less expensive than renting or leasing kitchen space but some of these smaller kitchens, which would be less expensive for a start up business, may not provide for a large scale operation and may not qualify per local jurisdictions.
Find and set up a kitchen for commercial operations
Some local authorities may restrict the use of a home kitchens on a commercial scale so you may need to find some other options like sharing or renting. Regulations such as Article 20-C Food Processor Establishment License (NYS) require the kitchen space or any area where processing and other food manufacturing takes place to be licensed. This could be a long and costly process and will put a lot of the legal responsibilities on you. Read below on renting or sharing kitchens to bypass some of these regulations.
Some facilities may be exempt from the need to apply for this type of permit if food is processed in the home. This exemption is called a Home Processor Exemption and it usually pertains to those selling at farmers markets, craft fairs or farm stands and not someone who wants to sell hot sauce in stores at the commercial level.
Article 20-C Licensing
Article 20 C Licencing is an application that is supplied by the Department of Agriculture and markets (NYS) to regulate facilities where food is processed. This link is the form that will need to be filled out and there is no fee for a first time applicant in a Kitchen Incubator Establishment or shared kitchen (more on this below).
The National Association of State Departments of Agriculture (NASDA) can help you locate the Department of Agriculture in your jurisdiction. They have a state directory for all 50 states in the US through this link where you can find out about the licensing requirements that you may need to register or licence a kitchen in your area.
Find your local health department to get your kitchen inspected
This is one of the most important steps to abide by if you plan on entering the hot sauce market if you already own or rent an established kitchen.
Because this information is different from state to state or within every county within that state, it is difficult to acknowledge exact information in this article. Because these site are different from each other and overloaded with information, it may be difficult to navigate through to find the information that pertains to you.
Here is a link that will give you contact for local health officials in your state. Email your questions to the contact in the state in which you will be manufacturing the food. The Directory of State and Local Officials will direct you to a local official who will usually be under the title of Agriculture and Markets.
This site will prompt you to a directory of names with the contact information. The far-left column will give you the areas that they govern. Copy the email on the far right and then send a form letter. You will most likely get a return e mail without the direct answer but it will include other pertinent contact information.
Your kitchen will have to pass inspection
Nacho.org (National Association of County Health Officials) has links to health inspectors in every state in the US. I found the local health department in my county in just a few minutes. They will usually have an phone number and e mail contact number.
Home Processor Exception
These foods are packaged in your home and are to be sold only in your state (at least that is what my state says). See below for a Home Processor Exception in your state. In my state of NY hot sauce falls under the prohibited foods to be manufactured and sold under a Home Processor Exemption therefore a licensed facility is needed.
Guide To The Hot Sauce Business
Incubator Kitchen or Leased Commercial Kitchen
Incubator kitchen (shared kitchen)
Aside from the requirements below, a basic commercial kitchen will have some equipment, utensils, storage and work space. If you have been making hot sauce for any length of time this will obvious to you. There are many regulations, inspections and associated cost with obtaining and running a commercial kitchen on your own. One way to buy pass some of the legal requirements is to rent kitchen space from an establishment that has the permits and inspections already obtained. These are called “incubator” kitchen.
If you are not ready to invest in the real estate of owning a commercial kitchen than you need a kitchen either owned, rented, leased or shared. The form in the example above calls a “shared kitchen” an Kitchen Incubator Food Processing Establishment. This will allow you to bypass many of the legal implications of owning your own kitchen and will shift it to another owner. Although there may often be contractual agreements such as a lease. Many kitchens function like this and may have several processed foods using some of the same equipment but this is a common occurrence for a start up hot sauce business.
Aside from the requirements below, a basic commercial kitchen will have some basic equipment, utensils, storage and work space. If you have been making hot sauce for any length of time this will obvious to you.
If you are new or inexperienced at making hot sauce than here is a list of items you may require to make and store your hot sauce in a shared kitchen space or incubator kitchen. This is not a complete list of what a commercial kitchen needs. Make a list similar to the one below to define exactly what your needs would be for a incubator kitchen.
- Hot / cold water
- Hours of availability
- Space for commercial blender or use of a blender
- Storage for peppers
- Counter top space
- Cleaning products
- Storage for your bottled sauce
- Basic utensils
- Containers for mixing
- Large cooking pots
- Walk in cooler
Use an existing kitchen
Some of the same items above may be desired if you are renting kitchen space but more often than not will not be available. The use of specific items can be determined between you and the owner of the space.
Rent kitchen space
Renting kitchen space that has already passed all inspections is a great option for someone entering the hot sauce business. Renting space may not provide some of the same amenities such as the use of equipment like an incubator kitchen may. The Kitchen Door is a service the can introduce you to local kitchens. I found one in my area for $22 an hour with a counter top to invite guests and test sauces.
Commercial Kitchens for Rent is similar to the kitchen door. If this is the option you plan on following consider pricing and access. This site allows you to search commercial kitchens for rent by state.
The only legal requirements would be the agreement between you and the owner and it is extremely important to have this. Like the other permits, inspections and licenses the local government entity will be different depending on location.
Questions to ask renting kitchen space
- What hours or times of the week are available?
- Is there a lease agreement?
- Monthly / weekly costs?
- Is there equipment available for use?
Shared use kitchen operator responsibilities
This is the person licensed under the Department of Agriculture to process food under Article 20-C. Again, article 20-C is NYS and the requirements for the kitchen owner may be different in each state or country as stated previously. The operator needs to obtain this license before they can allow you to rent or lease the space. Locate a kitchen so you are able to use this space without the legalities of inspections, insurance, permits and other local requirements.
Here is what to look for from the operator of a shared kitchen. These items should 100% necessary to avoid any legal implications associated with a licensed kitchen. These items should be discussed and verified before any contracts are sighed or any money is exchanged.
- Copies of health inspection records.
- What storage is available?
- Does it help with permits?
- Are there any kitchen consultants?
There can be some limitations such as availability and use for an incubator kitchen. Eventually as sales increase you will want to invest in owning your own space. This can become a commitment and can increase costs of your operations.
Operating your own commercial kitchen
Owning and operating a commercial kitchen can allow a lot of freedom in the hours you operate and can become a great area to practice the art of different hot sauce recipes. Operating these kitchens will brings us back to obtaining inspections and will also be the most costly venture.
- Find a location
- Arrange an inspection
These two simple steps are much more involved than what what this article can encompass. Locating a commercial kitchen can be done through local restate agents and your inspections will be done locally as well.
Registration of a food facility
Registering a facility with the FDA needs to get done if you are manufacturing food in a facility. It is the facility that will need to meet the FDA’s criteria. These regulations may be different by state and will also be different if you are selling hot sauce directly from a physical establishment. Other organizations worldwide may regulate a food manufacturing facility differently. Retail food businesses and farmers markets do not need to register with the FDA.
Some facilities are exempt from needing to register but it is necessary if you plan on manufacturing hot sauce on a commercial scale by selling in stores, both physical and online.
FDA registration requirements
Register with the FDA includes a stable and secure environment in which your hot sauce is manufactured and processed. This includes regular record keeping, inspections and reporting if there is cause for irregular methods of manufacturing that could cause illness.
Registration will include, name of the establishment, principal place of business, the location of each establishment in which that processing is carried on, the processing method and a list of foods so processed in each establishment.
Title 21 CFR 114 (Code of Federal Regulations)
Hot sauce falls under Title 21 CFR 114 Acidified Foods / Low Acidified Canned Foods if the pH is below 4.6. Here is the link to register with the FDA and here is the downloadable instructions. This site can be very difficult to navigate through.
Apply for a Food Service Establishment Permit
Food Service Establishment Permits are obtained if hot sauce will be processed and sold within a restaurant, sandwich shop or other retail food service locations. Some home made foods such as baked goods, jellies and sauces can qualify for a Home Processor Exemptions. If you are pursuing larger operations like a commercial establishment than you will have to go through the Department of Agriculture and Markets in your state.
Check out the latest post for more detailed information on FDA requirements or how to avoid them! This article covers several different methods of starting a hot sauce business.
USDA Food Standards and Labeling Policy Book
This document is a glossary of terms in dictionary form and can be very useful for the knowledge of making and producing hot sauce. This is a large document with many definitions referring to meats but there are some items that would include the contents of hot sauce or a claim on your label that your sauce includes these products.
For example products labeled “hickory smoked” must provide provide certification that 100% hickory is used in the smoking process. Here is the link for the Food Standards and Label Policy Handbook from the USDA.
How can I sell sauce in different states?
All food offered for sale in interstate commerce needs to adhere to the US Department of Agriculture or better known as the USDA. This includes the safety and handling of the process packaging and proper labeling. Current Good Manufacturing Practice (CGMP) (21 Code of Federal Regulations (CFR) Part 110). This is another guide from the FDA that covers sanitary conditions, equipment handling and good manufacturing practices. Here’s the link.
The manufacture of food and food products will be governed by local entities but as you decide to sell outside of your region other governmental agencies like the USDA will give approval. All food intended for interstate commerce (any transactions across state borders) is regulated by the FDA.
Do I need to follow FDA?
Yes. If your hot sauce is an acidified or low acidified hermetically sealed (air tight) container than you will have to register with the FDA. This is an agency that regulates food manufacturing, processing, nutritional contents and packaging in the US. Regulations will be different in your jurisdiction in which you are manufacturing and selling sauce.
If you are manufacturing and selling hot sauce in another country you must follow FDA guidelines to legally import hot sauce to the USA for the purpose of physical sales. The hot sauce will be subject to any inspections at the port of entry. Click this link to read the guidelines from the FDA on starting a food business.
FDA District Office
As stated several times in this article some areas where the manufacturing of hot sauce takes place will have local authorities working out of local offices. The offices under the FDA that perform all field activities is called the Office of Regulatory Affairs (ORA). This is the organization that will perform the inspections of your registered facility.
Home based business don’t apply to federal regulations but we are going big here and want to make sales across the country and eventually globally. Right? Check your local county health agencies for these regulations.
Now comes the fun part!…Bottle it, Label it, Sell it
FDA label guidelines
Although graphic design of a label and logo can be as much fun as inventing a hot sauce the FDA has food labeling guidelines but they do not approve labels. Every food product available for sale in the US follows these guidelines and they can be very stringent.
If your product has misinformation about its content you could be subject to audits, fines and legal penalties and this could lead to the shut down of operations. This mostly adheres to the nutritional label contents but the display label will also have guidelines to follow as well.
How do I know what is in my hot sauce?
Your sauce will need to be sent to a laboratory for testing so that the nutritional contents can be displayed on the label per FDA guidelines. Typically these laboratories will send a report giving the nutritional facts for your records and this is what will go on your nutritional label. Read more on How To Provide A Nutritional Label For Your Hot Sauce.
Once you have protected your recipe, found a kitchen to operate out of and have followed FDA guidelines for labeling you are now ready for legal sales of your product. Deciding a price point and marketing to a specific audience are going to drive the sales of your product. Read more in There’s Money To Be Made In The Hot Sauce Industry!
The importance of labeling a hot sauce correctly
Correctly labeling a hot sauce is directly related to successfully selling hot sauce. The FDA needs your hot sauce bottles to have the correct labeling per their guidelines. See here. The FDA has a clear and precise guide to properly labeling your hot sauce for the display label and nutrition label as well. Most labeling companies know the FDA requirements. Recipal is one of the least expensive companies providing nutritional labeling per FDA guidelines.
You can also get a good idea of what needs to be on your label by reading any packaged hot sauce label off the shelf of your local grocery store. The FDA does not pre approve labels for food products so you will not have to submit them. However, your product could be subject to audits where your sauce will require testing (at your expense) and you may also provide other documentation as well.
Labels are also necessary for consumers to understand what your product is, what ingredients are used in it and other important information for food consumption. Your customers rely on these labels so be as truthful as possible.
The legalities of marketing hot sauce
There are many ethical decisions to make in the decisions that need to be made to market your product and there are also legal implications behind selling your product honestly. According to Forbes there are several illegal marketing practices that should not be pursued. Insider info and bait and switch marketing campaigns are illegal and it is easy to get involved.
Deceptive advertising and the ability to substantiate claims are also cause for legal implications against on the way you are marketing your product. Health claims such as “zero calorie” or “contains vitamin C” may be truthful and evident on the nutritional label. Claims such as “improves digestion” may not.
Other legal actions taken for selling hot sauce
Now that you have protected your hot sauce recipe, found a kitchen that has passed health inspections it is now time to promote and sell your hot sauce. If you have followed some of the principles above you should have some important steps covered but there are a few more that will make your business more professional. For a complete comprehension of small business in under 2 hours read my Kindle book Understanding Small Business. Get it here from Amazon. Also available in paperback HERE!
Understanding Small Business
File a DBA or LLC
A DBA (Doing Business As) are filed on the state or county level and will generally cost about $35.00 but not every state has a DBA filing requirement. This DBA is simply a fictitious name that you are operating under. It could be the name of your sauce or a name you have chosen for the company making the sauce.
Verify that the name of your sauce or company is unique and has not been taken. The last thing that you want to do is come up with a great name for your sauce only to find it has already been taken. This could be different from your DBA or website name. The name of your sauce should stand alone and not have any similarities to other brands of sauce. You may want the name of the business (DBA), the website and the hot sauce to all have the same name but it is not necessary.
This is also true of a logo and label. A logo is a trademark and can not be legally used by another company once it has been registered. Designing a logo can be fun but it needs to be unique, stand alone and attract consumers. Use the TESS link to verify a logo design but chances are if you designed it yourself…its probably unique.
Federal ID or Social Security Number
Getting an EIN is as simple as applying here with the IRS and can be done in a matter of minutes. There is no cost for registering but this will be a requirement once you begin earing an income and will need to file business tax returns.
Insurance is an important part of starting a hot sauce business in order to protect your assets, protection against lawsuits or accidents. Insurance for start up business can be obtain for under $30.00 a month.
Get a bank account
Opening a bank account will be necessary once money starts to change hands. You do not need a business account or a business credit card but this is a good way to keep expenses separate. This is not a legal issue but it is certainly needed for making money transactions.
Making delicious hot sauce is easy compared to some of the necessary steps needed to sell hot sauce legally. If you are planning on making and selling hot sauce from a start up business and through entrepreneurship into a successful commercial hot sauce company…than you need to know the legal matters.
If you have a great hot sauce recipe, bottled it in an approved kitchen and provided a product and nutritional label…you are now ready to sell your sauce. There are many opportunities to begin selling hot sauce which little or no investment.
Time To Sell!
Increase Your profit margin with THE REVENUE TRACKER!
Now that you have protected your recipe and set up operations, and a good marketing campaign, it is time to start selling your sauce. First, you will need a price point for your sauce. You could guess by what the competition is doing or you could precisely calculate what it cost to make your hot sauce with THE REVENUE TRACKER.
This Excel spreadsheet is programmed to calculate the costs it takes to produce a single bottle (including marketing), adds profit, overhead, taxes and provides a price for your sauce. THE REVENUE TRACKER will log monthly costs AND PROFIT and compare them for the full year.
THE REVENUE TRACKER can be fully customized to meet your operational needs. There is no software like this out there specifically dedicated to help you make money selling hot sauce!