Category Archives: Legal

Starting a New Business

“Your cakes are great! When will you be starting a business?”

If you are reading this post, you may have heard this at some point from a well-meaning friend or family member. From the outside, starting a business seems like a quick and easy process…just set up a web site, throw together a price list, and you’re done, right? The reality of launching a business is far more involved, and most of the work happens behind the scenes. This subject could fill an entire book, but in this post I will attempt to hit the highlights, drilling down into more detail in future articles.

A brief overview of twelve steps to building a business from the ground up:

1. Business Plan — Create a business plan to help figure out what to sell, where to sell it, how much to sell it for, and who to sell it to. This will include research to determine if your business will be feasible in your area based on market saturation, competition, and local demographics.

2. Competitive Advantage — This is normally part of a business plan, but it is so important I think it deserves to be called out separately. What can you provide that your competition can’t or won’t match? Why should customers buy your products from you instead of somewhere else? How sustainable is your advantage?

3. Legal Compliance — A food service business will usually have special requirements from the health or agriculture departments of your city, county, and/or state which may or may not require commercial kitchens and inspections. You need to know what these requirements are before you start selling. Other legal issues to look at include business licensing (typically from your city), collecting sales tax, filing for a business name, and choosing a business structure.

4. Insurance — It may not be a legal requirement, but anyone selling food should carry business liability insurance to protect themselves. You may also need additional insurance on your vehicle if you make deliveries, and worker’s comp coverage if you have employees. Contracts should be written up and reviewed by someone familiar with local and state laws.

5. Financing — Whether you are investing $250K on a storefront or running a home bakery under your state’s cottage food law, you need to figure out where your cash flow will be coming from while you are in the startup phase, since your business may take a while to make a profit. If there is no other income coming in, don’t forget to account for your living expenses as well.

6. Accounting — Speaking of money, you will save yourself a lot of hassle if you work out how you will handle your accounting up front. Whether you will handle the books yourself with QuickBooks, hire an accountant, or just use pencil and paper, you need to keep a record of all your expenses as you continue through the startup process, and have invoices ready to go on your launch date.

7. Marketing — Implementing your marketing strategy will involve building a web site with SEO and social media presence, creating a name and brand that ties in well with your packaging and other customer touch points, and promoting your business to your target market. Having a system to manage your customer relationships (called customer relationship management systems, surprisingly enough) will help you build on your efforts as time goes on.

8. Procurement — Where will you be buying your supplies and ingredients? How much will they cost? Where will you store them? How often will you need to replenish your supplies? How will you track inventory? How often will you reexamine your current vendors to ensure you are still getting the best price possible?

9. Operations Management — Time is money. More specifically, time is a cost, and since your market will typically determine price you will be more profitable if you are more efficient. If you can break down the different tasks involved in completing an order and have a good understanding of how long each task will take, you will be able to set more accurate prices and identify where you can improve your processes. You also need to identify and fill slack time (for example, while cakes are baking or cooling) whenever possible.

10. Recipe Optimization/R&D — Look at all the different recipes involved in making the products you have for sale. Can you adjust recipes to use less expensive ingredients or reduce the labor required without impacting quality? Are there ways to create additional variety through relatively simple steps (for example, using a frosting base and adding extracts for flavor as needed)? Are you offering too many recipe options? Can products or components be made in bulk ahead of time and frozen or kept refrigerated?

11. Prepare for Launch — Put the finishing touches on your web site and social media presence, and coordinate advertising campaigns to hit your target market as soon as you are ready to “flip the switch” and start accepting orders.

12. Open for Business! — The first few weeks after you start your business are critical, since online reviews can tend to have a snowball effect that can be a great help or a great hindrance. Don’t be discouraged if things start slowly, stick with it and be sure to continually monitor referral links to your web site and the visibility of your advertising.

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Filed under Business Planning, Legal, Marketing, Operations

Copyright Law and Cake Decorating

Another common issue that is often ignored is how copyright law affects cake decorating. Copyrighted characters created by Disney, Nintendo, and Nickelodeon are often requested as decorations for kids’ birthday cakes, and trademarks from designer purse manufacturers and sports teams are a common sight on cakes for weddings and other events.

Under current copyright law in the US, in most cases you must obtain permission from the copyright or trademark owner if you want to duplicate a protected work, such as an original character or logo. There are a few exceptions to this rule (including use as a parody, educational use, or copying a small portion of a work as part of a review), but these exceptions typically won’t apply to cake decorating.

If you are copying a copyrighted character in fondant, gumpaste, buttercream, etc. on a cake for personal use, your risk is minimal as long as you do not display the cake publicly — this means no pictures posted on social media sites. On the other hand, selling a cake with copyrighted characters without permission can be dangerous even if you don’t post pictures yourself — if you did a good job, chances are the customer and other guests at the event will post their own pictures.

There are a couple ways you can protect yourself against infringing on copyrights:

Get permission first.

Some copyright owners will let you copy their characters for free, some will require a license fee, and some won’t allow any copying. If you’re not sure who the copyright owner is, a Google search of the character’s name will usually lead to a web site with a copyright notice at the bottom and contact information for the company. Make sure to get permission in writing.

Since some of the most popular characters are owned by companies that usually won’t grant a license (e.g. Disney), your customers may be disappointed. I find that it’s helpful to require the customer to provide written permission before placing the order, that way if the copyright owner denies the request, the customer’s wrath is directed at the copyright owner instead of you. As it should be.

Use Licensed Figurines

There is a component of copyright law called the “First Sale Doctrine”, which allows you to purchase a licensed copy of a copyrighted work (e.g. a Mickey Mouse figurine) and resell that copy without obtaining permission. This is not considered infringement because the copyright owner has already been paid by the licensee. You should make sure the item you buy is legit and not an unlicensed knockoff.

There are some companies (like DecoPac) that sell complete scenes composed of several licensed copyrighted elements. When you purchase these products the license may require the scene to be used as pictured only. It’s unclear as to whether or not this is enforceable, but unless you want to be a test case I would recommend abiding by the license.

Go Generic or Public Domain

Copyright only legally protects original work, and it only protects that work for a certain amount of time. It does not protect generic concepts at all, so (as an example) you would be able to make a cake in the shape of a purse as long as it doesn’t look like a Coach purse or have a Coach logo.

There are also some works that are in the public domain, either because the author has given up copyright protection or copyright has expired. For example, Lewis Carroll’s original Alice in Wonderland books are in the public domain, so you are free to create your own spin on any of the characters in the book without permission. However, since Disney’s characters inspired by Carroll’s books are protected, you would need permission before reproducing any of them.

The line between generic and copyrighted can sometimes be a little blurry. My rule of thumb is if an average person would look at a cake and think “hey, that’s (copyrighted character)”, you need permission. (Making Mickey Mouse blue won’t cut it.) And since your goal as a cake decorator is to have exactly that reaction, you can see why this can be a difficult situation.

One final note: you may notice many, many examples of infringing cakes posted online by both individuals and businesses. This may be due to people being unaware of copyright law or simply not caring about it, but it does not mean that copyright law is not being enforced. This law exists to protect the investment of people and businesses who spend time and money creating original works of art, and if you create your own original work you would want to enjoy those same protections.

Granted that the scope and duration of copyright law has gotten a little out of control: works are currently protected for 95 years from the original publication date, and you can expect this to be extended further before 2019, which is when Mickey Mouse will fall into the public domain. But that’s a discussion for another time, and unfortunately you still have to follow laws you don’t agree with.

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Filed under Copyright, Legal