Key considerations when opening a bakery

Answering the following questions will give you a foundation for opening your new business.

What type of bakery do you wish to operate?

Most bakeries are retail businesses that are open to the public and sell to customers. Some types include:

• Bakery cafes have a dining area available for customers to sit and eat. In addition to baked goods, cafes often serve coffee, tea and cold beverages. Some also sell a limited menu of sandwiches and salads to draw in the lunch crowd.
• Counter service bakeries are usually smaller and don’t have a dining area. Customers come in to purchase baked goods to enjoy at home.
• Food trucks make their baked goods in a kitchen facility that is closed to the public. Their retail location is a truck that may park in one specific spot or move to various locations.
• Ghost bakeries sell their goods by phone and online, and then deliver customer orders right to their door. Like food truck businesses, they operate a commissary kitchen to make the food.

What will you sell?

Bakeries can sell a wide range of products. The industry publication Bake Magazine reports that the following foods are the most profitable:

• Cakes
• Cookies
• Breads and rolls
• Cupcakes
• Sandwiches and wraps
• Yeast-raised doughnuts
• Beverages

One way to differentiate yourself from the competition is to offer specialty baked goods, such as vegan and gluten-free options. Some bakery owners choose to specialize in one of these areas exclusively.

What equipment will you need?

Depending on the type of bakery you open and what you intend to sell, you may need the following types of equipment:

• Commercial mixers
• Worktables
• Dough dividers
• Dough sheeters
• Dough scales
• Holding and proofing cabinets
• Refrigerators
• Shelving, storage racks
• Ovens
• Material moving equipment, dollies, trucks
• Three-compartment sink
• Hand-washing stations
• Bathroom fixtures
• Display cases
• Cash register, POS-system
• Tables, chairs for customer seating

What suppliers will you work with?

The recipes for the baked goods you intend to serve will help you determine what ingredients you’ll need to purchase on a regular basis. A very small bakery business may be able to buy the necessary ingredients at a grocery store or warehouse store. However, most bakeries work with a distributor.

Research local distributors and contact them for pricing information. You can also consider online suppliers that sell regionally or nationwide.

How to start a bakery depends on location

As food service businesses, bakeries are subject to strict local and state health and safety standards. Depending on where you’re placing your business, you may need to use specific equipment or design your layout in a particular way to comply with regulations.

Your location also determines what permits and licenses you need to obtain before opening for business. Get to know the requirements for your area early on, so you can take them into consideration when making key business decisions.

How to open a bakery: basic steps

The basic steps to opening a bakery include:

1. Put together a business plan

A business plan serves as a guide to opening your business. Writing one requires you to conduct a market analysis, determine what your business will offer, develop a management plan and business structure and put together a marketing plan. A business plan also includes financial projections that help you anticipate costs.

Read more: 9 Steps to Writing a Business Plan (With 2 Templates)

2. Get startup capital to cover initial costs

Your business plan will give you a rough idea of how much money you’ll need to start your business. Next, you’ll need to determine where that money will come from. Some small business owners use personal savings to cover startup costs.

Others take out commercial loans or seek investors who receive small stakes in the bakery in exchange for contributing startup capital. You may also wish to explore nontraditional sources of startup capital, such as crowdfunding.

Read more: How to Get Business Funding: A Guide for Employers

3. Secure a location and obtain the necessary permits and licenses

For retail bakeries, a good location is vital to success. To determine the best place to open your bakery, you’ll need to study the demographics, safety and accessibility of the area. How many competitors are located in the vicinity and how close you’ll be to suppliers are also key considerations.

In most cases, bakery startups lease space, rather than purchasing a building. Commercial leases are complex, so have an attorney review the agreement before you sign. Negotiation is an expected part of the commercial leasing process. Don’t hesitate to make a counteroffer if terms are less than favorable, or you believe the rent isn’t in line with market trends.

Once you’ve signed the lease, determine what licenses and permits are required to operate in the area. Take the steps needed to acquire them.

Read more: How to Find Commercial Lease Space for Your New Business

4. Set up the space and hire your team

After you’re licensed and ready to operate, you can begin designing your front-of-house and back-of-house areas and purchasing equipment. If you’re leasing your space, you may receive a tenant improvement allowance to help pay for some costs associated with modifying the space.

However, these allowances usually won’t pay for everything, so it’s important to have access to your startup capital by this stage. While renovations are underway, you can begin to hire and train your team.

5. Market your bakery

Once your team is trained and ready to serve customers, focus on spreading the word to draw customers. Use the market research and marketing plan in your business plan to guide you as you create your first marketing campaign. Establish a clear goal for your initial efforts and consider advertising through:

• Signage
• Newspaper advertisements
• Flyers
• Television
• Radio
• Social media

Read more: Creating a Marketing Plan for Your Business (With Template)

6. Open your doors and then have an official grand opening

A grand opening is a great way to let the neighborhood know about your business. You can give a discount to customers who stop in on the big day, and provide samples to encourage people to buy.

To ensure that things run smoothly, and you make the best first impression, schedule your grand opening for a few weeks after your first day of business. Doing so will give your team time to learn your processes and the use of the back-of-house equipment and your front-of-house POS system.

Hiring employees for your bakery

Who you hire can have a big impact on the success of your bakery. For a bakery cafe or counter service bakery, you’ll need employees for both the front and back of the establishment. Some common job titles for bakery employees include:

Pastry chefs

• What they do: Pastry chefs devise recipes, oversee the kitchen and perform baking tasks that require a high degree of skill.
• Do you need them?: Not all bakeries employ pastry chefs. If you already have your own recipes and plan to do tasks, such as cake design and decorating, yourself, you might not need one.
• How much do they make?: As of May 2019, the mean hourly wage for pastry chefs in bakeries was $22.48, and the average annual salary was $46,760.
• What to look for in candidates: Quality candidates will hold a degree in pastry arts and have previous experience working in and running a commercial kitchen. You may prefer to hire those who have worked for a similar bakery business in the past.

Bakers

• What they do: Bakers are responsible for mixing ingredients and baking.
• Do you need them?: Most bakeries need to employ at least one or two bakers.
• How much do they make?: As of May 2019, the mean hourly wage for bakery employees was $14.53, and the average annual salary was $30,230.
• What to look for in candidates: Hiring bakers who have previous experience can simplify the training process. During the interview process, ask candidates if they’ve used the various types of equipment in your kitchen and if they’ve ever made the baked goods you intend to sell.

Counter workers

• What they do: Counter workers are responsible for taking orders from customers, accepting payment and plating or packaging baked goods.
• Do you need them?: Food truck and counter service bakeries usually need at least two counter workers. Bakery cafes may need more.
• How much do they make?: As of May 2019, the mean hourly wage for counter workers employed by bakeries was $11.97, and the average annual salary was $24,890.
• What to look for in candidates: Quality candidates will have previous cash-handling experience and strong customer service skills.

Food prep workers and dishwashers

• What they do: Food prep workers complete simple tasks, such as preparing ingredients and rolling dough. Dishwashers are responsible for an array of cleaning tasks.
• Do you need them?: Most bakeries need at least one food prep worker and dishwasher.
• How much do they make?: As of May 2019, the mean hourly wage for food prep workers employed by bakeries was $13.09, and the average annual salary was $27,220. The mean hourly wage for dishwashers employed by bakeries was $11.74 as of May 2019, and the average annual salary was $24,420.
• What to look for in candidates: Quality candidates will be reliable and committed to teamwork. They must also be able to adhere to health and safety guidelines.

Opening a bakery FAQs

Is owning a bakery profitable?

Whether a bakery is profitable depends on many factors. The most successful bakeries usually see a healthy profit margin, but the average business in the industry usually has a low margin. Controlling food costs and carefully setting prices are key to ensuring profitability. Bake Magazine reports that profitable bakeries keep food costs at 35% or less.

How much would it cost to open a bakery?

Startup costs for bakeries depend on the size, location, number of employees and price of licensing and equipment. Initial startup costs vary widely, ranging from $10,000 to $150,000, according to a survey of resources conducted by SBDCNet.

Can you bake from home and sell?

Generally, bakery businesses can’t operate out of a home location. However, in some states, an individual may be able to produce and sell baked goods out of their home, provided they have a license and adhere to certain health and safety standards. Laws governing this practice are known as cottage food laws, home-food processing rules or baker’s bills. Your state’s Department of Health is a good starting point for researching the laws in your area.