Cakes, pies, donuts and even specialty coffee can make any bakery a beloved staple in a neighborhood or city. But before you pull out your rolling pin and flour to begin your next business endeavor, it’s important to understand the costs associated with becoming the next Molly’s Cupcakes, Dominique Ansel or Flour Bakery + Cafe.
The State of the Bakery Industry
Bakeries can be retail, selling individual products to customers or wholesale, providing bulk amounts of items to other businesses, organizations or individual consumers. Bakeries can even function as online marketplaces. According to a study by First Research, there are currently more than 6,000 retail bakeries in the United States drawing in $3 billion in annual revenue, and 2,900 commercial bakeries at $32 billion in revenue.
The Cost to Run a Bakery
Entrepreneur magazine notes that the average startup cost for a bakery is between $10,000 and $50,000. The Start Your Own Business Bible says bakeries can jumpstart with a nest egg of $2,000 and can draw in between $2,000 and $5,000 in monthly income. You should consider costs: securing a lease for a physical store; supplies such as mixers, bowls and storage containers; personnel; food and ingredients; and furniture and decor.
For smaller bakeries, the expense breakdown should allot 25 percent of funds for ingredients and packaging, 35 percent of the money for labor, 30 percent to pay for overhead (rent, bills, etc.) and 10 percent for profit.
Joining a franchise can be even more costly. Noted chain Great Harvest Bread Co. Cafe & Bakery places the cost of opening a store under their brand to be as high as $615,930 for overhead, operating expenses and rental.
Securing Funds for a Bakery and Maximizing Profit
In addition to saving and scraping money together, aspiring bakery owners can fund their sweet dreams by securing a loan from a bank or finding outside investors. DIY decorations and renovations can also decrease overhead costs for owners working with limited resources. Once your bakery is open, it’s also advisable to use all of your inventory, provided it’s in good condition, to prevent throwing away funds on wasted food or equipment.
Proper budgeting, and pricing your products well, will also ensure that you operate within your means, and don’t undersell your company or turn patrons away by being too pricey. Owners should also make sure they have contingency plans in place so that unexpected costs don’t place them in the red. Opening any kind of business, including a bakery, requires a huge amount of thought and planning, and over time can become a worthwhile investment.