Bakeries are currently in high demand, owing to the frequency of special occasions and events. People are always looking for high-quality bakeries to meet their needs. This article is for bakery owners who want to expand their business.
This step-by-step guide to starting a bakery has all you need to know!
1. Understanding the bakery industry and market
Starting a bakery in this fast-changing business climate requires a lot of preparation and knowledge of technology, future trends, and consumer preferences.
Here are some bakery market statistics that might help you build a firm basis for your business:
- Bakery market size: In 2023, the US bakery market was valued at $99.47 billion. Between 2023 and 2028, this market is expected to increase at a CAGR of 2.08%.
- Retail vs Wholesale Bakery: Commercial wholesale bakeries generated a revenue of 31 billion dollars, which is ten times that of retail bakeries. As of 2022, the United States had roughly 205,000 bakers. This includes both home bakers and commercial and retail bakers.
- Home baking business: By 2023, the market for home bakeries supplying baking ingredients is expected to be worth $15.6 billion.
2. Consider bakery business ideas
The first step in starting a bakery is to consider all the different bakery ideas you're interested in. Home bakeries, retail bakeries, and wholesale bakeries are all viable options.
The baked goods market has grown tremendously, so it's a great time to get started. There are several choices available for starting your own bakery business.
1) Bakery cafe: A bakery café is an excellent alternative if you want to offer dine-in or seating options to your customers. Bakery cafes typically offer coffee, drinks, and savory snacks in addition to their signature baked goods.
2) Counter-style bakery: If you want a store that takes up a little area, a counter bakery is an excellent option. The customer walks in, places an order, and receives the takeaway on the go.
3) Bakery food truck: A food truck bakery produces baked items in rented commercial kitchen space before selling them from food trucks.
4) Home bakery: If the food truck idea does not appeal to you, start a home-based bakery instead. Starting a home bakery involves minimal cost and resources.
3. Perform Market Research
You might be wondering if opening a bakery in the area is a practical option. Knowing what's going on in the baking industry is essential for meeting customer needs.
The good news? Bakeries are on the rise!
However, it's necessary to study your local business environment for things like:
- Local Market Trends
- Target Audience
This information will be useful later when building a business plan.
So, before you start your firm, find out what your potential customers desire by conducting preliminary research.
When deciding which baked goods you provide, keep in mind that some market groups are larger than others, as seen below:
- Bread: 32%
- Rolls: 19%
- Cakes: 15%
- Retail bakery products: 10%
- Soft cakes: 8%
- Pies: 2%
4. Come up with a bakery name
The bakery name is the cornerstone of your brand's identity. As a result, it must be distinctive and authentic to your brand's values.
There are numerous name-generating tools available to help you in coming up with the perfect idea. However, we have a few tips for you to consider before finalizing your bakery name:
- Don't make your names too fancy. Select names that are simple to spell and pronounce.
- Try to include bakery-related terms in your business name.
- Before using that business name, check to see whether someone has registered a trademark or copyright.
- Check the availability of the domain name online. Do the same for social media sites.
- The niche should reflect your specific niche. For example, if you want to start a cake shop specializing in wedding cakes, names like Everlasting Eclairs, Amour Cakery, Blissful Butter Bakes, and so on can help you build a strong reputation.
- Make it simple. Include your friends and creative peers in the group to brainstorm ideas for business names.
5. Create a bakery business plan
Just as a baker would not bake without a recipe, you should not start a business without one.
To turn your fantastic bakery idea into a profitable bakery business, you'll need a structure and a plan. A well-crafted company strategy can help you do just that.
Writing your own bakery business plan can provide you with a thorough understanding of your business concept. It will compel you to look into topics that are sometimes overlooked and overshadowed by the joy of launching a bakery.
A detailed plan functions as a bible for your firm. It has answers to all the steps, processes, and details required to run an efficient bakery.
List the sections of your business strategy by including these:
6. Think about the locations
Retail bakeries thrive in high-traffic areas. Ideally, the venue will be conveniently accessible to many people, have enough seating, and be priced reasonably for the square footage.
When selecting your business location, consider the following factors:
- Accessibility: Is it easy for customers to reach your location?
- Competition: Are there any other bakeries nearby?
- Foot traffic: How many potential customers walk by on foot?
- Parking: Is there enough space for customers to park their own vehicles?
- Growth potential: Is it possible to expand in the future?
- Demographics (target audience): Who lives and works in the area? Does this match your ideal customer?
- Cost: Research all aspects of the pricing to buy or rent the space.
- Bakery layout: There's more to think about than just how customers will move around the bakery. Continue reading below.
7. Create a bakery menu
Your bakery menu is like a fingerprint that will distinguish you in the market. It's important to have a menu that fills a market gap and sets you apart from competitors.
Depending on your bakery concept and target audience, you can include popular market-trending delicious foods. Or, better still, be the trendsetter.
Examples include gluten-free specialty, keto-friendly baked items, wedding cakes, artisan bread, flaky croissants, and so on.
Don't make it an all-specialty menu. Trends die and shift. The menu should include a few delectable delights and old favorites that will entice customers to become regulars. Bread, typical pastry flavors, coffees, muffins, and so on.
After you've decided which baked items to sell, start building your menu. It's important to remember that design entails much more than just making something visually appealing. To increase sales and profits, you must develop the optimal placement for the product and pricing.
8. Register your bakery and apply for business licenses and permits
It is advisable to register your business so that you can file returns and apply for necessary licenses and tax schemes.
State and local regulations for business registration differ depending on the type of business and its industry.
Select a business entity
The structure of your bakery business is defined by its business entity. This structure impacts your company's liabilities, state taxes, and filing fees, as well as the ability to secure business funding.
Overall, your business structure will influence the success and long-term viability of your bakery.
Here are a few common business entities to pick from:
- Sole proprietorship
Apply for tax registration & business EIN
The second step is to register with the state tax commission. Again, based on your business strategy, the tax needs will differ by state. Visit your state's official website to see the tax registration criteria.
Apply for business licenses and permits.
After you've given your bakery firm a legal name, start getting the licenses and permits required to make it legally compliant.
Create a checklist and draft your applications for your state's bakery licenses:
- Food handling license: all businesses that handle or procure food are obliged to get this license.
- Zoning permits: In many states, you must obtain zonal permits before launching a home-based business. Even food trucks must have a zoning permit to operate in specific areas. Check your state's rules and take the necessary steps to comply.
- Building permits: You must get this permit if you are renting a commercial space. You also need permission to build and renovate the rental space.
- Health department permission and food service license: The health and safety certification verify that you have completed all of the health and sanitation requirements for operating a bakery.
Be highly aware of your licensing obligations. Any kind of noncompliance will result in significant fines and, in certain cases, the permanent closure of your business.
9. Brand Your Bakery
Consider it a secret ingredient that will give your business a deserving taste of success in the market.
Begin by establishing your bakery's purpose, values, target audience, and rivals. This will allow you to weave an impeccable story on all fronts.
Do you want to establish your bakery as a brand that creates flawless wedding cakes or one that sells a variety of breads? Are you aiming to establish yourself as a bakery that sells scrumptious classics or as a specialty bakery that sells gluten-free treats?
Now, focus on little details such as the name, design, logo, decor, bakery flavors, packaging, employee uniforms, and menu to express your own brand story. Add the flavor of your brand into everything you do, be it digitally or physically.
Finally, remain consistent. Branding is like compound interest whose rewards increase year after year.
10. Determine your bakery's financial and operational expenses
The bakery has a lot of daily expenses to keep it going. If you don't keep an eye on expenses, your already small profit margins will dwindle.
So, before you invest your money and open a bakery, obtain a thorough understanding of your daily operational expenses. Maintain a realistic outlook when forecasting your monthly business operating costs. Account for the following expenses:
- Monthly rent or mortgage: $2,000-$2,500
- Business insurance: $500-$1,000
- Marketing and advertising: $500-$1,000
- Payroll: $2,000-$2,500
- Baking supplies and ingredients: $1,000-$1,500
- Maintenance and repair: $400–$600
- Technology expense: $100-$500
Rent, salaries, and supplies account for most of your monthly operational expenses. To keep costs under control, you must establish vendor relationships right from the beginning.
Also, before the operations expenses start, open a separate business bank account. It is advisable to keep your business finances separate from your personal accounts. Use your EIN to apply for a company credit card.
11. Secure Funding
If you have personal savings to start your business, that is excellent! However, you may need to borrow a portion of your startup costs until the business is sustainable.
Consider the following methods for obtaining funding for your business, as advised by the Small Business Association:
- Venture Capital Funding: If you can locate an angel investor who believes in you and your idea, this type of finance can be beneficial. However, it entails joint ownership, which many entrepreneurs are not thrilled about. However, it reduces risk and prevents borrowing.
- Crowdfunding: Another approach to avoid a loan is to raise funds from many people who each invest a small amount of money. Investors typically receive something in return, such as advertising credit, gifts, or other benefits. Crowdfunding projects are hosted on several web platforms.
- Business loan: Public and private banks provide a variety of business loans to small business owners. Submit your application and get a loan at a specific interest rate.
- Venture Capitalist: If potential investors find your idea compelling, they may invest in your company. You can obtain the funding you need to launch a bakery by selling a part of your shares.
- A business line of credit: Like a credit card, you are granted permission to use an amount within a particular limit. However, you will only be charged for what you use.
- Loans to finance bakery equipment
- Startup Grants
- Working Capital Loans
12. Hire your bakery staff
Now, let's put up a strong team that will drive your bakery business toward success. Depending on the concept and needs of your bakery, you will require:
- Bakery managers
- Bakery chefs
Do not hire a large number of employees right away. Strike a balance between full-time and part-time employees to lessen payroll workload in the first few months.
13. Purchase equipment
You've discovered a space and secured funding. Now you must arrange your kitchen and dining space for baking and serving the best products.
What Equipment Do I Need to Open a Bakery?
A commercial kitchen requires reliable equipment. Purchase your equipment online or locally. Your bakery equipment list for your commercial kitchen should comprise the following:
- Ovens – Commercial-grade ovens might be expensive, but they are an essential piece of equipment for your business. Many bakeries opt to lease larger equipment to save money on initial expenses.
- Mixers are large-capacity stand mixers with dough hooks for kneading bread.
- Refrigeration – Used to store perishable items like milk and cream.
- Tables/Workspace – Depending on the type of baking, tables may be required to decorate cakes or package items.
- Storage is a place to store your ingredients before they are used, as well as packaging or other goods. Carts with shelves may be useful for cooling baked goods straight from the oven.
- Dining Area – Tables, chairs, and a shop counter are all essential components of your bakery.
- POS System – A key component of every business is how to let your consumers pay. Having a Point-of-Sale system is essential for your business. It's even better to find one that works well with your accounting program!
14. Set the atmosphere and launch
Wholesale bakeries do not need to have front-of-house decor. If you intend to open a bakery cafe or counter-service bakery, you must first create the appropriate atmosphere.
Your bakery's motif should reflect your brand. When a customer walks in, they must experience the warm, enthusiastic, and cozy feelings that your brand represents.
When designing the dining area, make sure there is enough space between the tables to allow privacy. Invest in comfortable couches and clean-lined furniture.
Work with your counter's display shelves. How you present your baked products makes a huge difference.
The entranceway should be brilliantly lit up, putting people at ease as soon as they walk in. Find a way to avoid the stench of freshly baked goodies at the door.
Here are a few tips to help you create the ideal atmosphere for your new bakery in the market:
- Once you figure out how to govern your audience with the right kind of ambiance, you will be on your way to creating a successful and profitable business.
- After creating a clear bakery floor layout, get to work on the ultimate grand opening.
- Deploy a digital marketing plan to establish a strong online and social media presence. Advertise and create excitement for the grand opening. Spread the word via email, pamphlets, and local events.
- Make your launch day stand out by introducing special offers and discounts. The launch day will bring new customers to your bakery. It's an excellent opportunity for you to hook them on your delicious offers and world-class customer service.
- Set a day for launch and open your bakery's doors.
If you can already smell the lovely croissants baking in your oven, then it's time to get started with these bakery startup tips! Follow our guidance to overcome many of the difficulties that new entrepreneurs and bakers experience.
If you were to open a bakery, would you do so at home, wholesale, or from a food truck? Check out our blog to find out how much it costs to start a food truck.