A Food manufacturing business is an enterprise that processes edible raw foods and transform them into food products that can be sold for a profit. There was a time starting a food manufacturing business was a daunting task owing to limited resources.
A good number of potential business owners were also reluctant to venture into the food industry because of the massive amount of capital it used to demand.
However, the advent of technology and industrial innovations, coupled with the numerous available financial assistance programs, provides varying opportunities for entrepreneurs who are eager to start their own business in the food manufacturing industry. You just have to carry out extensive research and steadily seek resources that can help you grow your venture.
Steps on How to Start a Food Manufacturing Business
Table of Content
Conduct Market Research
You need to carry out extensive market research because it’s a necessary part of any viable business plan. Carrying out market research helps you know if your products are ideal and sellable to your intended market, as well as analyze if there is both a need for your product and space in the market for you to generate substantial revenue. You must understand the level of demand for the food products you are looking to manufacture.
Also, take time to look at your local shops to see if they already sampling similar products to what you intend to manufacture. Also, consider how your products will go against those existing ranges. Identify the things that make your product ranges more attractive to customers.
a. Who is the Target Audience?
In this line of business, your customer base will more or less depend on the exact sector of the market you are looking to target. They may include:
- Other food manufacturers
- Wholesalers and distributors
- Retail outlets such as supermarkets, delicatessens, butchers, convenience stores, petrol filling station forecourt shops, off-licenses, and health shops
- Tourist and visitor centers, garden centers, airport shops, gift shops
- Farmers markets
- Specialist food suppliers: gourmet hamper, fine food specialists, online businesses
- Catering outlets, pubs, nursing homes, hotels, and so on
- Airlines and rail operators
- Members of the public
b. Is Food Manufacturing Business a Profitable Business?
Yes. A food manufacturing business is agreeably one of the most lucrative businesses anyone can start. Have it in mind there are over 1 billion people on the planet, and this massive population will always have to feed. As long as you can come up with products that soothe the needs and appetites of the large majority of people and a company that complies with government regulations, you should be massive.
c. Are There Existing Niches in the Industry?
Yes. But this will most often depend on your target market. However, once you decide to target the consumer market, there are different types of food products to choose from. Some ideas include:
- Ready-prepared meals for adult consumers, pubs, catering outlets, and so on. You can also go further by choosing whether these meals will be supplied ready-to-eat, or whether they will require heating or cooking. You might also narrow it down to a particular niche range like organic, vegetarian and vegan, or ethnic
- Baby foods and products specifically for children, things like sandwich box fillers. You might be able to leverage the current emphasis on healthy school meals for children
- Gourmet items such as pates, smoked fish and meat products, and other delicatessen-style products
- Snack items such as biscuits, crisps, confectionery
- Meal preparation ingredients such as ready-made pastry, flavored risottos and couscous, and so on
- Jams, preserves, chutneys, pickles, and similar products
d. Who are the Major Competitors?
- Anheuser-Busch InBev.
- Tyson Foods.
- Archer Daniels Midland Company.
- The Coca-Cola Company
- General Mills
- Smithfield Foods
- Mondelez International
- Kraft-Heinz Company
e. Are There County or State Regulations or Zoning Laws for Food Manufacturing Business?
Yes. Numerous Federal, State, and local governments regulate the operation of all food manufacturing businesses, including small-scale processing. Therefore, it is necessary to note the types of food that are allowed to be manufactured in small-scale facilities and endeavor to contact the appropriate agencies that regulate licensing and facility inspection.
Coupled with State-level regulations, the U.S. Food and Drug Administration (FDA) regulates food safety issues with the Hazard Analysis and Critical Control Points (HACCP) system. Remember to consult with your State agriculture or health department for more information about how to get started.
f. Is There a Franchise for Food Manufacturing Business?
- Advanced Fresh Concepts: $692,000
- Dough & Arrows: $140,000 – $200,000
- Green Bar: $8,168
- Saladworks: $199,730 – $549,295
- Golden Krust: $225,900 – $687,000
- The Salad House: $269,200 – $454,500
- The Dough Dough: $375,000 – $450,000
- Pet Wants: $59,830 – $197,000
- Goodwill: $222,000
- Popeyes Louisiana Kitchen: $383,500 – $3,545,800
- Golden Corral: $2,168,419 – $6,602,5130
- Auntie Anne’s: $30,000
- Creams: $349,795(£275,950) To $461,280 (£363,900)
- Cinnabon: $30,000
- Marble Slab Creamery: $293,085 – $376,135
- Jersey Mike’s Subs: $144,700 – $786,200
- Raw Addiction: $159,400 – $266,900
- Souley Vegan: $162,400 – $251,500
- Cinnaholic: $187,000 – $368,500
- Maoz Vegetarian: $248,000 – $572,500
g. What Do You Need to Start a Food Manufacturing Business?
- Adequate Capital
- Reliable suppliers
- A menu
- Real Estate
And so much more!
Memorable Food Manufacturing Business Names
- Excellent Foods
- Prime Bites
- Hot N Hawt
- Classic Taste
- Elegant Food
- The Traditional Kitchen
- Source of Health
- Organic Food Nutrients
- Chop Life
- Atlas Kitchen
- Clean Plate Kitchens
- Zone Bakery Joint
- Full Moon Classics
- Royalty Meals
- King’s Grillz
- Appetizer Pack
- Heavenly Food
- Mama’s Choice
- Morning Bird
- Mountain Peak
- Meal Point
- Mum’s Kitchen
Register your Business
a. What Type of Business Structure is Best for Food Manufacturing Business?
In the United States, the most common business entities for small food manufacturing businesses are sole proprietorships, LLCs, and co-ops. Other business entity options include partnerships, S-corporations, and C-corporations.
However, new entrants into this business are advised to structure their business as an LLC, mainly because it limits a business owner’s liability for the business. An LLC also offers tax efficiency and remains uncomplicated as to ownership structure, so it’s perfect for a food manufacturing business owner who is seeking adequate protection, but some flexibility when it comes to paying taxes
b. Steps to Form an LLC
- Select a Name for Your LLC.
- File Articles of Organization.
- Pick a registered agent.
- Choose between member and manager management.
- Establish an LLC operating agreement.
- Comply with other tax and regulatory requirements.
- File annual reports.
c. What Type of License is Needed to Open a Food Manufacturing Business?
When looking to venture into the food manufacturing business, have in mind that there are numerous regulatory requirements you need to meet. A good number of these requirements apply to all food manufacturing businesses, and some are specific to the particular food product, such as low-acid canned food, seafood, or juice. Nonetheless, basic licenses you will need include;
- Business licenses and permits
- A food handling permit
- A Certificate of Occupancy or CO for your facility
- A liquor license or beer and wine license to sell alcohol
- A food license to make and sell food out of your home
- A resale license to be able to buy products at wholesale
d. What Type of Certification is Needed to Open a Food Manufacturing Business?
While you may not necessarily need to be certified to start a food manufacturing business, however, there are certifications available to help you boost your credentials and reputation in the industry. Certifications to consider include;
- Certified Food Protection Professional (CFPP)
- Certified Nutrition Specialist (CNS)
- Certified Professional – Food Safety (CP-FS)
- Food Safety Manager Certification
- ServSafe Food Protection Manager Certification
- Certified Pastry Culinarian
e. What Documents are Needed to Open a Food Manufacturing Business?
- FDA Certification
- Federal Tax Payer’s ID
- State Permit and Building Approval
- Business License
- Business Plan
- Employment Agreement (offer letters)
- Operating Agreement for LLCs
- Insurance Policy
f. Do You Need a Trademark, Copyright, or Patent?
Yes. While this will depend on the niche you intend to venture into, your brand is an important aspect of your business, and it will become necessary to protect it by trademarking. Since this industry is massively dependent on repeat customers, you must make sure that people can identify you correctly in the competitive market.
Do your Cost Analysis and Budgeting
a. How Much Does It Cost to Start a Food Manufacturing Business?
Aside from the sector and niche you choose, note numerous factors can influence startup costs. For example, while the average cost of opening a full-scale bakery might reach $500,000, opening a food truck could cost as little as $30,000.
In some sectors of this industry, the cost to buy into a franchise will be one of the biggest startup costs an entrepreneur will have to contend with; while in some, property and equipment costs will be the most cost-prohibitive.
b. What are the Costs Involved?
- Setting up a business name: $150 – $200
- Licenses and permits: $200 – $300
- Insurance: $100 – $300
- Business cards and brochures: $200 – $300
- Recipe Process Approval: $70-$100/recipe
- Website setup: $1,000 – $3,000
- Location security deposit: $0 – $5,000
- Site preparation and equipment: $0 – $20,000
- Equipment: $1,500 – $200,000
- Initial Inventory: $500 – $150,000
c. What Factors Determine the Cost of Opening a Food Manufacturing Business?
- The type of food manufacturing business
- Cost of employees and management team
- An initial investment in food product
- Real estate
- Design for a physical space
d. Do You Need to Build a Facility?
This will more or less depend on the niche product you intend to offer in the food manufacturing business. However, note that the building of food manufacturing plants is a strictly regulated process in the U.S. Agencies such as the FDA and USDA play a crucial role in establishing the rules for their safe operation and maintenance, while also stipulating guidelines and tips for the building of new facilities.
While the cost of building a facility will vary from one location to another, the cost to build a 140,000-sq. ft. food manufacturing plant, including standard packing industry equipment, is estimated at $33,663,764.
e. What are the Ongoing Expenses for Running a Food Manufacturing Business?
This will depend on the niche you choose, but here are basic expenses to note;
- Maintenance of your facility and machines
- Cost of mortgage or lease buildings
- Training and certifying employees
f. What is the Average Salary of your Staff?
- Manager: $86,000
- Merchandise Manager: $66,480
- Accountants/Cashiers: $52,600
- Delivery crew: $48,720
- Sales staff: $42,310
- Cleanup crew: $34,120
g. How Do You Get Funding to Start a Food Manufacturing Business?
In this line of business, there are numerous ways to raise capital:
- Bank loans
- SBA-guaranteed loans:
- Government grants
Write a Business Plan
a. Executive Summary
Classic Foods will be a top-class manufacturer of beverages including 100% juices, juice drinks, lemonades, and plant-based beverages. Our aim at Classic Foods is to offer the highest quality products and we are very ready to see to the needs of our customers.
At Classic Foods, we promise to go above the standard food safety practices by participating in the highest level of Safe Quality Food (SQF) certification. The SQF certification program is an excellent series of standards and best practices well noted by The Global Food Safety Initiative to make sure businesses deliver both safe and quality products.
b. Products and Service
- 100% Fruit Juice
- 100% Vegetable and Fruit Juice Blend
- 100% Vegetable Juice
- Almond milk
- Juice Drink/Cocktail
- Oat milk
- Packaged Water
c. Mission Statement
Our mission at Classic Foods is to always make available innovative products, state-of-the-art manufacturing, quality assurance, and industry expertise as the very foundation of our company.
Our vision at Classic Foods is to always evolve to meet the needs of our customers – today and tomorrow. Note that from unique flavor offerings to imaginative packaging solutions, we at Classic Foods will never stop looking for better ways to serve.
d. Goals and Objectives
Our goals and objectives at Classic Foods include the following:
- Establish a regional sales staff.
- Create concrete sales in the region’s five top cities in Year 2.
- Guarantee tight control of cost and operation during expansion.
e. Organizational Structure
- Merchandise Manager
- Delivery crew
- Sales staff
- Cleanup crew
a. SWOT Analysis
- The strategic location of the facility
- Strong distribution network.
- Low product cost
- Strong supplier relationships
- Skilled and experienced manpower
- Accreditation and certifications.
- Newly established business
- Limited cash flow
- Inadequate supply chain
- Frequent changes in management
- New opportunities for the marketing of products online and on other platforms
- Social media marketing
- High paying capacity of customers
- Healthy and other new choices of consumers
- Partnerships and associations
- Limited suppliers
- Competition in supply chain
- Changing tastes of consumers
- A situation like covid-19 and other emergencies
- New hazards and food safety risks
b. How Do Food Manufacturing Businesses Make Money?
Although this will vary depending on the target audience you service but note that a good number of businesses in this industry make money from selling foods and food products, mainly to clients in a complex commerce ecosystem. Revenue is generated through this and other related services.
c. Payment Options
- Payment via bank transfer
- Payment with cash
- Payment via credit cards
- Payment via online bank transfer
- Payment via check
- Payment via mobile money transfer
- Payment via bank draft
d. Sales & Advertising Strategies
- Join the Guild of Fine Food as a producer member to get an emailed list of all of the Guild’s retail members who you could contact to find out if they would be interested in stocking your products
- Join a regional specialty trade association to benefit from their marketing initiatives
- Sampling your products at local or regional trade shows
- Attend meet-the-buyer events
- Participate in in-store promotions
- Approach local retailers, wholesalers, and catering outlets with samples of your products
- Include details of relevant items to the Food Standards Agency list of products that don’t contain the six colors associated with hyperactivity in children
- Source an online listing in a specialist food producer directory or the Fairtrade Foundation website
- Create your website with an online ordering facility
- Advertise in trade journals, yearbooks, and directories
a. How Much Should You Charge for your product/Service?
In this line of business, have it in mind that your two largest items of expenditure are going to be raw materials and staff costs.
Owing to that, it is vital to monitor the cost of your ingredients and to make sure that your workforce stays productive and that wasteful processes are reduced as much as possible. Note that if you import raw materials, your costs will be affected by currency fluctuations and also to a degree by fluctuations in farmgate producer prices.
b. How Much Profit Do Food Manufacturing Business Owners Make a Year?
According to industry reports, the annual income of a food manufacturing manager, who is often the owner of the business, ranges from $25,000 to $52,000 per year.
c. What Factors Determine the Amount of Profit to Be Made?
Have it in mind that numerous factors can affect this income, including the number of years the food manufacturing business has been in business, the size and location of the facility, its specializations, and even how efficiently the facility is run.
d. What is the Profit Margin of a Food Manufacturing Business?
The price of products in this industry is fairly regulated and standardized, therefore your earnings will more or less stem from your ability to keep your overhead costs low. The type of food you make and sell will also determine your earnings. Nonetheless, most food products have profit margins within the 30% range.
e. What is the Sales Forecast?
- Year One: $750,000
- Year Two: $1,160,000
- Year Three: $3,200,000
Set Up your Shop
a. How Do You Choose a Perfect Location for Food Manufacturing Business
First and foremost, note that the location of your manufacturing facility needs to be away from the city but close to the resources necessary to reduce logistics costs. In the same vein, it must be close to the place where you will be selling your products. When choosing a commercial space for your food manufacturing facility, you may want to follow these rules:
- Central location accessible via public transport
- Ventilated and spacious, with good natural light
- A flexible lease that can be extended as your business grows
- Ready-to-use space with no major renovations or repairs needed
b. What State and City are Best to Open a Food Manufacturing Business?
- San Francisco, California
- New Orleans, Louisiana
- Chicago, Illinois
- New York City, New York
- Los Angeles, California
- Napa Valley, California
- Charleston, South Carolina
- Seattle, Washington
c. What Equipment is Needed to Operate?
While this will also differ depending on the food products you manufacture, basic equipment to note include;
- Kitchen appliances
- Cold storage
- Flatware and utensils
- Furnishing for the Facility
- Cleaning supplies
Note that even the smallest establishment may need to hire a couple of extra hands to grow production. Also, note that who you hire and how many people you hire will all depend on your business needs.
Nonetheless, some examples of staff you might need may include delivery drivers, bakers, chefs, and food technicians.
Launch the Business Proper
It is advisable for new businesses to start up by hosting a launch party to let their potential clients know that they exist and the services they offer. However, as your opening day nears, prepare for launch by re-analyzing and improving some crucial elements of your business.
- Develop your website
- Necessary software and tools
a. What Makes a Food Manufacturing Business Successful?
- Timely Fulfillment Of Orders
- Ability To Deliver A Marketable Product And Continue To Develop It
- The Ability To Establish Relationships With Loyal Buyers
- The Ability to Operate With Strong Profit Margins.
- Healthy Balance between Quality and Cost.
b. What Happens During a Typical Day at a Food Manufacturing Business?
- Ordering ingredients and non-food supplies
- Mapping out a budget
- Offering top customer service
- Scheduling employees
- Updating business website
- Maintaining web presence
- Overseeing quality control
c. What Skills and Experience Do You Need to Build a Food Manufacturing Business?
- Attention to detail
- Food manufacturing experience
- Marketing skills
- Business knowledge and experience
- Management experience
- Customer service skills
- Networking skills
- Food service experience