From restaurant to wholesale: Part 3
Many factors affect the licensing of your popular restaurant dishes and sauces. Learn how the type of product, business name and level of sales can change the rules for your restaurant.
April 25, 2014 - Author: Diane L. Smith, Michigan State University Extension
Selling your popular dish or sauce wholesale while you operate a restaurant can increase your sales beyond your restaurant traffic. Before making that call to the Health Department, determine the following: 1) which product(s) you want to wholesale, 2) what form to sell it in (frozen, refrigerated or on the shelf), 3) when you will be able to produce it and 4) where are you going to sell it. As you decide what to do, take the following scenarios under consideration. In the first three scenarios, let’s assume a restaurant wants to make and sell a refrigerated or frozen food (without meat) or a shelf stable food product for wholesale.
A restaurant plans to operate under a different company name for their manufacturing portion than their restaurant name. In this case, the restaurant would get a Michigan Department of Agriculture Rural Development (MDARD) license under this new manufacturing company name and they could most likely use the same kitchen they use for the restaurant since it is the same "people" making the food. In this instance, the “predominance of sales” rule is not a rule that applies since they are operating the manufacturing business under a different name and are getting their MDARD license.
A restaurant wants to operate under the same company name as their restaurant for the manufacturing portion of their business. In this case, the manufacturing portion of the business would fall under the health department license as long as their wholesale product sales fell below 50 percent of the combined sales of the restaurant and the wholesale total. In this case, they could most likely still use the same kitchen since the same "people" would be manufacturing the product.
A restaurant wants to operate under the same company name as their restaurant for the manufacturing portion and they expect that their sales of the manufactured product will exceed 50 percent of the combined sales of the restaurant and manufacturing sales. In this case, the restaurant would need to get an MDARD license for the product being wholesaled. Again, they could most likely use the same kitchen they use for the restaurant since it is the same "people" making the food.
A restaurant wants to run their restaurant and also wholesale processed products with more than two percent cooked meat or poultry or more than three percent raw meat (other than sandwiches), such as pizza pockets, meat pizzas, meat burritos, or meat egg rolls. These products would fall under U.S. Department of Agriculture (USDA) regulations where strict requirements for kitchen set-up and production time drastically change the ability of many restaurants to sell wholesale.
Once you have made these decisions, it is time to pick up that phone and contact your local Health Department Inspector to talk about your ideas. Based on what you learn, you can then decide to make some changes, drop the idea or move on to the next step of licensing and preparation.
The MSU Product Center, in partnership with Michigan State University Extension, provides free business counseling for product development and marketing strategies that will help Michigan entrepreneurs commercialize high-value, consumer–responsive food products. For more information, visit the MSU Product Center website or call 517-432-8750.
Other articles in this series: