Advertiser Disclosure

Gluten-Free Goodies Are Booming Business in Philadelphia Eateries

June 18, 2015
Small Business
Many or all of the products featured here are from our partners who compensate us. This may influence which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own.

“Gluten free” is a life-saver for some and a fad for others, and for small business, it has presented a fresh opportunity.  An estimated 22% of the U.S. population is on a gluten-free diet, according to market research firm Mintel, and a 2013 study reported 200 million U.S. restaurant visits annually included a gluten-free order.

With those kinds of numbers to chew on, eateries in Philadelphia — the country’s sixth-largest metropolitan area — have begun to jump on the gluten-free bandwagon.

Michael Savett has seen the number of restaurants and cafes that offer gluten-free food in the Pennsylvania city grow over the last dozen years. His son was diagnosed in 2003 with celiac disease.

These days, “you can get everything from soft pretzels to cheese steaks to Indian food to Mexican food,” says Savett, who created the Gluten Free Philly blog and smartphone app. He lists 1,400 restaurants and cafes that offer gluten-free food, and the total keeps growing.

For those with celiac disease, avoiding gluten — found in wheat, barley and rye — is essential.  Gluten triggers the body’s immune response, damaging the small intestine. Others are sensitive to gluten or believe avoiding it will help them lose weight.

Although the demand is clear, entrepreneurs hoping to capitalize on the gluten-free trend by opening an eatery in Philadelphia face some challenges.

The usual roadblocks

No matter whether your business is offering gluten-free products, you’ll face complex tax and license requirements.

Meg Hagele, owner of the High Point Cafe, which offers both traditional and celiac-safe gluten-free pastries, says there are many branches of city government to satisfy. After 10 years in business, “I still don’t have total confidence that I’m fully compliant with everything.”

Small-business owners often complain about confusing taxes and licensing rules, says Sylvie Gallier Howard, deputy chief of staff in the city’s Office of Economic Development: “A lot of that is years of legislation that’s hard to undo. We have reduced a lot of that, but it’s not perfect.”

To help entrepreneurs navigate the requirements, the city’s Office of Business Services, or OBS, is expanding its online help center, and the licenses required for small businesses will soon be available online. If food businesses are having problems, says Gallier Howard, the OBS will sometimes offer to call a health inspector or the department of licenses and inspections to try to push things through.

The city has addressed taxes for new businesses, which have been a major barrier. In Philadelphia, taxes for each coming year are due in advance, and new businesses have to pay for two years at once.

Until this year, there was no minimum on the revenue a business had to earn before it was liable for city taxes, but starting in 2015, Gallier Howard says, the first $50,000 of earnings are exempt.The exemption will increase to $100,000 of earnings over the next two years, making it easier for new ventures to get off the ground.

One thing Philly entrepreneurs won’t run into are rules governing gluten-free businesses.  There are no such regulations. Some businesses, however, will have a qualified auditor inspect to confirm that the plant can produce gluten-free food.

The gluten-free challenge

There’s a difference between offering gluten-free fare and being a place where those with celiac disease can eat.

Jennifer North, vice president of the National Foundation for Celiac Awareness, says many restaurants and food manufacturers who cater to gluten-free people don’t really produce food that’s safe for serious sufferers.

“Bakeries are especially problematic because of airborne flour,” North says. “Flour stays in the air for 24 to 48 hours.” Airborne flour can contaminate gluten-free baked goods, and even a trace of gluten can cause intestinal harm to people with celiac disease.

Some bakeries are entirely gluten-free, avoiding this problem. Others allow several days to elapse after they bake traditional breads and pastries, then clean equipment thoroughly and do a run of gluten-free baking. Others, like the High Point, use special pressurized air systems to keep airborne flour out of dedicated gluten-free kitchens in buildings where both types of baking occur.

gluten free eateries Philadelphia

High Point Wholesale macaroons/High Point Wholesale

North and her team are working to increase awareness of the seriousness of celiac disease and says their efforts are paying off in the Philadelphia region. Their work includes training kitchen staff. They aim to “help food service operators understand how to source, prepare and serve gluten-free food, and communicate with gluten-free customers.” The national organization is based in nearby Ambler, Pennsylvania.

She says Philadelphia restaurateurs are lucky that there is sufficient local demand — including those with celiac disease and other chronic health conditions drawn to the city by its large number of hospitals and universities — to support dedicated gluten-free businesses.

What role will location play?

Finding the right location for your gluten-free bakery or restaurant is another challenge.

Because this is still a niche market, foot traffic alone may not keep your business alive unless you’re in a very high-traffic area, says Amy Kunkle.

Amy Kunkle

Amy Kunkle/High Point Wholesale

She owned a gluten-free market and cafe called Food for All from 2010 to 2013 near Hagele’s cafe in the Mt. Airy neighborhood. Kunkle, who is now executive chef at High Point Wholesale, believes not being in a central location contributed to her store’s demise.

Had she been in bustling Center City, “I would’ve made it,” she says. “It’s such a niche that the right location would be key.”

Krizha Bautista found great foot traffic for her Philadelphia-area gluten-free bakery, Posh Pop Bake Shop.  She says her products — 15 varieties of cake pops, plus a dozen different cupcakes and fresh cinnamon rolls — virtually sell themselves in her quaint downtown Haddonfield, New Jersey, location, just across the Delaware River from Philadelphia.

A sweet experience in Philly

Michelle MacDonald originally opened her wholesale gluten-free bagel business, Sweet Note Bakery, in her native Bucks County, north of Philadelphia. But when it was time to expand, she found a location in Manayunk, a trendy neighborhood in Northwest Philadelphia.

For Sweet Note Bakery, the move had unexpected benefits. The community support for people living with celiac disease and gluten sensitivity has helped her business, she says, as have city programs that help small businesses.

She got a loan through the Enterprise Center, a community development corporation that offers support to minority- and women-owned businesses. More recently, Sweet Note obtained a loan from Ben Franklin Technology Partners, which supports tech companies.

The new loan will help the business expand again, which may take it outside of Philadelphia simply because of real estate needs — an established commercial kitchen is not easy to come by within the city limits, MacDonald says.

Sweet Note bagels are now sold at 450-odd locations in 20 states, but MacDonald is glad she made that move to the city:  “Philadelphia is on the cutting edge of gluten free.”

For related information, visit NerdWallet’s resources on how to start a business. For free, personalized answers to questions about starting and financing your business, visit the Small Business section of NerdWallet’s Ask an Advisor page.

Virginia C. McGuire is a staff writer at NerdWallet, a personal finance website. Email: [email protected] Twitter: @vcmcguire.

Top photo of Michelle MacDonald courtesy of Sweet Note Bakery.