From Home to Commercial: Cottage Food Guide

Are you wondering about the difference between a cottage food operation and a commercial kitchen? Are you running out of space in your home-based bakery kitchen? Or maybe you have a product that can't be prepared at home due to your state’s cottage food laws?

Let’s take a closer look at the when, why, and how of transitioning from a cottage food business to a commercial kitchen.

My Transition from Cottage to Commercial

If you've been around this blog for a while, then you've heard me talk about how I got my start as a cottage food operator, baking from my small kitchen before going on to open four retail bakery shops. I knew it was time to leave my home kitchen and move into a commercial kitchen when I secured a large wholesale order for a well known chain of coffee shops. Once I knew that the relationship was going to be a reliable, ongoing one I knew it was safe to start looking into larger spaces. 

I was delivering to 20 stores every day, and my kitchen could no longer keep up. I didn’t have enough room to bake, package, or store the products I was making. My counters were too small, my fridge was packed, and supplies were taking over the house. It was a big change. The new space that I moved into had room for everything and room to grow as well. This transition helped me grow my business in a major way. Leaving my home-based business and renting a commercial kitchen was a huge step. Oone that allowed me to grow and scale.

Keep reading for a comprehensive guide filled with my best practices and tips to help you make the transition with confidence.

What is a Cottage Food Kitchen?

A cottage food kitchen is part of the cottage food industry, where producers make and sell homemade food from their private residence. These businesses operate under states’ cottage food laws and are allowed to sell low-risk foods like bread, pies, cookies, and jams.

Cottage food producers usually sell at farmers markets, through direct sales, or from their home address. Many states allow limited online sales within state lines, but crossing state lines for the sale of cottage food products is not permitted under most regulations.

Each state has specific restrictions and labeling requirements, so check with your local health department, department of agriculture, or department of health to learn what’s required for your cottage food permit.

What is a Commercial Kitchen?

A commercial kitchen is a licensed food establishment used by small businesses, restaurants, caterers, and food producers who require space and equipment to prepare food items safely and legally under federal regulations.

Commercial kitchens are inspected and approved for food safety, temperature control, and public health compliance. Renting space in a commercial kitchen is often the next step for cottage food operators who are scaling beyond their home-based business.

When Should I Consider Renting a Commercial Kitchen?

Here are a few common scenarios that might indicate it's time to grow beyond your cottage food production setup:

1. I’m Out of Space in My Home Bakery Kitchen

When your home kitchen feels too cramped to keep up with your orders, that’s a big sign it may be time to expand.

• Not enough refrigerator space to store perishable items or finished products
• Limited space for packaging materials, product labels, or storing dry items like wheat flour and brown sugar
• A small work surface that makes it difficult to produce in batches or manage multiple orders
• Your family kitchen and business life are constantly colliding

If this sounds familiar, a commercial kitchen might be the solution that allows you to streamline production and reclaim your personal space.

2. My Favorite Recipes Aren’t Allowed Under Cottage Laws

Many states have specific requirements for what type of food is allowed to be prepared in a home kitchen. Items considered potentially hazardous, like those requiring refrigeration or strict temperature control, are typically prohibited.

Some examples of food items not usually permitted under cottage food rules include:

• Cheesecake
• Flan
• Swiss Meringue Buttercream
• Dairy-based frostings or fillings
• Custard pies

If you love baking these, a commercial kitchen can allow you to meet food safety standards and legally produce them.

3. I Want to Sell Wholesale to Retail Stores

States’ cottage food laws often prohibit selling beyond direct-to-consumer. If you want to expand your sales venues and sell your products wholesale, you’ll likely need to move to a commercial kitchen.

This can open up opportunities to sell to:

• Coffee shops
• Local cafes
• Grocery stores
• Restaurants
• Retail shops and boutiques

These types of partnerships can increase your visibility and create consistent revenue streams.

3 Tips to Successfully Transition from Cottage Food to a Commercial Kitchen

Here’s what I wish I had known before making the leap from home processor exemption to full-scale food establishment:

Tip 1: Get Clear About Your Finances

Before signing a lease or purchasing equipment, take a close look at your numbers. Good bookkeeping is essential.

You should know:

• How much you bring in each month (gross income)
• How much you spend each month (expenses and overhead)
• How much you have leftover each month (net profit)
• How much the new commercial kitchen will cost, including rent, supplies, insurance, and licensing
• What your sales goals need to be to make it sustainable

If these numbers are unclear, it’s time to tighten up your records before expanding.

Tip 2: Have Predictable Income First

Home-based bakeries are great for starting with low risk. But before taking on more overhead, make sure your income is reliable.

Ask yourself:

• Are you regularly selling products like wedding cakes, pet treats, or soup mixes?
• Are you receiving repeat orders and gaining new customers consistently?
• Is your brand and product line clearly defined?

Having stable, predictable income is one of the best signs you're ready to scale.

Tip 3: Document Your Operations

As you grow, having things written down helps you stay consistent and prepare for help.

Start documenting:

• Recipes with exact ingredient lists (including vanilla extract, soy lecithin, etc.)
• Step-by-step instructions
• Labeling requirements, including net quantity of contents and usual name of the product
• Safety protocols, cleaning schedules, and temperature control logs

This will help you train future team members and stay compliant with local regulations.

Questions to Ask When Renting a Commercial Kitchen

Before you commit to a space, it’s important to ask the right questions. Every facility is different, and what works for one food business may not work for yours.

Here are some key questions to ask:

• What days and times is the kitchen available to you?
• Can you leave ingredients or dry items stored onsite?
• Are there refrigeration and freezer options available for long-term use?
• Does the kitchen maintain inspection records with the local health department?
• Are you covered under their existing business license or inspections, or do you need your own?
• Are you allowed to bring in helpers or employees?
• What types of food establishments operate there (and do their operations affect yours)?
• Are there additional requirements for using the space (like cleaning checklists or time limits)?

Asking these upfront will save you stress and help you choose a location that aligns with your business goals.

FAQ: Cottage Food Laws and Regulations

What are the differences in state cottage food laws?

Every state has its own version of the cottage food rule, and the regulations can vary widely. For example, New York cottage food laws are much more flexible than New Jersey, which has historically had some of the strictest regulations in the country.

That’s why it’s essential to check your local jurisdictions for the most accurate and up-to-date information. Click here for my state-by-state guide with links to each state’s requirements and labeling rules.

What does the gross sales cap mean, and what are the limitations?

A sales cap is the maximum amount of revenue you are allowed to make each year under a cottage food permit. This number varies by state and is typically between $5,000 and $75,000 annually.

Once you hit the gross sales cap, you’ll need to explore upgrading to a commercial license. Visit this blog post to see a breakdown of each state’s income limits and additional requirements.

Can I sell my products in retail shops or grocery stores?

This depends on the type of license you hold. Most cottage food bakers are restricted to direct sales, meaning they must sell directly to the consumer.

To legally sell in a retail shop, grocery store, or through a distributor, you typically need a commercial license and must follow additional food safety and packaging requirements.

Do I need to include an ingredient list on my labels?

Most states require that cottage food bakers list every ingredient used in their food products, in descending order by weight. This includes sub-ingredients (like what’s inside chocolate chips) and common allergens.

Labeling is one of the most important aspects of food safety and transparency. Check this guide to see what your state requires for labels, including sample formats and labeling best practices.

Transitioning Can Be a Smart Move

Whether you’re just researching the idea of of a commercial kitchen, or ready to grow, understanding your options as a cottage food operator helps you make the right decision.

If your state’s cottage food law has specific requirements that are limiting your growth—like sales venues, business license needs, or safety regulations—renting a commercial kitchen can open new doors for wholesale, catering business, or online expansion.

This transition isn’t about abandoning your home-made food products; it’s about building a sustainable small business with broader opportunities.

Need help taking your next step? Check out the Bake Better Academy—your resource for business planning, sales strategies, labeling requirements, and best practices for the cottage food industry. Our training is packed with the detailed information you need.

Let me know in the comments: what type of food do you make, and are you thinking about expanding your food cottage permit into something more?