No one is forcing you to "partake of a cupcake made with flour riddled mouse poop". Why do you want to be a part of a nanny state? By the way, how do you know there was anything like that near that kitchen? I would bet a fair amount of money that that kitchen was much cleaner than the local McDonalds or KFC.
Requirements for commercial-grade kitchens, legal compliance, inspections, taxes, fees, and the like are all designed to keep the “little guy” (or girl) out of the market. Have you ever wondered why the "mom and pop" stores very seldom make it more than a few months to a year? The big corporations flood the political spectrum with contributions and lobbying so politicians create more regulations to "make us safer". Is everyone (most people anyway) that oblivious to what is going on?
The system is designed to keep innovators like Chloe working for someone else — not competing with the powers that be. With all the artificially-imposed hassles and hurdles, working for an established company starts to seem much easier, cheaper, and less stressful. An honest start-up business has everything working against it.
The idea that a government bureaucracy can keep people safe is a delusion. People get sick even from the most highly-regulated food sources. The red tape and regulation creates a false sense of security at best, and a crushing burden at worst. Eating inspector approved cupcakes cannot taste nearly as sweet as the freedom to do things without constantly needing permission.
But by all means keep pushing for things that will squash small businesses. Just remember that the next time you or anyone complains about The Olive Branch or some other restaurant shuttering its doors.