14 Aug Opening a Bakery: What You Need To Know
Happy Monday, friends!
Over the past two years or so, I’ve received so many emails from you guys, asking questions about how I opened my bakery, what the process was like, etc. Back in the beginning of 2016, I wrote a post on what I learned after opening a bakery (read it here) but I didn’t really go into enough detail for some of you regarding what you need to know before and during the process of opening a bakery, which left you asking so many more questions. So I thought it was about time to sit down and tell you what you need to know!
Something important to remember is that this post is written from my personal experience, and the process that I went through may not be the exact one you’ll go through (or that you’ve already been through) – every city, every landlord, every business is different! Hopefully this helps answer some of the questions you’ve been asking! I love hearing from you, so please feel free to share your experiences and ask any questions below.
Opening a Bakery: What You Need to Know
Create a plan and know your budget
This is a big one and one that is so important! Before looking for a space, before hiring anyone, before doing anything, it is so important to sit down and figure out what you’d like to achieve with your business. Also known as…a business plan! This includes what you’d like to sell, who your customers will be, doing your research on rent prices in areas you are considering, equipment costs, ingredients and packaging availability and cost, etc. Some companies go way into detail with this, but that is basically what I wrote down, starting with the budget at the top and creating a list of costs underneath. As I mentioned in my other post here, opening any sort of business will almost always cost a little more (or in some cases, a lot more) than you think, so keep this in mind when looking at your budget.
Choose a name
First piece of advice: try to be original! Make a list of names you like, then search your country’s trademark database (here’s Canada’s) to see if your name or something close is already taken. If it is, move on to another name. Once you do find a name, be sure to register the matching web domain (and hire someone to build a website for you), as well as the social media handles.
Know your brand
I get asked all the time how I came up with branding for my company. The truth is, I feel that I am the worst person to ever give advice on this topic because I just honestly and truly did what I loved – baked feminine, sprinkly things and designed my shop, website, packaging (boxes, ribbons, bags) and business cards in the same fashion. For the menu, lots of sprinkles, cutesy cookies, feminine cakes and macarons in pastel hues – it all just flowed naturally. I also had a clear vision of what I didn’t want to do (super-bright colours, typical holiday colours at Christmas, character cakes of any kind) and steered my brand in a more delicate, sweet and more feminine direction. Initially, some customers were angry when we politely refused making an Elmo cake (and some of that staff I had in the beginning didn’t understand why I wouldn’t make just anything any customer asked for) but most just understood that Sweet Bake Shop isn’t the place to go for that type of thing – it made sense, because it wasn’t my brand. If you don’t feel comfortable developing branding on your own, you can always reach out to someone in marketing to help assist you in developing something that you love.
Create a menu
To me, this was the fun part. Because I had been baking out of my apartment for a few years before opening a storefront, I was able to test the water with cake flavours, frostings and cookie doughs when actual customers ordered them and gave me feedback. I knew what my best-selling flavours were, what the most requested designs were and what my least-ordered sweets were, too. From there, I filled in the gaps with new recipes (more cookies, more cake flavours, more frostings, etc.) and made sure to test them on friends and family first. We started with a small menu and added new flavours and desserts as time went on. All of my recipes were printed out, scaled (example: a recipe for Vanilla Cupcakes would have measurements for 24 cupcakes and 48 cupcakes, etc.), laminated and placed in a binder, so recipes could be easily accessed and even spilled on, too.
Price out your desserts
I get this question every single week: How do you know what to charge for your desserts? It’s a bit of a complicated process, but skipping it and just pulling a price out of thin air isn’t the way to go about starting a business. I had my mom (a serious numbers person) look over all of my prices and math before I settled on final prices for each item. So basically, here’s how you do it:
Start with one of your recipes. First, you’ll need to know the total cost for all ingredients purchased (bags of flour and sugar, butter, etc.). Next, I break my recipe down so that I know the weights or volume of each ingredient. Then, I figure out how many recipes I can make from each ingredient purchased (each bag of flour, bag of sugar, palette of butter, etc).
Let’s say you have a recipe for 24 cupcakes. Here is an example for vanilla cupcakes, broken down into weights per package/bag and their price. Let’s use flour as an example. A 20 kilogram bag (which is 20,000 grams) of flour costs about $17.00. For this recipe, we’ll say I need 480 grams of flour for 24 cupcakes.
So you divide 20,000 grams (which is how many grams of flour per bag) by 480 grams (which how many grams of flour per recipe) = 41.66 recipes per bag. To round it out, let’s just say 40 recipes per bag of flour to account for spillage, etc. Then we take the cost per bag of flour (about $17.00) and divide by the number of recipes per bag (about 40 recipes), which equals 0.425, or about 43 cents in flour per recipe. So to sum up, in this case, the cost of flour for one recipe of 24 cupcakes is about 43 cents. That’s one ingredient and you have to repeat this process for each ingredient in the recipe (sugar, butter, etc). Once you have prices for each ingredient, total them up and you’ll have the cost of ingredients covered.
You’ll also need to account for packaging costs (cupcake boxes, cupcake liners,boxes), labour and overhead (rent, hydro, WCB, insurance, etc.) and factor that in as well. Finally, do your research and find out what other bakeries in your city are charging and make sure you’re in a similar price range – you don’t want to be charging $6.00 per cupcake if the going rate is about $4.00!
Proper packaging for your baked goods is so important! While having fancy, custom packaging is lovely, it can be really, really expensive, and can really cut into your budget. However, you will need packaging of some sort, such a boxes for sweets to be carried out of the shop in, shopping bags, etc. Ordering packaging from an overseas packaging manufacturer can cut costs, but also can take a very long time to arrive on your doorstep (think months). However, if you order well in advance, this can work out well. If you choose to order from North America, these guys are great in a pinch and I have big love for Georgette Packaging, as the owner Sarah is amazing and understood exactly what I was trying to achieve with my branding. But again, it really boils down to your budget, so try your best not to break the bank with packaging.
Location, location, location
Get to know your city, the different neighbourhoods and really have a look at what’s around in those areas. Is the area you’d prefer to open up shop already full of bakeries? Do you think that customers and residents in the area will pay the prices you’re hoping to charge? Choosing an area that has a lot of walk-by traffic is definitely a smart move, as well as an area that is close to public transit or that has ample parking (street, parkade, parking lot, whatever) so that people can easily carry their baked goods to their car.
It’s so important to be sure that the space you’re interested in is zoned for a bakery! To find out, go to your city’s website (like this) and search by address. I’ll never forget the poor woman who was in line at City Hall in front of us, who had already leased a space and was there to obtain the permits required to move some plumbing…and was being told that her business couldn’t even operate in that space, because it wasn’t zoned for the type of business she was opening. Heart-breaking, but avoidable! Doing a little research beforehand will save you from shedding major tears later.
Permits and such
I found this part of opening up shop super stressful, especially since I knew absolutely nothing about permits, rules and regulations surrounding the opening of a newly-renovated, food-producing storefront. Here in Vancouver, you’ll typically need: a business license, permits (think electrical, plumbing, signs/awnings, patio permits, you name it), a food service permit and a FoodSafe certificate. Some (but not all) of these permits can take months to obtain, which could mean renovations coming to a grinding halt. You’ll also need to jump through a few more hoops with your local health department (Vancouver Coastal Health here) by submitting a potential floor plan and having them approve it, before installing anything.
Here was my potential floor plan that I submitted:
Negotiate some free rent
The worst thing that your potential landlord can say is “no”. However, it’s completely normal to ask for a month or two free rent while you make necessary renovations and most business owners I’ve spoken to about this have said that this is usually met with a “no problem”, especially if the space really needs some work. Don’t be afraid to ask!
When you look at a potential space to lease, it can be tough to know what condition you’ll be receiving it in, especially if the space has a business running in it at the time you’re checking it out. For example, when I signed my lease, the space was a fully-functioning hair salon. Sinks, chairs, blow-dry stations, mirrors and all. When I took possession of the space months later, it looked like the “before” photo below. Originally, I wanted to paint the brick white or at least have it coated in some sort of sealant that would protect it from any food products that would inevitably end up on it’s surface, but my landlord said “nope”. So in came the drywall guys, the electrician and then the tile guys. A much bigger bill than I anticipated!
DIY (Do it Yourself)
Unless you have an unlimited (or very large) budget, you’re probably going to need to do a lot of the work yourself. This includes sanding, priming and painting furniture and walls, building your own signs and potentially going to restaurant equipment auctions in warehouses in the suburbs. Doing as much as you can yourself will really help keep your costs down!
This is where the majority of your money could end up being spent – equipment is pricey! To keep your costs down, I highly recommend searching for local restaurant supply auctions, where you can pick up gently-used equipment on the cheap. Another option is to rent new equipment with a company like SilverChef, who is a rent-to-buy equipment funding partner – I used them and had a great experience! And of course, if the money is flowing, you can always purchase new equipment from fancy restaurant supply companies, like these guys.
Register to pay taxes
Here in Canada, you’ll need to pay taxes such as GST/HST and PST if your business is making (or will make) over $30,000 annually. Additionally, if you have employees (which hopefully you will), you’ll need to register for a payroll account to pay employee payroll deductions/taxes.
Contracts and such
Contracts are so important. For example, all of my staff signed non-disclosure agreements, as well as non-compete clauses. The last thing you want is a disgruntled ex-employee taking your recipes to another bakery or having them start a competing business after leaving yours. No fun. You’ll also want to have your employees sign an employment contract, which states their wage, amount of days/hours they’re expected to work, etc. You can find templates for these contracts all over the internet, but you can also have a lawyer draft them for you as well (or at least have a lawyer look over your paperwork for any holes in the contracts). Additionally, here in British Columbia, every person preparing food must take a quick course in something called FoodSafe. The test is taken online, it’s quite simple and upon completion, you’ll receive a certificate. Every member of your team must present one to you before working in your kitchen.
You’ll (hopefully!) need some employees to help you bake and take care of customers! Be sure to interview each potential employee at least once and try to hire people based on not only their skills, but on their ability to get along well with others and work as a team. Inevitably, you will end up hiring some employees that won’t be a good fit for your company – I’ve never met a business owner that has kept every single person that they’ve ever hired. Not everyone works well in an early-morning, fast-paced environment…and that’s ok! All you can do is hire as best as you can, treat everyone with respect and hope for the best!
Marketing and advertising
As I mentioned above, you can hire a marketing/public relations company to help assist you with brand development. They can also help spread the word about your new business by sending out press releases, drawing media attention with an opening party and getting you a spot on your local news channel to plug your bakery. You’ll also want to use your social media platforms to advertise your sweets on a daily basis, (which is something that you can do yourself) to save costs. Additionally, some people place ads in their local paper, which can be really helpful, too! Personally, I found that Instagram proved to be the most successful way to advertise my business and the desserts sold there, because it could be updated hourly and I had full control over when and what was posted there. Plus, it’s free – always a good thing!
Costs to remember
- Payroll (pay for your staff)
- Baking ingredients (major fave is SnowCap)
- Insurance for the space (an insurance broker can help to find you a good deal)
- Work Safe (or whatever your local worker’s insurance program is)
- A security system (cameras recommended)
- Some form of pest control (legally required here)
- A laundry service for cloths and linens (assuming you don’t have a washer and dryer in the space) and/or janitorial services, if you don’t want to clean your space yourself
- Accounting/bookkeeping service charges and fee’s
- Advertising, if any
- Office supplies/equipment (ie, printer, paper, ink, etc)
- Telephone/internet services
Opening a bakery is costly, stressful (especially in the beginning) and exhausting work, but it’s also so rewarding! I’m sure that there are some points that I missed, so please leave any questions that you may have in the comments section below!