Undercover Caker


I think it is time to tackle the people who operate illegal bakeries. Yes, selling cakes from your home without a license is, in most places, illegal. It certainly means that your home business is not sanctioned by the governing agency.

Please note at the outset that I am not discussing in this blog people who have a license under Cottage Food Laws. I am also not discussing people who operate bakeries from their homes where it is allowed by their city/county and they have been licensed. This is just a message to and about those who sell cakes, but do not go through the process to have a legal shop.

Since I am from the great state of Oklahoma, many of my notes will relate primarily to what is permissible in my home state. You should always check with the proper authorities in your area.

Let’s start at the beginning. You make a cake, usually for someone in your family first. Soon, you are doing the cakes for everyone in your extended family and circle of friends. At first, you do it for free because you just want to make cakes! A few people start slipping you money to cover your expenses, because, after all, they would have had to pay for a cake if not for you. One day, you get the call you have hoped for and a little bit dreaded: a friend of someone you know needs a cake and wants to know how much you will charge. The first time you take money from a stranger, you become the operator of an illegal bakery.

In Oklahoma, this opens you up to involvement from the Health Department, the city/state taxing agencies, zoning issues in your neighborhood and liability issues. I will be honest, many people do this every day and never get caught. There was a time many years ago when I did it. Some very big names in our industry have done it.

On paper, this seems like a victimless crime. No one gets hurt. You are just baking a cake, after all – what is the big deal?

When I first started making cakes, the Internet was not as prevalent. If you wanted to advertise a business, you had to buy an ad in a newspaper or magazine. The unwritten rule in OK at the time was that the legit businesses would look the other way, so long as you did not advertise. This meant that unlicensed bakeries did not show up at bridal fairs, have web pages or have listings in the phone book. A few years ago, this all started to change.

I began to see women who did cakes from home at the exclusive bridal shows. Every home baker had a Facebook page for her cakes, some had listings on Craig’s list and lots started setting up web pages. All of a sudden, the unlicensed shops started aggressively pursuing cake business.

This aggression made them easier targets for governing agencies and legal bakeries that were just trying to get by. I know that legit shops have turned in these illegal operations. I even did it once. The playing field simply isn’t level when someone doesn’t follow the rules. It is so hard to make is as a bakery, the last thing you need is a cake maker undercutting your price because she works from home and doesn’t have the overhead. Every time she does that, it is money out of your pocket that could pay your employees, your overhead or your non existent salary.

I asked our health department what happens when someone is turned in for running an illegal operation. My agent said that she usually calls up to try to place an order – to see if the claim is true. The person then receives a warning that all of their kitchen equipment is subject to seizure. In extraordinary cases, they can come in and take it all. The agent told me that the threat of action from them normally takes care of things.

The agent told me that the real enforcer in a situation like this is the Oklahoma Tax Commission. The city licenses businesses to sell products and businesses are to collect sales tax on those sales. Home bakeries that operate without a license usually are not collecting sales tax. The tax commission will come after your little bakery business with a vengeance if they want. You could be subject to fines and interest, as well as the back taxes.

Then there are liability issues. If people get sick at the party or wedding and blame you, do you have business insurance to cover the hospital bills? If you are delivering a cake and get into a wreck, do you have commercial insurance on your car? We always think about the upside of our business, but forget about the potential risks.

What if a neighbor gets tired of seeing cars pull up to your house to get cakes…maybe you just have a cranky neighbor. They can turn you in for running a business in a residential zone. That opens up all kinds of other issues with the government.

I think the one thing I keep coming back to is that running an underground bakery means that you keep it on the down low. If you are advertising all over the place and aggressively marketing your business, chances are you are going to eventually draw unwanted attention. My advice would be to think before you take each step and to ask yourself if it is worth it. I think about James Bond. What kind of secret agent would he have been if he had a Facebook page called 007, if he had a listing in Craig’s list proclaiming that he was a secret agent for hire and if he set up a booth at security conferences bragging that he was the best spy ever? If you step out of the shadows, you need to be cognizant of both the good and the bad that could come from your decision.

Eyes wide open, people. You’re either an undercover Caker or you are publicly running an illegal shop. Be smart and cautious about the decisions you make.

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24 thoughts on “Undercover Caker

  1. Great information Ruth! I do a lot of cakes, but only for friends and family. I take them to work and church as well. I would like to see OK pass a Cottage Food Law like many other states have done. Until that time, I’m very generous to keep up or improve on my skills! 🙂

  2. I was so confused when I first started doing cakes because there were so many home bakers but it was against the law. No one was willing to talk about it. I called the HD and asked permission before doing projects for my church, which was fine and even encouraged by the HD. Once I understood the rules, I chose to work for a bakery as a decorator instead of baking illegally. I LEARNED SO MUCH! I actually had one woman get enraged when I wouldn’t do her neices wedding cake (illegally) and threatened to turn me in to the HD! (Ummm, OK..here’s the number) When SB81 – TX Cottage Food Bill went into effect I was able to work from home. I don’t want to compete with the commercial bakeries. I respect what it takes to run a store front shop. I do the sort of cakes most shops are not set up to handle, such as 3D sculpted and involved fondant and gumpaste work. There is room for everyone, but everyone needs to follow the law. If you don’t like the law – work hard to change it. Once it is changed – follow it to the letter and respect others. You will be glad that you did. Meanwhile, hone your skills and use this gift as an opportunity to bless others.

    • Great comment Linda! It is a dangerous road that many people travel. Just one bad customer experience or one angry legal store owner could rock the home bakery’s world forever! There is a huge line between friends/family cakes and cakes for the public. People need to think if they cross that line.

  3. So let me get this straight-when you baked illegally it was fine and turning people in was wrong. Now that you own a bakery, baking illegally is wrong and turning someone in is the right thing to do. You understand that is the definition of hypocrisy, right?

    Donna, don’t hold your breath on her helping you pass the law in OK. People
    like the author believe they have paid their dues and you should have to as well.

    • Sara, thanks for your input. I did not say it was right when I did it, only that I was guilty of it a long time ago.

      I did turn in one and only one illegal shop who was aggressively targeting my customer base.

      I have no problem with Oklahoma passing a Cottage Food Law, if they decide to do so. There has been a movement here for about two years. I have never spoken for or against it.

      This blog was simply to try to open people’s eyes to the dangers they could face if they operate an illegal bakery. Some friends of mine are honestly unaware of what could happen to them.

      I have never tried to tell you or anyone else TO or NOT to do anything. I am simply an educator. Please do not assign motives to me.

  4. Texas , at this time ,has passed the Cottage Food Bill but they keep trying to change it.I imagine many places of business are feeling the new freedom of bakers.Allowing orders by internet is illegal (it is supposed to be a small business—face to face) as is selling at Flea Markets,ect.There is a” Bakery to rent” business here where you can rent a legal kitchen to do your own legal baking

  5. Ruth, since you don’t seem to mind reaching out on “touchy” subjects, maybe you could also address the issue of people who ignore copyright, trademark or logo issues. I’ve put this out to Cake Central magazine to do some research and publish an article, since I couldn’t get any of the big names to speak with me on this issue, but that was about a year ago and I haven’t seen anything. Newbies who are into cake decorating, watch the shows and see people like Duff and others do, for instance, a Scrabble game board or other recognized themed character for payment may not realize just what they’re getting into.

  6. Thanks for the blog! We are having a HUGE problem with this in my area and it’s starting to take a negative toll on my business. A lot of people are taking the Wilton Cake Decorating courses at the local Michaels and within weeks are advertising a “business” out of their home on facebook. I get ridiculous amounts of people coming into my shop asking about prices for cakes and when I tell them I always get the response “well so-and-so was only going to charge me this and she’s taken the courses too” – well so-and-so doesn’t have overhead, doesn’t have insurance, doesn’t take training classes, doesn’t have to pay employees, etc., so yeah she’s going to give it to you dirt cheap. It’s illegal to do it in this area out of your home – or else I would be doing it – trust me! haha but I don’t think people understand what can actually happen to them if they’re caught. It’s making it really difficult to us who are trying to make a living doing it, when these illegal home bakers are undercutting us. Thanks again for posting! I’ve been waiting for this one 🙂

    • Hi! I wish I could tell you what it takes, but every state is different and, in many states, the health department regulations vary by county. To become legal, I would call the health department in your county first! You should also check with your city licensing bureau to see what they require. Many vo techs offer small business advice classes. Those could be invaluable in making sure you catch everything.

  7. well said! I am in New Zealand where the rules are strict and health regulations have to be followed to the letter with spot inspections, liicense to operate rules, neighbour consents and food hygiene courses to be attended every 3 years. It cost me $35,000 to set up my home business with all the correct lighting, space, insect protection, equipment and consents, I pay my taxes on time and have never failed a health and safety inspection. But I know of home decorators who have cats and dogs inside walking on the very tables that they are making cakes on who dont pay a cent in taxes and dont follow any hygiene rules. Ive never dobbed anyone in but I sure as hell feel like it when I pay my $500 to the council every year for the privalege of working from home. If I had a penny for the amount of times I have had home decorators look enviously at the kitchen and say they wish it was theirs, without thinking about how much I have sacrificed a lot for my business and without seeing the mountain of bills and compliance that must be followed – it did not come for free!

  8. As soon as I made the decision to change my path and go into the business, I went the to the city where i live to inquire about licensing. When i found out that no home based licensing was available, I started looking for a commercial kitchen, got liability insurance, took food handler classes and off I went. I now share kitchen space with a dear restaurant owner- he shuts down and i go to work. All edibles are made and stored there. I do run the actual “business” side of my company at home, but who eats paper? So- where there is a will and a passion, there is a way. I can’t imagine doing it any other way…..

  9. I operate my cake decorating business out of my home in Portland, Oregon. When I started decorating it was for my daughter, then friends. When I started to get requests from non-friends I did so but only charged for the materials. At the same time I started to investigate the legalities of operating a full business from my home. I started to ask questions at the local cake shops and it was amazing to me that they were less than informed about the laws in Oregon. I was more amazed when I realized how incredibly easy it was to license a home.

    It was not free, it costs money to pay for the kitchen license, the business license, the city license and your food handler card. The business insurance to cover property and liability has been the biggest expense next to ingredients and for electricity and let’s not forget about your own labor costs, education, equipment, and other misc. expenses. At some point it will be beneficial to pay rent for use of my home kitchen by my business but that is a whole other story. So, point is, running your business from home is far from free. Granted we do not have the same overhead that a large bakery has with employees but we do not produce as many cakes either. On a per person basis I will guess it is similar.

    So back to licensing. I think for most, getting the information on who to contact and what to do exactly is the hardest and most intimidating part of the process. Once you get connected the process (at least in Oregon) is simple. When I started though it was far from easy because I was starting from scratch with no idea of who to call. Everyone had ideas of what I should do but it was all hearsay and most of it ended up being only partly true.

    I understand why those who only make a cake or two a year would not want to spend upwards of $1000 to get licensed but you owe it to your clients/customers to go through the process of licensing your home kitchen or finding another licensed kitchen to work from. There is a lot to be learned from the process especially about safe food handling. My inspector is my go-to person for questions about food handling and they have always been more than willing to answer them. My experiences with my inspectors have been very positive and other than the first visit when I was shaking in my boots I now look forward to their visits. I have a great sense of pride for developing my business legally and I know that I am producing my products in the safest environment possible. I do not have any fear about being turned in and I can charge industry standards for my custom cakes and products because I AM A PROFESSIONAL.

    I have and will continue to report those who are operating high volume businesses illegally. I believe that any business, cakes or otherwise, that is operating a full-scale operation from home should have a business ID number, pay taxes, fees etc. just like the rest of us. For those who are operating mostly hobby and partly business I hope you are letting your friends and family know that you are not operating in a professional kitchen. Many churches are licensing and renting their kitchens and there are commissary kitchens for rent. They are sometimes hard to find but networking at local restaurant supply stores are a great resource for finding them. If you are selling cakes you work that expense into the cost of your cake…it is part of doing business.

    For those Oregon residents who want more information on licensing please check out my website. I will be loading a page soon that has links for all licensing in Oregon especially the Portland area. You can also call me and I am more than happy to point you in the right direction.

    Thank you Ruth for all of your blogs and helping to educate and expand the knowledge for all bakers from hobbyist to professional.

    Leslie

  10. This is an issue that can go round and round – but regardless of our opinions – each state/county has thier own regulations. I am VERY blessed to live in a place that allows me to work out of my home – I have taken the time and money to convert a small office/room in my house to a “sugar room” (no one allowed but me and clients!) A fridge in my basement for just the perishables for my business – along with proper shelving for dry goods. I am ServeSafe certified. I also have an exterminator that comes from april to Nov (always had him – lived in the south for 10 years – made me a “bug-a-phobe!”) I have the proper insurance and am health inspected. I also make a point with every order I get – the first thing I do is take 16% out to make sure I have enough $$$ to pay my taxes! Doing this costs me a few thousand dollars a year but it is well worth it! Doing it right and protecting myself/home/family is a priority. I would probably would have never done this if I had to open a store front – too much of a risk for me financially (I live in rural MA.) We are all told that “we can follow our dreams” but we all have a responsibility to the public if you are serving them – I hate it for my very talented friends who live in other places who aren,t as luck as I. Work to change laws and once changed – follow them – just because some businesses are “legit” doesn’t mean they are clean and well run. When you work from home it’s mostly word of mouth and your reputation is riding on how well you follow the rules as well as how wonderful your work tastes and looks. It takes a lot of work to have your home constantly under a “spotlight!” – I clean my home with the thought of “if I was the bride/customer where would my eyes go, what would I see?” Basically – whichever avenue you have to take – nothing comes easy or free! But remember what they say about that easy path? Thanks Ruth for posting – education is a good thing!

  11. This is a wonderful discussion, and I thank everyone for participating, and Ruth for writing this very thoughtful article. I have a licensed kitchen in my home, very unusual where I live, but I worked with the Health Inspector and the Department of Consumer Protection, and made my dream a reality. Like so many others, I am hurt by the hobbyist baker, as they don’t pay taxes or insurance or licensing fees. I worked hard to get where I am today, and it’s difficult to see others take the easy route. My saving grace, I know I am doing it the way it is supposed to be, I don’t have to look over my shoulder, I can provide paperwork when a venue requests it, I don’t have to worry about the IRS questioning my lifestyle vs. income. Thank you –

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