Entrepreneurs starting up any type of new business face a number of challenges, including financing the venture, finding quality employees, generating sales and a host of other operational and technological challenges. Starting and running a food manufacturing, packaging or distribution company is a particularly risky and challenging undertaking since delivering unsafe food can result in serious adverse health consequences to humans. Any entrepreneur contemplating starting a baking or snack company (or any food company for that matter) should carefully review and plan for the Top 10 food safety considerations.

Laws and Regulations:Food companies are regulated businesses and are subject to myriad federal, state and local laws, regulations and codes. For example, most food manufacturers are required to register with the Food and Drug Administration (FDA) and are now subject to a new federal law, the Food Safety Modernization Act (FSMA), which contains the most sweeping changes in federal law since 1938. FSMA also gives FDA new enforcement authority to mandate food recalls, conduct more frequent plant inspections, inspect records, suspend FDA registration, regulate imports and require food safety plans.

Food companies also are subject to state and local health and safety codes and inspections. Food companies must understand the regulatory landscape in which they operate and take appropriate steps to verify legal compliance, or they will not be in business for long.

Suppliers:Any company that is in the business of selling or distributing a food product is liable if that product is defective and the defect causes an injury. It is irrelevant whether the ingredients that caused the injury were defective when they came from a supplier. As a result, food companies must perform due diligence to get comfortable that they are dealing with a supplier with sound food safety practices. This due diligence can include plant inspections, third-party audits and independent testing.

In addition, agreements with suppliers should cover issues relating to food safety such as requiring suppliers to have a food safety plan, setting forth procedures for recalls, authorizing access to supplier records, providing for audits, implementing contractual indemnity provisions in the event of a claim, and requiring that the supplier carry adequate liability insurance.

Food Safety Plan:Regardless of whether your business is currently mandated by law or customer purchasing requirements to have a food safety plan, it would be reckless to conduct business without one. A food safety plan is plant-specific and includes development of a Hazard Analysis Critical Control Points (HACCP) plan

A HACCP plan involves both hazard identification and development of critical control points. Hazard identification is the process of identifying potential significant hazards based upon likelihood of occurrence, severity and plant history. The hazard identification process should look at environmental risks such as allergens andListeria.

Critical control points and critical limits are then developed for each significant hazard, leveraging on the fundamental prerequisite programs in place, including current Good Manufacturing Practices (GMPs) and standard operating procedures (SOPs) for sanitation, supplier control programs, personal hygiene and training. The HAACP plan must require that critical limits be monitored, required controls verified, corrective actions be implemented and provide for suitable documentation. Management commitment is essential for an effective food safety plan.

Traceability:Traceability refers to the ability of a food manufacturer to have a documented record to track inputs and processes of food as it moves though a company’s manufacturing processes, as well as up and down the supply chain. As you can imagine, food traceability is very complex, and companies are struggling to find systems that are comprehensive but also manageable and affordable.

FDA recognizes that food tracing is imperative, but food companies are struggling to find realistic and cost-effective tracing systems. As a consequence, FSMA has required FDA to do pilot testing and has specified that there will be no mandate to use specific technologies, or to fully trace food up or down the supply chain.

With that said, traceability is critical to both sound manufacturing processes and the ability of a food company to respond quickly and appropriately in the event of a voluntary or mandatory recall situation. However, experts can assist with the design and implementation of traceability systems, taking into account a bakery’s or snack producer’s unique requirements and budget constraints.

Recall Plan:The old adage, “He who fails to plan plans to fail,” applies when a company is confronted with a recall situation. The company should establish a recall team composed of senior executives, legal counsel and communications professionals. Each member of the team should understand his or her role. The company should maintain and update a formal recall plan that includes logging of communications, steps taken and relevant events, maintaining records of all injuries, documenting the internal investigation, and cooperating and communicating with government officials. A mock recall can test whether the plan actually works.

Finally, the company should understand its obligations under the Reportable Food Registry (RFR) to report any situations involving a reasonably probability of serious adverse health consequences to humans or animals to FDA’s portal within 24 hours of their discovery. Company personnel should be trained on their obligations to report into the RFR as such reporting can obviously have a huge impact on the company going forward.

Government Inspections:With any food company, inspections go with the territory. Inspectors can be from any number of local, state or federal governmental agencies. Generally speaking, the quicker the inspector leaves a plant, the better. Preparation and readily available documentation provide the keys to success.

In all cases, the company should consider who should be the point person for government inspections. In the case of certain governmental inspections stemming from food safety issues, the company should consult with legal counsel in advance to review documents that may be subject to attorney-client privilege or where a Freedom of Information Act (FOIA) letter should accompany documents to be released.

Insurance Program:Food companies have special insurance needs. Bakeries and snack manufacturers should work with a quality insurance broker who understands the industry and, specifically, a company’s overall business and can recommend appropriate insurance coverage and liability limits.

Not only must a company carry workers’ compensation and product liability insurance, but it should explore special insurance programs to cover food product recall expenses. Also, an experienced broker and legal counsel will be on the lookout for troubling exclusions for common claims against food companies that may be buried in esoteric policy exclusions.

Customer Audits:Customer audits are the new normal in the food industry, especially when dealing with larger retail and food service customers. If a bakery or snack producer is not prepared to follow best practices in terms of food safety and quality, it will not be able to sell to sophisticated buyers. Companies must understand customer requirements early in the sales process to determine if getting the business is feasible and worth the costs to do so.

Additionally, the audit checklist in all likelihood has been developed in close cooperation with the bakery’s or snack producer’s customer. It will not work to challenge auditors or try to have them focus on other items. And, just like with government inspections, the sooner the auditor leaves a facility, the better.

Documentation:Food safety professionals say, “If it isn’t written down, it didn’t happen.” That’s why food safety plans should be monitored, verified and documented on a consistent basis. In the event of a food safety issue, relevant records will be required to be provided to governmental authorities and other parties.

Furthermore, FSMA grants FDA increased authority to inspect records and contemplates that additional record-keeping will be required for “high-risk” foods. There will, however, be sensitivity to keeping certain records confidential, such as recipes and other trade secrets, as well as records related to unaffected products. Food companies must understand what records have to be produced and ways to protect trade secrets, including using protective provisions of FOIA.

Experts:There are many critical activities a food company must undertake to comply with the complex web of regulations and requirements applicable to ensuring safe food. Don’t be afraid to get help. There are good, affordable food industry experts available to assist companies. For example, there are consultants who can assist with reviewing or developing food safety plans and plant layouts. In addition, insurance brokers, IT professionals, accountants and lawyers can augment an internal team. In the end, having good and open communication among the team can help the challenges of running a food company.

Alan Leib is a partner at the Chicago law firm Horwood, Marcus & Berk Chartered and is chair of the firm’s food and beverage industry group. Mr. Leib is also a CPA and is certified by the International HACCP Alliance.