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• High costs and legal requirements have pushed Hawke’s Bay’s small-scale entrepreneurs into operating informally.
• Shona Brewer formalised her catering business two years ago, after initially operating informally, noting there were challenges in the process.
• Hospitality New Zealand emphasises the importance of food safety regulations for all food businesses.

The underground food economy is on the rise as small-scale entrepreneurs use social media to start hospitality businesses out of their kitchen.

Hospitality New Zealand says informal food businesses are being emboldened by the social media reach they can get, and the customers they can find as a result.

But Hospitality NZ chief executive Steve Armitage says while testing food concepts at home can help aspiring entrepreneurs get started, he has some concerns.

“It’s important that all food businesses operate within food safety regulations to ensure the public can have confidence that the product they are buying has been prepared safely,” Armitage said.

A Havelock North woman who came to New Zealand from abroad told Hawke’s Bay Today despite the fact she holds a work visa, she does not yet feel ready to enter the local workforce or start her own business.

As a result the woman, who asked not to be named, started an informal business selling home-made sweet treats.

She is now supplementing her family’s income and supporting her son’s dream of becoming a pilot.

“There aren’t many opportunities for people like me, with certain language barriers.

“There are kitchen regulations I’d need to follow to properly open a business.

“So I usually sell only at small school events, within the community, and to friends or friends of friends that come by recommendation.”

The woman said her son’s aviation training costs about $350 per hour, and she would like to invest more to boost her products, but she can’t.

With only one stable income in the household, it’s a case of every extra dollar helping.

Formalising the business is “not a priority”, she says.

“But I am educating myself and might move to the next step, and I’ll make it legal when I can.”

Shona Brewer, a catering business owner in Clive, knows first-hand the challenges of transitioning from an informal business to an officially registered one.

After spending 23 years working as a chef in Auckland, she moved to Hawke’s Bay eight years ago and began selling roast dinners through Facebook after the outbreak of the Covid pandemic.

“At that point, we didn’t have any food delivery services in Clive. I started by doing roast dinners, and each Wednesday night I would deliver them to people in the coastal areas, and I did that through the local Facebook groups,” she said.

“I didn’t actually know anything about the legal requirements at first.”

Shona Brewer, a catering business owner in Clive, started it as an informal work after fully transitioning to a registered business months later.

After learning about the need for business registration, tax compliance and food safety certifications, Brewer sought assistance through Work and Income New Zealand (Winz), as there is a self-employment start-up payment available.

“The process was difficult, and while there was a lot of talk about help to set up, that support was very difficult to access.”

Brewer said she sorted out the paperwork but Winz lost it, so she decided to self-fund her business.

“The money I was making, I was fully reinvesting into the business. And I had friends that would help me out,” she said.

“I started with $200 in savings to buy ingredients and takeaway containers.”

At first she couldn’t afford a registered kitchen, which would have cost her about $800.

“We approached a church in Hastings and they allowed us to use their kitchen, which is registered. So we worked out of there for a couple of months,” she said.

Over time, she reinvested her earnings into her business, eventually getting the amount of money necessary to formalise it.

“I didn’t want to take on debt so I built the business step by step, ensuring it could sustain itself.”

It took about four months for Brewer to formalise her business, and she said she would “definitely” keep operating it informally if she didn’t get support.

“The way that I thought of it was, ‘If the business can pay for it, we will formalise it’. But I wasn’t going to go into personal debt to start it.”

For many independent business owners, navigating the process of legalising a business can be challenging.

Ministry of Business, Innovation and Employment (MBIE) national manager at Bolen Ng said any food-related business must be registered with the local council or the Ministry for Primary Industries.

“These are responsibilities that exist regardless of how long you have been a company director‚” he told Hawke’s Bay Today.

Ng says enforcement actions can be applied for breaches of the law, including formal warnings, infringement notices, and even prosecution in serious cases.

“We encourage anyone who needs guidance on getting businesses started to visit business.govt.nz, which also has a link to specific information on registering a business in New Zealand,” he said.

Now fully registered, Brewer is a strong advocate for supporting small local businesses so they can grow and be able to meet the legal requirements.

She shifted from hot dinners to catering, noting increased competition from delivery giants such as Uber Eats and Deliver Easy.

“It’s an incredibly difficult time right now for hospitality, as we’ve got fruit and vegetable shops, restaurants, and cafes closing down all the time,” she said.

Though her business is stable, “it’s tougher than last year”.

“But we are still surviving.”

Brewer credits that to strong community ties, sponsoring local sports teams and charities such as the Breast Cancer Association.

“It’s something big corporations don’t do. They take their profits away, whereas the small locals keep it in the region,” she says.

“Please, support local businesses. It really is a hell of a hard time right now for hospitality.”

* An initial version of this article had an online headline that stated ‘I’ll make it legal when I can’: The rise of the underground food economy. The combination of this headline with a main picture of Shona Brewer created the incorrect impression she had said this. The headline is regretted.