Farm shops sell produce which has been reared or grown on the farm, along with a range of other produce sourced from local and specialist suppliers.
Farm shops are typically diversification ventures run from premises as part of working farms. Operators of farm shops will need an understanding of the legal and financial issues relating to farm diversification, such as those affecting agricultural tax reliefs, business rates, planning consent and VAT.
Farm shops must comply with a range of trading legislation covering food hygiene, labelling, alcohol licensing, consumer rights, weights and measures and waste disposal.
This profile provides information about starting up and running a farm shop. It describes the skills required, the training available, the current market trends and the key trading issues. It also explains the legislation that must be complied with and provides sources of further information and support.
Qualifications and skills
There are no qualifications legally required to start up and run a farm shop. However, in practice, anyone starting up this type of business will need an up-to-date understanding of food hygiene and safety legislation and related practical issues, and the retail sale of food.
Suitable retail courses for a farm shop operator and their staff include:
- Operating an Effective Farm Shop, which is a three-day course provided by Fresh Retail and the Farm Retail Association. The course cost £495 (excluding VAT) and covers product costing, gross margins and operational standards. Go to https://freshretail.co.uk/collections/digital-downloads/products/fresh-success-operating-an-effective-farm-shop for more information.
- The Commercial Realities of Running a Farm Shop, which is a recording of an online workshop provided by the Farm Retail Association. The workshop covers farm shop turnover, managing staff, marketing and business planning. Go to https://farmretail.co.uk/training/ for more information.
- Food Business Start-ups, which is a two-day course run occasionally by the School of Artisan Food in Welbeck, Nottinghamshire. The course costs £295 and is aimed at anyone intending to start up a new food enterprise. It covers how to write an outline business plan and how to develop a clear action plan to launch an artisan food business. Go to www.schoolofartisanfood.org/courses/short-courses/business/food-business-start-ups-two-day for more information.
- Retail Cheese, a one-day trade course for those involved in sourcing, buying and selling cheese, run by the Guild of Fine Food. The course costs £150 for members and £195 for non-members (prices excluding VAT) and is held in London, Dorset, Harrogate and Scotland. It covers knowing what to stock, improving product knowledge and how to educate and build rapport with customers. Go to https://gff.co.uk/training/cheese for further information.
- Social Media Marketing Training, which is a two- to three-hour online course provided by High Speed Training. The course costs £25 (excluding VAT) and explains the benefits of using social media for marketing and how to comply with advertising standards (www.highspeedtraining.co.uk/business-skills/social-media-marketing.aspx).
Farm shop operators must be able to demonstrate appropriate food safety and hygiene knowledge. Although a formal qualification is not legally required, obtaining a certificate in food safety is a good way of demonstrating this knowledge. Suitable courses include:
- The Level 2 Food Hygiene & Safety for Retail course, which is an online course from High Speed Training specifically designed for retailers. It costs £20 (excluding VAT) and covers handling food, keeping premises clean and managing stock control processes effectively. Go to www.highspeedtraining.co.uk/food-safety/training/level2-food-hygiene-safety-retail.aspx for more information.
- The Level 2 HACCP Training for Catering & Retail course, which is an online course also provided by High Speed Training that costs £30 (excluding VAT). The course covers Hazard Analysis and Critical Control Point (HACCP) principles, which must be used by food business operators to create a food safety management system when registering their business premises. Go to www.highspeedtraining.co.uk/food-safety/level-2-haccp-course.aspx for more information.
Under alcohol licensing legislation, which varies across the UK, farm shops selling alcohol must hold various alcohol licences, which may require mandatory qualifications, as follows:
- In England and Wales, farm shop operators must appoint themselves or a member of staff as a designated premises supervisor, who will be responsible for authorising the sale of alcohol to consumers. This supervisor must hold a Personal Licence, which requires successful completion of the Level 2 Award for Personal Licence Holders.
- In Scotland, farm shop operators must appoint themselves or a member of staff as a premises manager. The premises manager will be responsible for authorising the sale of alcohol to consumers and must hold a Personal Licence, which requires successful completion of the Scottish Certificate for Personal Licence Holders.
Both these qualifications involve between eight and ten hours of study, culminating in a one-hour multiple-choice examination. They cost from around £100 and are run by various accredited providers that are listed at www.gov.uk/government/publications/accredited-personal-licence-qualification-providers.
- In Northern Ireland, farm shop operators must hold a Liquor Licence. Licences are issued by county courts, which require applicants to demonstrate that they are fit to hold a licence. Although there are no mandatory qualifications, the court will take account of the applicant’s qualifications and experience.
Farm shop operators can keep up to date with news and developments in the speciality food sector and improve their awareness of trends by attending events and reading journals and resources, including:
- The Farm Shop & Deli Show (www.farmshopanddelishow.co.uk), which is held over three days each April at the NEC, Birmingham and provides opportunities to network with speciality and gourmet food producers and to sample new products.
- ‘Fresh Produce Journal’ (www.fruitnet.com/fpj/31/about-us-3), which is a trade publication for Europe’s fresh produce industry that covers topics such as market trends, changes to fresh produce grading systems, and new varieties of fruit and vegetables.
- ‘Fine Food Digest’ (https://gff.co.uk/publications/fine-food-digest/), which is a trade journal published every other month by the Guild of Fine Food. It features news and information about the speciality food sector.
Key market issues and trends
Current market issues affecting start-up and established farm shops include the following:
- It is estimated there are over 1,000 premises in the UK which could be defined as a farm shop, according to the Farm Retail Association (FRA). A project run by the FRA and Harper Adams University is aiming to build a clearer picture of the UK’s farm shops and uncover the true value of the sector in order to better support and promote farm retailers. The findings will be published in Spring 2022 (www.farminguk.com/news/project-seeks-true-value-of-uk-s-farm-shops-amid-pandemic_58930.html).
- During the pandemic, more people shopped locally, by choice or necessity, which resulted in an increased interest in farm shops. Research by NFU Mutual found that since the pandemic, many rural retailers have adapted their retail model to meet the demands of local communities.
- Farm shops have enjoyed ‘burgeoning sales’ since the first Covid-19 lockdown in March 2020 and are filing the supermarket supply gap, accordingly to Farmers Weekly in October 2021. Farm shops have an estimated combined turnover of more than £1.5bn, including sales from farm shop cafés (www.fwi.co.uk/business/diversification/video-how-local-farm-shops-are-filling-the-supermarket-supply-gap).
- The ‘2021 Diversification Report’ published by NFU Mutual revealed an increase in diversification activity. In April 2021, around 37% of UK farmers were running a diversification venture (up from 31% in April 2020), of which 34% said they planned to diversify further. Changes to the Basic Payment Scheme has led in an increase in the number of farmers diversifying. Go to www.nfumutual.co.uk/farming/farming-diversification/ to download the report in full.
- Sales of organic food increased by almost 13% in 2020, according to the Soil Association’s annual ‘UK Organic Market Report’. Some categories experienced even higher growth, including produce (15.5%) and meat, fish and poultry (16.8%) (www.farminguk.com/news/uk-organic-market-now-worth-2-79-billion-report-says_57560.html).
Farm shops are typically run from premises located on or next to a working farm. Local authority planning permission may be required before a farm building can be converted for use as a farm shop.
In England, Wales and Scotland, change-of-use planning permission is required if a ‘significant’ amount of produce is to be sourced from external suppliers rather than being supplied directly from the farm. There is no set definition of ‘significant’, although some local authorities consider this as being up to 10%. Farm shop operators should check with their local authority planning department rather than assume permission is not needed. Go to www.rother.gov.uk/planning-and-building-control/agriculture as an example.
In Northern Ireland, planning permission will typically be required before a farm building can be converted for use as a farm shop, and may be granted where the proposed business is ‘clearly tied’ to an existing farm holding or occupant.
Tax implications of farm diversification
Tax reliefs that are unique to the farming industry could be jeopardised by farm diversification activities such as starting a farm shop. It is important for farm shop operators to seek professional advice before starting to trade in order to understand the potential tax consequences of diversification and to establish the best legal structure and format for a new retail enterprise based on the farm.
Diversification activities can result in the loss of valuable and unique agricultural tax reliefs, and can also affect farm tax computations and accounts. Diversified activities must usually be treated separately from farming activities for tax purposes, both with regard to income and apportionment of business overheads.
Various professional membership bodies list accountants who can provide specialist advice about tax planning for farm diversification. Relevant professional bodies include the Chartered Institute of Taxation (CIOT, www.tax.org.uk) and the Institute of Financial Accountants (IFA, www.ifa.org.uk).
Premises and business rates
While agricultural land is exempt from business rates, a farm shop is valued for business rates in the same way as any other shop. Business rates for farm shop premises vary significantly depending on the location, layout and size of the premises.
In England and Wales, the Valuation Office Agency is responsible for determining the rateable value of retail premises based on their size and rental value, and this figure is used by local authority valuation officers to set local business rates (www.gov.uk/topic/local-government/business-rates).
In Scotland, business rates are the responsibility of the Scottish Assessors (www.gov.scot/policies/local-government/non-domestic-rates), and in Northern Ireland they are dealt with by Land & Property Services (LPS), part of the Department of Finance (www.finance-ni.gov.uk/topics/property-rating).
Food business registration
All business premises, such as farm shops, where food is prepared, displayed and stored are legally required to be approved by or registered with the environmental health department of the local authority in the area where the premises are located.
A farm shop operator must submit an application for registration at least 28 days before they begin trading. Go to www.food.gov.uk/business-guidance/register-a-food-business for a guide to food business registration.
As part of the registration process, farm shop operators must produce a written food safety management system. The system must be based on Hazard Analysis and Critical Control Point (HACCP) principles, which require the farm shop operator and any staff who prepare or handle food to follow procedures that ensure it is safe to consume. Go to www.food.gov.uk/business-guidance/hazard-analysis-and-critical-control-point-haccp for information.
Farm shops handling or preparing ‘products of animal origin’ (POAO) (such as meat, game and poultry) need to be ‘approved’ by the environmental health department of their local authority, unless they are exempt because their supply is ‘marginalised, localised or restricted’.
After receiving the application, a local authority environmental health officer will inspect the premises and any statutory documentation on a regular basis.
The Food Standards Agency (FSA) has published a ‘Safer Food, Better Business’ pack for retailers in England and Wales, which covers registration and HACCP. Go to www.food.gov.uk/business-guidance/safer-food-better-business-for-retailers for more information.
Guidance is also available for food retailers in Scotland (www.foodstandards.gov.scot/publications-and-research/publications/retailsafe) and Northern Ireland (www.food.gov.uk/business-guidance/safe-catering).
Food hygiene ratings
The Food Hygiene Rating Scheme (FHRS) is run by the FSA in partnership with local authorities. Following an inspection by a food safety officer, farm shops are given a rating from zero to five, based on their standards of food safety and hygiene.
In Wales and Northern Ireland, farm shops must display their rating on the premises in a prominent place in the entrance to the shop that is clearly visible to customers. Operators in England are not required to display their rating, but it is considered good practice to do so.
Go to www.food.gov.uk/safety-hygiene/food-hygiene-rating-scheme for more information about the FHRS.
A similar voluntary scheme, the Food Hygiene Information Scheme (FHIS), operates in Scotland. Go to www.foodstandards.gov.scot/consumers/food-safety/buying-food-eating-out/food-hygiene-information-scheme for more information.
Other food safety and hygiene regulations
Under the various regulations, farm shop operators must comply with strict rules regarding the safety, presentation, traceability, labelling, and withdrawal and recall of food produce that they have purchased from their trade suppliers (www.food.gov.uk/business-guidance/general-food-law).
The rules are enforced under the Food Safety and Hygiene (England) Regulations 2013, the General Food Regulations 2004 (which apply in Scotland and Wales) and the General Food Regulations (Northern Ireland) 2004.
To comply with the regulations, farm shops must keep records of their immediate suppliers. These traceability records should include the name and address of the supplier, the nature and quantity of the order and the date of the supply.
Under the Food Safety Act 1990 and the Food Safety (Northern Ireland) Order 1991, food must be of the nature, substance and quality that consumers expect and must not be misleadingly labelled or presented.
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