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Opening your own business can be a rewarding experience, turning your passion into profit. If you are interested in opening a bakery, you have several options. Firstly, you can purchase a bakery from an existing business owner, or perhaps enter into a franchise chain. Bakers Delight is one such successful example. However, you may be considering opening and setting up your own bakery from scratch. In that case, there are some legal considerations to note. To help, this article will explore key legal considerations before opening a bakery.

Have You Thought About a Name?

Choosing a business name is an important part of the setup process. Once you choose a unique business name, it is always a good idea to protect it and secure its use over other businesses. 

Accordingly, you may consider registering a trade mark to secure your exclusive rights to use the name. A registered trade mark also gives you legal options to prevent competing businesses from using your name. Importantly, marks that are too descriptive of the goods and services you provide will be difficult to register. For example, attempting to trade mark the word “fresh” is extremely difficult as other bakeries will also want to rely on this description. Ultimately, you want your business name to be unique and memorable. 

Having a registered trade mark over your business is another value-add if you plan to expand or sell the bakery in the future.

What Business Structure Are You Using?

When setting up your bakery, you firstly need to consider how you will structure your business. There are pros and cons for different business structures, and it is up to you to decide which works best for you. Ultimately, your business structure will depend on the goals of your bakery. 

If you are planning to be in the bakery business for the long haul, a company structure may be the most suitable option. A company is a separate legal entity, meaning that your personal liability and assets remain protected if your business were to fail. A company is also beneficial if you want to expand your business by franchising or licensing. Likewise, this structure is ideal if you decide to sell your bakery.

Once you decide on your business structure, you will need to apply for an Australian Business Number (ABN) and a Tax File Number (TFN). If you decide to use a company structure you will also need an Australian Company Number (ACN). Further, if you expect that your annual turnover will be more than $75,000, you must register for the goods and services tax (GST).

Where Are You Getting Your Supply From?

Are you planning on getting up each morning and baking your cakes and pastries? Or are you planning on having some delivered from a third party? Below we explore the different considerations for each.

Baking Yourself

If you are baking your own goodies, you need to consider if it is logistically possible to consistently do this. Also, consider how you will keep your goods fresh. With this option, it is likely you will need to hire employees. In this case, you need to consider whether they will be casual, part-time, or full-time employees and what award or pay rate will apply to them.

Using a Third Party

If you are seeking to have a third-party deliver your baked goods, you need to ensure that their goods are fresh and safe to consume. In this instance, we would strongly recommend having a supply agreement drafted by a contract or business lawyer. This ensures that both parties are aware of their obligations. This also means you are protected in the event that anything goes wrong.

Do You Have the Necessary Licenses?

Opening a food business requires you to have some sort of food business license. Importantly, food safety laws are specific to each state. Hence, you must be aware of the food safety laws that apply to your state, and the relevant licenses you must obtain. For example, in addition to seeking approval, the NSW Food Authority requires most food businesses to appoint a food safety supervisor who needs to be registered.

If you are unsure of the applicable laws and regulations in your state, it is best practice to engage a lawyer experienced in dealing with small businesses and licence applications. The last thing you want is to cut corners and find yourself in legal trouble by trading without an appropriate licence. 

Have You Considered Workplace Health and Safety?

Kitchens are dangerous working places. If you are employing staff members, it is recommended that you either:

  • include an extensive workplace health and safety clause in their employment agreements; or
  • have a lawyer professionally draft a work health and safety policy.

Either way, you need to detail your expectations which you can set out in your workplace policy. Your workplace policy can cover elements like:

  • dress requirements; 
  • using appropriate equipment; and
  • the procedure employees must follow if someone gets hurt.

You will also need appropriate insurance to cover your workers.

What Happens If a Client Has an Allergy?

When operating a business in the food industry, there is always a risk that clients will have allergies. Whilst some food businesses clearly set out their ingredients for each item, sometimes it is impossible to ensure that a particular item does not have traces of something else.

For legal protection, we recommend having a strong disclaimer – for example:

“While we take all reasonable care in the preparation of each item, please consider that each item has been produced in facilities which handle a range of food products, including but not limited to, milk, eggs, peanuts, gluten, etc. It is not possible to guarantee the total absence of any of these ingredients in any of our items.”

Importantly, for clarification purposes, each client has rights under Australian consumer law. Therefore, having a disclaimer does not mean that you can remove yourself from all responsibility.

Key Takeaways

There are many considerations when starting your own business, especially in the food business industry. There are common considerations that apply to all new businesses, like its name and structure. However, opening a bakery has additional requirements like obtaining correct approvals and licenses to handle and sell food. 

For more information on opening a bakery, contact LegalVision’s business lawyers on 1300 544 755 or fill out the form on this page. 

Frequently Asked Questions

What is the difference between a business name and a trade mark?

A business name is one you register with ASIC, especially if you trade under a name that is different to your own. Alternatively, a trade mark is a form of protection you can apply to several elements of your business, like its name, logo or slogan. With a registered trade mark, you can prevent others from misusing your business name.

How should I manage the supply for my bakery?

When opening and running a bakery, you have options to bake the goods yourself or enter an agreement with a supplier. Both options present their own benefits. For the former, you can control the quality of your baked goods, though you will likely need to hire staff. Likewise, a third-party supplier can ease your responsibilities. However, it is best practice to have a supply agreement in place. 

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