labels Another Newbie Question: Private Label related

In regards to using your kitchen as a base of operations initially, the state laws vary wildly on that, and the FDA usually defers to the states on such matters. Some states allow you to do so from home, provided you don't exceed a certain amount of gross annual sales, while others won't give you the time of day unless you rent time from a commercial kitchen @ $2500 a month minimum. Check with your state's food regulatory websites regarding making hot sauces.
 
There are also commercial co-packers that can do everything for you (bottling, labelling (including designs by professional artists), USDA and FDA requirements, the works), but they invariably have minimum amounts, like 90-100 gallons of product for the ones I've checked out, which still comes out to $2-3 a bottle tops, but then the issue becomes storage, since 1 gallon of bulk sauce translates to 26 5-ounce bottles of hot sauce. Multiply that by 90-100 gallons and figure out where to store it all, and they do require that money up front, so if you go with them, and the sauce flops, you're stuck with a lot of hot sauce nobody likes and sizeable hole in the wallet.
 
One thing that's definitely worth pursuing is forming an LLC. Reason being, you can keep any personal money separate from money for the hot sauce co., and on the off-chance someone goes "This Hot sauce is too hot, I'm gonna sue", they generally can't sue you personally... And plus banks (the ones I've walked into anyway), tend to like LLC's because with sole proprietorships, they tend to hem & haw about wanting a separate SSN or EIN for the bank account, which you would generally get with an LLC, especially if you use LegalZoom. Another good reason for doing so beforehand is, if your state regs require going to a commercial kitchen, many won't give private individuals the time of day, and require business insurance with them as the co-insured. Some co-packers are a little more lenient when it comes to private individuals, but other's aren't so much, so forming a business first solves that problem right away.
 
One good thing to do as well, is, especially if you're starting small, to do the Farmer's Market thing, or to get in touch with a local restaurant. With Farmer's Markets, you sell directly to customers, and with a local dive, you can set up a consignment, where for every bottle they sell on your behalf, they get a buck or two, and you get exposure. And with FM's especially, you can gauge how good your sauce is by providing samples and asking people to give input on them. 
 
 
Hope this helps

Hi GeminiCrow-
 
to THP!
 
 
(for those who may not know- Private Labeling is where an established sauce company like Rothchild's Farms take their sauces and puts the customer's label on it.)
 
For your questions, GeminiCrow, the short answer is.....probably not a chance....for a few reasons.
 
 
Opening up and re-packing a sauce would entail that you be fully licensed as a commercial processor using a licensed facility.  And I doubt the original packer would sign off on that.  Once you open the bottle, they cannot guarantee the safety of the product.  It's not as simple as just pouring the sauce into another bottle.  It has to be heated, bottles need to be sanitized.... I wouldn't sell to someone if I knew they were going to re-pack the bottles.
 
The next reason is the corks.  The whole process of re-packing the sauces would have to be approved by a process authority and having spoken to a PA recently about corks...they are basically not allowed for consumable products. (wine is different, the corks are compressed with a machine, etc...)  They are not airtight, if the bottle turn over they can leak, they can't be sanitized...
 
 
Having said that- there are some cool shaped bottles that have screw top seal-able bottle.  Talk to the producer, if it's a large enough run, they may pack the sauce in your unique bottle.  Depending on if they fit on the production line, etc....
 
Hope this helps.  Good luck in your ventures and Have Fun!!!
 
salsalady  

salsalady said:

(for those who may not know- Private Labeling is where an established sauce company like Rothchild's Farms take their sauces and puts the customer's label on it.)

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Also, it may or may not be a sauce they have in their own line. Usually it is not. So there are many out there with the same exact sauce, but not the actual ones they produce for themselves.

elcap1999 said:

In regards to using your kitchen as a base of operations initially, the state laws vary wildly on that, and the FDA usually defers to the states on such matters. Some states allow you to do so from home, provided you don't exceed a certain amount of gross annual sales, while others won't give you the time of day unless you rent time from a commercial kitchen @ $2500 a month minimum. Check with your state's food regulatory websites regarding making hot sauces.
 
There are also commercial co-packers that can do everything for you (bottling, labelling (including designs by professional artists), USDA and FDA requirements, the works), but they invariably have minimum amounts, like 90-100 gallons of product for the ones I've checked out, which still comes out to $2-3 a bottle tops, but then the issue becomes storage, since 1 gallon of bulk sauce translates to 26 5-ounce bottles of hot sauce. Multiply that by 90-100 gallons and figure out where to store it all, and they do require that money up front, so if you go with them, and the sauce flops, you're stuck with a lot of hot sauce nobody likes.
 
Hope this helps

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Thanks for the response...
 
I'm not even in the stratosphere yet of those kind of numbers.
my goals at this point are really small...
 
i'm talking, ordering 10 cases of 5oz PL, then transferring it to a cool 5oz bottle and selling via a farmers market or online within my network.
 
as for an original sauce, i'm going to look into the FDA regulations regarding how much i can do from home, but my buddy suggested Ultimate Foods in CT, who work with very small minimums of quantities that I'd have to produce. but all that will come on the success and traction i gain initially...
 
thank you!!

salsalady said:

Hi GeminiCrow-
 
to THP!
 
 
(for those who may not know- Private Labeling is where an established sauce company like Rothchild's Farms take their sauces and puts the customer's label on it.)
 
For your questions, GeminiCrow, the short answer is.....probably not a chance....for a few reasons.
 
 
Opening up and re-packing a sauce would entail that you be fully licensed as a commercial processor using a licensed facility.  And I doubt the original packer would sign off on that.  Once you open the bottle, they cannot guarantee the safety of the product.  It's not as simple as just pouring the sauce into another bottle.  It has to be heated, bottles need to be sanitized.... I wouldn't sell to someone if I knew they were going to re-pack the bottles.
 
The next reason is the corks.  The whole process of re-packing the sauces would have to be approved by a process authority and having spoken to a PA recently about corks...they are basically not allowed for consumable products. (wine is different, the corks are compressed with a machine, etc...)  They are not airtight, if the bottle turn over they can leak, they can't be sanitized...
 
 
Having said that- there are some cool shaped bottles that have screw top seal-able bottle.  Talk to the producer, if it's a large enough run, they may pack the sauce in your unique bottle.  Depending on if they fit on the production line, etc....
 
Hope this helps.  Good luck in your ventures and Have Fun!!!
 
salsalady  

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Thank you...
 
Unfortunately you gave me answers I was hoping not to hear.. haha
I kind of figured that.....
 
Even if i purchased a gallon of PL sauce and had a fda regulated kitchen do the transfer for me, it'd probably cost too much where i couldn't make a dime on the bottle.
 
 
i guess i'll explore this idea with my original sauces..... thank you!!

elcap1999 said:

 
One thing that's definitely worth pursuing is forming an LLC. Reason being, you can keep any personal money separate from money for the hot sauce co., and on the off-chance someone goes "This Hot sauce is too hot, I'm gonna sue", they generally can't sue you personally... And plus banks (the ones I've walked into anyway), tend to like LLC's because with sole proprietorships, they tend to hem & haw about wanting a separate SSN or EIN for the bank account, which you would generally get with an LLC, especially if you use LegalZoom. Another good reason for doing so beforehand is, if your state regs require going to a commercial kitchen, many won't give private individuals the time of day, and require business insurance with them as the co-insured. Some co-packers are a little more lenient when it comes to private individuals, but other's aren't so much, so forming a business first solves that problem right away.
 
 

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I'm sorry, that's just bad advice
 
If you injure someone, you WILL get sued in your personal capacity. The LLC will provide no protection
 
so, 
 
1) try your best not to injure people. Make your sauces in a safe manner. That means following the spirit as well as the letter of the regs. "If in doubt, throw it out"
2) get insurance. Then the insurance co has some skin in the game, and they will provide the lawyers to defend you against the trivial law suits
 
The good advice that is buried in there is "treat it as a business from the start"
 
 
A business can take many forms
- sole proprietor ship
- LLC
- S - Corp
- Partnership etc
 
If you are in a state where an LLC doesn't cost anything then by all means do it, just don't expect any tort protection from it. An LLC becomes valuable later on if you want to bring on partners or have the business get financing on its own merits without you personally standing surety.
In California, where an LLC costs $800 per year, I chose not to do it as I saw no value as a start up. Matanzima is a sole prop.
 
But, I still have separate business banks accounts, I have business insurance, all my permits are in the name of the business etc. Its a real business. You don't need an LLC to be a real business.

Fortunately, I do have an LLC, and the hot sauce co. is one of three entities I am running under it at this time, with the HS being the newest....
 
Def. plan on following all the rules as I don't or wouldn't want to f*ck around with food other people will ingest....bad business model...LOL

Just to be clear, there are two types of LLCs; 1) Single member/owner and 2) multiple member.  If you are a single member LLC, you are treated as a sole proprietor and have no protection against your personal or business assets.  If you are a multiple member LLC, you will have protection against your personal assets but not your business assets.  A spouse does not count as a multiple member.  Either way, get insurance as the great equalizer.  If you live in Delaware, you can probably get by w/ either as they are very lienent.  Other states may not honor Delaware though.
 
Also, there are many kitchens around if you want to get creative.  VFWs and churches may be significantly cheaper.  A church by my house rents their licensed kitchen to a friend of mine for $50/day.

PepperDaddy said:

Just to be clear, there are two types of LLCs; 1) Single member/owner and 2) multiple member.  If you are a single member LLC, you are treated as a sole proprietor and have no protection against your personal or business assets.  If you are a multiple member LLC, you will have protection against your personal assets but not your business assets.  A spouse does not count as a multiple member.  Either way, get insurance as the great equalizer.  If you live in Delaware, you can probably get by w/ either as they are very lienent.  Other states may not honor Delaware though.
 
Also, there are many kitchens around if you want to get creative.  VFWs and churches may be significantly cheaper.  A church by my house rents their licensed kitchen to a friend of mine for $50/day.

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I think that's still a little misleading. A multi member  LLC will protect your personal assets against liability arising from the other guys negligence, but not your own negligence
 
http://www.litigationandtrial.com/2009/05/articles/attorney/automobile-accidents/can-i-set-up-an-llc-to-avoid-personal-liability-in-a-lawsuit/
 
If you are personally making the sauce, and you are negligent and injure someone, then you can be held personally liable, no matter what the structure of the business.
 
From the article above:
"there are plenty of reasons for setting up an LLC, such as protecting investors, limiting contractual liability, limiting liability arising from employee’s conduct, and a host of business and tax uses, but avoiding personal liability for your own conduct isn’t one of them."

Bingo.  

True. You are never protected from negligence or just being an idiot. Hence the insurance requirement. The point was that one is afforded more liability protection for personal assets in a multiple member LLC than a single. I should have been more detailed in my response.

I'm not sure insurance would protect you from negligence either.

That said I'm no attorney, so no one here seeking council should take anything I say as gospel. lol