Bakeries are one of the most challenging businesses to open. Competition is usually fierce, with many franchises and established retail bakeries in the market. With the right combination of careful planning and dedication, our blueprint will empower you to successfully start your own bakery.
1. Decide what type of bakery you would like to open.
There are two main types of bakeries, wholesale and retail. Each type of bakery serves different customers and has different needs.
Wholesale bakeries sell to other businesses. A wholesale bakery is typically larger than a retail bakery as their baked goods are marketed to businesses like grocery stores, restaurants, delis, and cafes, and would likely produce higher volumes of baked goods. Wholesale bakeries do not require a high-traffic location or front-of-house space as they don’t sell directly to customers. Starting a wholesale bakery can be more expensive as they require a large space and lots of baking equipment.
Retail bakeries sell their baked goods directly to customers. They are the most common type of bakery. Retail bakeries typically have a lower startup cost compared to wholesale bakeries, as they require a smaller space and less baking equipment. They will require front-of-house space and a high-traffic location to deal directly with customers. There are many variations of retail bakeries, with each type specializing in specific baked goods.
2. Decide on a business name.
Make a list of the names that you like and then check those names in the U.S. trademark database to see if those names or similar names are taken. Once you have found a suitable name, make sure to register the matching web domain and social media handles, should you wish to market your brand online.
Learn more about how to name a business.
3. Write a business plan.
Your business plan is the foundation of the bakery and will serve as an invaluable guide for how to structure, run and grow your new bakery.
The business plan can fall into one of two common categories: traditional or lean startup. The traditional plan is very detailed, takes more time to write and is quite comprehensive, while the lean startup plan is high-level, written quickly and only contains key elements.
The main sections of your bakery business plan must include the following:
- Executive Summary.
- Company Overview and Description.
- Market Analysis.
- Business Offerings.
- Management Plan and Ownership Structure.
- Marketing and Advertising Strategy.
- Financial Projections.
4. Get loans to start your bakery.
Opening a bakery involves many costs. If you are unable to fund the bakery on your own, you will need to take out a loan. The most common ways to get funding for your bakery are commercial loans, business lines of credit and small business loans.
Commercial loans can be applied for at any major or local bank. You will need a high credit score to qualify and will benefit by getting access to large amounts of capital at lower interest rates, although you may have to wait months before accessing funds.
Business lines of credit work similar to a credit card. Upon approval, you can use credit up to a certain amount and you are only charged for the amount that you use. You have more access to credit once you pay off the existing balance. Business lines of credit do not allow you access to as much money as other loan types and require a higher lending standard.
Small business loans are meant specifically to protect small businesses and provide them with startup capital. They are available to those with borderline credit and offer lower interest rates. They require collateral and the approval process may take longer than other loan types.
5. Buy or lease a commercial space.
The commercial space that you require is determined by the type of bakery you wish to open.
Wholesale bakeries can be located farther from cities while retail bakeries will require a commercial space in populated areas. Food truck bakeries may require leasing space in a commissary kitchen.
Key factors to consider when looking to lease a commercial space are:
- Proximity to suppliers.
- Size and space requirements.
- Health regulations and zoning.
- Safety and crime rates.
Consider hiring an attorney to assist you in drawing up and negotiating a lease. To avoid potential issues with the landlord, specify the length of the lease, any raises in the rent that might be included, who will pay for renovations and what utilities are covered. You can consider negotiating with the landlord for one or two months of free rent during the renovation phase, especially if there is a lot of work to be done to get your bakery up and running.
6. Obtain the necessary permits and licenses.
The foodservice industry is heavily regulated on a federal, state and local level.
The licenses that you require are a business license and food service license. A business license is issued by your state and gives you permission to legally conduct business in a specific geographical location. A food service license is issued by your city’s health department and ensures that your bakery is operating in accordance with food safety regulations. Fees for a food service license are determined by the classification and size of your bakery.
There are a variety of permits that are required depending on your location. These may include an electrical permit, a plumbing permit, a signs and awning permit, a patio permit, a dumpster placement permit and a food handler’s permit. You can contact an attorney to get advice on local laws and regulations, especially specific laws applicable to a bakery.
What licenses and permits do I need to start a bakery business?
Food Service license.
Signs and Awnings permit.
Food Handler’s permit.
7. Design a layout.
Once the location for your bakery has been finalized, you can plan how to lay it out. Keep in mind your layout will need to be approved by the relevant authorities.
Kitchen and back-of-house layout: When creating the layout for the back-of-house area, you will need four main sections, cleaning, storage, food preparation and cooking. If your bakery has a front-of-house area, then the back-of-house layout must include a service station where food can be transferred.
Your kitchen layout must have a logical flow to create a seamless back-of-house environment. This usually starts with the storage area before going to the food preparation and meal cooking stations, after which the freshly baked goods can be served to customers or packaged, while the dirty dishes, pots and pans will eventually end up in the cleaning station.
Your kitchen layout will be also be determined by the placement of water and gas lines. Accurate measurements of the back-of-house must be recorded so that you are sure that you have sufficient space.
Front-of-house layout: When creating a design for the front-of-house floor plan, use a layout that makes customers comfortable and facilitates purchases. Bakery layouts come in four variations.
- The straight floor plan enables customers to browse the freshly baked goods easily as the display cases are organized in straight lines.
- The angular floor plan creates an upscale presentation using curved displays.
- The diagonal floor plan enables customers to easily flow through the bakery.
- The mixed floor plan combines all floor plans listed above to maximize the space.
8. Buy/lease equipment for the bakery.
In order to open up your bakery, you will require equipment and supplies.
Essential bakery equipment:
- Shelving serves as storage space for ingredients, supplies, plates and utensils, and other items.
- Baking equipment. Including a commercial mixer with accessories, a stand or tabletop mixer, a machine that assists with crimping, folding, trimming and sealing dough, a slicing machine, and a dough proofer.
- Commercial ovens. Consider the number of goods you'll bake daily to decide how many ovens you'll need.
- Utensils including dough cutters, flour sifters and spatulas. If customers will eat at the bakery, cutlery and crockery will be needed.
- Pans for preparation, moving and display.
- Donut fryers with accessories are required if donuts are included in your menu.
- Wrapping materials, bags and boxes for customers to take their baked goods away.
- Cooling racks.
- Display cases so that customers can see all the baked goods that you have available.
- Warewashing equipment such as a three-compartment sink should be the centerpiece of the cleaning station. Include a hand-washing station for your employees with essential items such as disposable gloves, sponges and scrubbers.
- Chemical detergents and sanitizers to keep your kitchen clean and safe.
- A modern and reliable POS system to process transactions when customers buy baked goods. The POS system should accommodate multiple payment options and have good integration capabilities. The POS system will also assist with daily, monthly and annual reporting.
- A business phone system for phone queries and orders.
It is recommended to use equipment financing for assets such as a dough proofer, ovens, fridges and point-of-sale systems. This ensures that the business credit card, bank line, and personal capital is kept healthy for things that will continuously cost money. Liquid capital should be saved for things that you will need to spend money on, unexpectedly or otherwise.
What equipment do I need to start a bakery?
Wrapping materials, bags and boxes.
Chemical detergents and sanitizers.
Business phone system.
9. Make sure your bakery is registered and has an EIN.
Your bakery needs to be registered with the government in order to legally employ people and deduct taxes. Registering will give you an Employer Identification Number (EIN). This number helps the tax agency to recognize who an employee works for when they file their income tax at the end of the year. If you don't already have an EIN you can apply for one online through IRS.gov.
10. Recruit and train staff.
One of the most important parts of starting any business is hiring. Consider using hiring software like Betterteam to help quickly find the right people.
Bakery Staff Job Descriptions and Interview Questions:
You may want all staff to sign non-disclosure agreements and non-compete clauses in their contracts to avoid ex-employees taking your recipes to another bakery or starting a competing business. Consult with a legal practitioner to draw up your employment contracts that include these non-disclosures and non-compete clauses.
11. Market your bakery.
It is highly recommended to do marketing and advertising campaigns prior to the opening of your bakery. Your marketing strategy can be simplified in the following steps:
Conduct thorough market research to identify your target market. The information you need to gather will revolve around demographics in the bakery’s area, competitors in the area and niche markets that you can capitalize on.
Write a market analysis and add it to your business plan. This is a summary of your market research and includes information such as the average income level in the bakery’s area, discretionary spending among the target market and competitor prices.
Create realistic goals for marketing and advertising your bakery. These could include a set target of followers on your business social media accounts and achievable sales targets for the month.
Decide on the most appropriate form of advertising for your business. Consider whether traditional newspaper, Google search, social media, word-of-mouth, radio, or other forms of reaching an audience are right for you, and within your budget.
Create a digital presence. Customers will likely look at the bakery’s social media accounts and website before deciding on whether they want to visit, so an active online presence is important.
Consider search engine marketing (SEM) to increase the visibility of your bakery in Google and other search engine results pages. When people are looking for a bakery, they usually search on their phones for "Where is the nearest bakery?" or "What's the best bakery near me?" and scan through the results.
You may want to research this topic on your own to get started or consider hiring an agency that can handle this. At a minimum, you'll want to register for Google My Business and upload images to your account. This will allow companies to find you more easily in Google search and locate you on a map.
Local SEM Essentials for Bakeries:
Register for Google My Business.
Start a Yelp! profile.
Create a Facebook account.
Take images of your baked goods.
Upload images and descriptions to all your accounts.
Encourage customers to rate you.
Research pay per click advertising.
12. Host a grand opening.
Opening the bakery is the final step in this process and hosting a grand opening of your new bakery is a perfect way to welcome customers to your business. Advertising the grand opening of the bakery is key to creating interest and ensuring that customers know the location of the bakery as well as the opening date.
Consider offering opening specials, free samples and discounts to entice customers into visiting your bakery for the grand opening. These could be in the form of offering a baker’s dozen to those who purchase a dozen or more baked goods, offering discounts to the first 100 customers, or offering free samples.
Real-World Tips, Tricks, and Strategies from Successful Bakery Owners:
"Baking is a multi-billion-dollar business. No one is the big dog. Maybe Entenmann's or Pillsbury is, but not us. The market is so large that we are not competing for customers per say. People seek us out. I'm certainly not crafting my strategy around what anyone else is doing."
"I knew that if I was going to take the business further, working from home was not going to cut it. Corporate clients want to know that they were dealing with an established firm. Now, the majority of our business comes from corporate clients."
"Make sure to use your business account for anything relating to the business. This helps you know exactly what you are using and buying. Use your bank account and a system like Quickbooks to integrate a payroll option to pay your employees, and even yourself."
How to Start a Bakery FAQs:
What is the best type of bakery to open?
You have the option of opening a wholesale or retail bakery. A wholesale bakery would produce larger volumes of baked goods marketed for businesses, while retail bakeries serve customers directly and produce baked goods on a smaller scale. Startup costs to start a wholesale bakery would be remarkably higher.
Should I open a bakery business from home?
Consider this if your startup capital is limited and obtaining a small business loan is difficult. You can keep costs low while establishing your bakery’s brand. Home bakeries usually specialize in variations of specific baked good such as muffins, cupcakes and cookies.
How much does it cost to start a bakery?
Bakery startup costs can range anywhere from $2,000 to $50,000 depending on the type of bakery you wish to open. Wholesale bakeries cost significantly more than retail bakeries due to larger location space and more equipment required. Online bakeries are often operated from home and require very little startup costs.
What happens if my bakery fails a health inspection?
If your bakery fails a health inspection because of critical violations, it can be shut down in most states. Non-critical violations can be just as detrimental to your bakery as failing often enough can damage your bakery's reputation.
How can I market my new bakery?
Share images of your goods to Instagram and Facebook.
Register for Google My Business.
Hold a grand opening.
Offer discounts and free samples.
Sell goods at a farmer's market or other local event.
What type of commercial space do I need to open a bakery?
Wholesale bakeries should lease commercial space away from the city to reduce leasing costs. Retail bakeries should lease commercial space in populated areas to attract customers. Food truck bakeries may require commercial space in a commissary kitchen while online bakeries may not require commercial space.
Are there any specific ways to design my bakery layout?
Yes, the back-of-house layout needs to have a logical flow for cleaning, storage, food preparation and meal cooking while the front-of-house floor plan must be comfortable for customers and should easily facilitate purchases.
What should my bakery business plan contain?
Company Overview and Description.
Management Plan and Ownership Structure.
Marketing and Advertising Strategy.
What revenue does a bakery generate monthly?
The revenue generated by a bakery depends on a range of variables, from scale, to experience, to business model. Bakeries often experience surges in business during the holiday season and the summer wedding season which compensate for off-peak periods.
Best Books to Read Before Starting a Bakery:
How to Start a Bakery Business: The Complete Guide to Opening and Operating a Successful Bakery
How to Start a Bakery: A Six Figure Business Plan for Bakers
The Business of Baking: The Book That Inspires, Motivates and Educates Bakers and Decorators to Achieve Sweet Business Success
Baking as a Business
What baked goods must I sell at my new bakery?
According to The SMB Guide research, the most popular purchases for customers at a bakery are cookies, cakes, cupcakes, muffins/scones, cinnamon rolls and bread. Gluten-free and vegan options, particularly with cakes and cookies, are proving to be successful new product introductions.
How do I comply with Health Department regulations at my bakery?
Follow proper sanitation procedures.
Label opened products with use-by dates.
Use gloves and hair protection.
Use approved decorating tools.
Never store items on the floor.
Store food at the correct temperature.
Ensure the cleanliness of sinks.
Store ingredients in food-grade containers.
Never store cleaning products near food.
Ensure that your bakery is rodent and pest free.
Store utensils and table linen in appropriate areas.