Foodies, rejoice. (Photo Credit: JTeale)
Many aspiring food entrepreneurs dream of turning their love of baking into the next Sprinkles or of using the acquired art of hamburger grilling to launch the next In-N-Out. Not only do these two extremely successful California chains make millions of dollars, they make mouths water nationwide. But breaking into the food business is no easy task; even entrepreneurs with innovative and delicious recipes find it hard to cook their way to the top.
Taking a page from the tech industry, culinary incubators and accelerators are popping up across the country. Kitchen incubators are designed to help entrepreneurs launch and grow food production businesses by shielding them from the two major barriers to entry: steep startup costs and limited access to capital.
An old tofu factory in the Central Coast city of Watsonville, the former Frozen Food Capital of the World, is now the home of El Pajaro Community Development Corporation’s new commercial kitchen incubator. El Pajaro, a nonprofit committed to helping underserved micro-entrepreneurs, launched the project to promote job creation, as the region grapples with an unemployment rate well above the state’s.
“The unemployment rate in our community is in the double digits and we see the commercial kitchen incubator as a vehicle that will create the badly needed jobs that our community needs,” said Jorge Reguerin, El Pajaro’s Board President.
The cost of building a commercial kitchen that complies with strict and complex health regulations can be crippling. “It costs roughly about $200,000 to $300,000 to get a food business off the ground; that’s a huge barrier to entry,” said Reguerin.
For a small fee, cooks can rent space to create their tasty treats in the 9,000 sq. ft. kitchen incubator, which provides industrial cooking equipment and is completely up to code.
By removing the need to purchase expensive equipment and to open a brick-and-mortar, “the kitchen really lowers the startup cost and supports a person in creating their own job as well as jobs for other individuals in the community,” said El Pajaro Executive Director Carmen Herrera-Mansir.
To increase the chance of business success, entrepreneurs must have a business plan to use the kitchen incubator. To avoid common startup pitfalls, participants with little to no business experience are recommended to complete El Pajaro’s 13-week business planning course, said Reguerin. The course, taught in both English and Spanish, teaches aspiring entrepreneurs the basics of business management, provides individual business counseling, and helps with creating a viable business plan.
But the technical assistance doesn’t end upon completion of the course.
“Once you are a member of the kitchen incubator program you have access to industry specific consultants and to resources that include software that allows you to cost out your recipes and create packaging labels that comply with nutrition and health department requirements and are given food processing training,” said Herrera-Mansir. “And all of these services are provided bilingually.”
In addition to a winning recipe and a business plan, entrepreneurs need money to take their product to the market. However, accessing financial capital is a major challenge as banks have pulled back from making small loans under $250,000.
El Pajaro’s kitchen incubator gives participants access financing up to $5,000 to kickstart or grow their food business through a microloan program.
“We have a character-based loan program that we manage in partnership with the Santa Cruz Community Credit Union, and are working to expand the program to have more funds to be able to give larger loans,” said Herrera-Mansir.
El Pajaro’s kitchen incubator leverages the skills of the community to create opportunities for economic empowerment and jump-start the regional economy. In a region surrounded by fresh produce where many residents have food processing experience having worked for companies such as Green Giant, fostering the creation of small food businesses makes perfect sense.
A kitchen incubator removes barriers faced by budding entrepreneurs when starting a food business while providing a relatively low-risk space to grow their business before making costly investments in equipment and space. Providing that access to capital and the technical assistance needed increases the likelihood of success and sustainability.
Who knows? The next big California food company just might get its start in a kitchen incubator in Watsonville.