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How to Start a Bakery Business from Scratch

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How to start a bakery? First, know different types of bakeries and figure out what kind of bakery do you want. Then, do an all-round business plan. Without this, you'll be making vain efforts. And next, you should...

Table of Contents

Chapter 1 What are Different Types of Bakeries?

Speaking of bakeries, they may produce similar products and look pretty much the same. However, they come in different types and scales. Different bakeries serve different kinds of customers and face different challenges. Therefore, it is important to figure out what type of bakery you want before investing.

There are mainly two types of bakeries: retail and wholesale.

Retail Bakery

Retail bakeries create and produce freshly baked products and then sell them directly to customers. This means retails bakeries require both front space and kitchen. Food trucks, bakery cafes and wedding cakes bakeries all belong in this category. Opening a retail bakery means you have the opportunity to:

⏺interact and community with customers directly.

⏺create attractive storefront and interior design.

⏺start up the business with lower cost.

⏺increase extra profit. For example, you can equip the bakery with coffee machine, fruit juice, ice cream, tea, etc. to attract more people and increase the profit.

Where there are advantages, there are also disadvantages. First, it takes time to figure out how many products you should prepare approximately every day. Second, the income changes every day depending on the number of customers buying. These two factors affect your cost and profit greatly. Last but not least, besides bakers, you need extra employees to be in charge of the shopfront and the cashier’s desk.  

Wholesale Bakery

Wholesale bakeries sell their products to other businesses like restaurant, commissaries, grocery stores, supermarkets, cafes, etc. With large scale orders and regular customers, you’ll have a higher and steadier income. Compared with retail bakeries, the interior design and the location of the wholesale bakery is not that important. With less rent and interior design fee, you can invest more on production equipment, food packages, delivery trucks, etc.

In conclusion, a wholesale bakery brings you a huge profit over retail bakeries but you need more overhead and upfront costs to make that happen.

Besides these two types, home bakeries are now commonplace. Home bakery is a good choice for investors with very limited amount of capital. The most important thing to do before planning is ensure bakery business from home is legal in your region. Necessary licenses and permits, essential raw materials and equipment and clean working space is all you need.

Considering what kind of bakery you want to invest is the first step. Now it’s time for you to weigh up the pros and cons to make the final decision. 


Chapter 2 How to Open a Bakery: 9 Steps to Success

After deciding what kind of bakery you’d like to have. You can start to get these 5 things done to create your own bakery.

Step 1. Business Plan

A comprehensive business plan is vital to a successful bakery. A careful market analysis before starting a bakery business can help you identify how to be competitive, how to price your baked goods and how to better serve your customers.

In terms of bakery industry, here are some questions to consider.

What are the costs and how much can they be?

   For investors that start from scratch, the costs include startup costs, storefront rent, decoration, cost of ingredients, raw materials and equipment, employees’ pay, permits fee, marketing and promoting, operating costs.

What baked good do you want to serve and what is the price of them?

Generally speaking, there are 2 kinds of products in every bakery: everyday mainstays and creative products. The former one is to pay the rent and the other one is to attract more new customers, giving an impulse to the profit.

   The price varies with the cost of raw materials, the location and the target market. According to surveys, the cost of labor and materials should be about 40% of the price, which means a bread that costs$2 can sell for$5.

You can find ways to increase the added values of your products. For example, beautiful and solid packages, customization, considerate services, etc. are all acceptable ways.

What is the name of your bakery?

   Name is one of the most important factors of a business. Here are 3 things to remember when coming up with a business name.

   ①The name should be unique, simple, easy to pronounce, spell and remember.

   ②The name should convey the essence of your business.

   ③There should be no confusing words or meaning in the name.

Step 2. Capital and Business Loans  

It goes without saying that you need a large amount of money to cover the costs. What’s more, it’s going to take months until your bakery becomes profitable, thus you need to prepare extra money for the operation of the bakery.

If you don’t have that much money, loans are here to fund. Here are 4 common types of loan for reference.

①Term Loan  

Term loan is a way to get more capital with great stability and flexibility. The lender provides you with a lump sum and you can repay at regular intervals over a set period of time. The term loan often comes with a fixed interest rate, that is to say you can easily figure out how much money you need to pay every month, which ensures your business to operate normally.

②SBA Loans

SBA stands for Small Business Administration. That means SBA loans is founded by the government with lower interest rates and fees. However, it takes a long process to apply, which may even get you stuck waiting for 6 months to get the money. If you need money urgently, the SBA loan is not a good choice.

③Merchant Cash Advances

Merchant Cash Advance is an option for short term financing due to its high interest rate. You can use it as a temporary loan to help meet the urgent need. It usually takes about one week to get the money. What’ s more, merchant cash advance is very suitable for people with bad credit.

④Equipment Loan and Leasing

If you don’t have money for the bakery equipment, try the equipment loan or leasing the equipment.

The loan enables you to buy the expensive machines and the leasing allows you to use the machine with less costs. One advantage of leasing is that you can see if the machine can meet your long-term needs, so that you won’t waste money on the machines that you don’t really need.

Step 3. Business Place

The location and type of the business place depends on the type of the bakery. In terms of the right location, here are 5 factors to think about.

①Accessibility

Wholesale bakeries sell their products to businesses instead of direct customers. Therefore, they are supposed to be located in places in developed road conditions. You don’t want the traffic to hinder your bakery products from being transported to your customers. Retail bakeries require large numbers of foot traffic and potential customers, thus, commercial centers, neighborhood, squares, etc. are all good options.

②Target Demographics

If the people in the area prefer natural foods rather than processed foods, that area is not suitable for your bakery. Moreover, make sure people in the community nearby match your customer profiles. In a word, the consumption level varies with the community. It is necessary to choose a location that’ll make your bakery profitable.

③Number of existed bakeries nearby

Similar business results in competition. If there are many similar bakeries in one market or neighborhood, potential customers will be distracted. If your products and price are not that attractive, the situation will be worse. But if you have some unique products or techniques, it is suggested to locate your bakery in somewhere with mature market. In that way, you’ll gain customers without much efforts.

④Possibility of expansion

With the growing business, you may need large space to accommodate more machines, people and facility. Are you choosing a short-term location or location for long-term operation? Is this place going to meet your future requirements as the business expanding? Think about these before making the decision. You don’t want to lose your regular customers and the presence you’ve established in that area. What’s more, moving the bakery takes lots of labor and money, not to mention the time you wasted.

⑤Safety

Nobody wants to shop and eat in an area where they are likely to get robbed and hurt. Therefore, it is necessary to locate your bakery in an area with low crime rate and great security. Bad locations will decrease the profit and result in more costs because you have to take additional security measures you have to take to keep your business safe.

Step 4. Licenses and Permits

Permits you need to open a bakery vary from location. Thus, you can check local laws and regulations to see what you need. It takes a long time to get all the permits done, so it’s better to start the process as early as possible.

Here are 4 permits you must get before opening your bakery. Check the local laws and regulations for the rest of permits.

①Business License

Business license is issued by the city or county and it gives you the authority to operate in your jurisdiction. You can search your city’s name and “business license” on Internet and that’ll lead you to your state’s government website where you can find the application and procedures. Business licenses are annual licenses and they need to be renewed periodically for a fee.

②Food Service Licenses

Food service licenses indicates your bakery complies with all the food preparation, storage and safety regulations. And it ensures you the authority to sell food.

③Health Department Permit

Bakeries need to get permits from local health department. Permits typically include employee health permit and building health permit. The employee health permit requires specific employee to obtain food handler’s permit, which means the employee has completed a class teaching them food safety, food storage, food sanitation practices, etc. Building health permit indicates your business premises follows the sanitation regulations.

The health department will check the bakery regularly to ensure the business meets all the standards from food service licenses and health department permits.

④Sales Permit

The bakery owner needs a sales permit if the state collects sales tax during customer purchase. You can get the sales permit on your local government’s website.

Other Permits

You may need other permits like sign permit, liquor license, dumpster placement permit, etc. to comply with local laws. You can visit the local government’s website to figure out.

Step 5. Layout and Interior Design

After leasing the proper location and get all the permits you need, you can start designing your bakery. You can be as creative as you like, but don’t forget these 5 necessary sections: cleaning, storage, food preparation, meal cooking and display section.

Step 6. Essential Equipment

Although the equipment you need mostly depends on the type of your bakery, there are 7 purpose you have to fill: dough preparation, storage, baking machines, display, payment, cleaning, small baking tools. I’ll introduce the equipment for every purpose in the next few chapters.

Step 7. Employees

Employees are important to your bakery. How many employees do you need? What do they do in the bakery? Do they have to be experienced?

Step 8. Marketing

Before making a move, you can do some research and analysis. This helps you to map out your target market, the income level in your area, competitor’s prices, etc. There are many ways to do the marketing and advertising. Signs and flyers are all good options. You can also consider social media, where you can advertise, promote and publicize other events.  

In terms of wholesale bakeries, it is better for them to find out the suppliers of their target customers and focus on their competitor.

Step 9. Opening Ceremony

Opening ceremony is the last step of starting up a bakery. This is the best time to attract customers. You can offer discounts and free gifts to impress the customers. And don’t forget to invite your friends and family who have been supporting you forever.


Chapter 3 Checklist of Essential Bakery Equipment

As implied by the name, bakery equipment is the equipment that is used to process bakery products. Besides bakery products like bread, bakery equipment can also be used in dough-related and pastry-related industries.

There are many types of bakery equipment. You can choose what you need according to the type and size of your bakery. Bakery equipment includes bakery ovens, dough preparation equipment, bread slicer and grater equipment, mixers and accessories, holding and proofing cabinets, bakery work tables, buns and sheet pan equipment, baking pans and other small baking tools.

Bakery Ovens

Ovens are indispensable to bakeries. Choosing the right one can improve the efficiency and ensure the quality of your products.

Dough Preparation Equipment

Dough preparation equipment includes spiral dough mixer, dough roller, dough divider, dough rounder, dough sheeter, etc. These machines help you to produce various bulk doughs and form them into required size and shape.  High quality dough is the foundation of finished products. Thus, you may want to pay more attention to choosing and purchasing the dough preparation equipment.

Source: https://cnbakeryequipment.com/

Bread Slicer and Grater Equipment

Automatic bread slicer and grater enable you to slice the bread into even slices in a few seconds. Compared with manual labor, automatic slicing and grating saves time and improves the cutting result.

Mixers and Accessories
Planetary mixers are designed for a wide range of application. Besides dough, it can mix and emulsify various paste, puree, soup and sauces. Mixers always come with different accessories like the mixing head of different shapes, which broaden the usage of the mixer. Thus, mixer will be a worthwhile investment in your bakery.

Holding and Proofing Cabinets
Proofing plays a vital role in the production of bread. It is hard to keep the perfect temperature and humidity for proofing. If the temperature or humidity goes wrong, you’ll waste a bunch of materials and time. Thus, proofing cabinets are here to help. Some ovens also have the proofing function so that you can proof and bake the bread in a single machine, which saves time, labor and space in the bakery.

Bakery Work Tables
Bakery work tables can be used as the link between different equipment and production process. They can make the production flow more organized and consistent. Tables come with undershelves or drawers can also be used for storing the tools you use every day. This also saves space in the space-deprived kitchen.

Pan Equipment
Movable racks for pans and trays are necessary. You can put lots of pans and breads in a small space and move them everywhere. Rack covers are an option to protect the products on the rack. Meanwhile, rack covers can keep the products at ideal temperature for a longer time.

Small Baking Tools

In addition to large equipment, small baking tools are also needed in bakeries. These small baking tools are versatile and relatively inexpensive, thus you can prepare some spare tools, in case they get broken. Baking pans of different size and shape, weighing scale, measuring cups, rubber spatulas, pie server, sieve, pastry brush, rolling pins, whisks, etc. are all common small baking tools.


Chapter 4 5 Tips for the Maintenance of Bakery Equipment

Bakery equipment is what saves a great amount of time and labor in your bakery. If the equipment breaks down, the work and production flow will be interrupted, resulting in losses. Thus, regular and proper cleaning and maintenance is absolutely necessary. Cleaning and maintenance help maximize the service life of your bakery equipment and stabilize the production. It may include replacing components and lubricating oil and removing residues.

The cleaning and maintenance vary from equipment. However, the central theme remains the same. Here are 5 tips to keep your equipment run smoothly.

①Read the User’s Manual

Read the user’s manual before you do any cleaning, maintenance and repair to the machine. After reading, follow the instructions to operate. What’s more, make sure all your staff know how to operate, clean and maintain the machine.

②Clean the machine regularly

The first tip is to clean your machines regularly. Remove the flour, the dough, the oil and other residues to keep the machine sanitary. This also prevent the machine from being blocked. You can do the cleaning after every day’s work or even after every shift.

③Clean with Proper Tools

Some machines only need clean water and cloth for cleaning, while some need cleaning agent and tools too. However, some cleaning agent may not be applicable to the machine and some tools may be too hard to the machine. Make sure you use the right tools so that there is no damage to the machine. After all, most warranties don’t cover artificial damages.  

④Perform Instant Maintenance

Check all the visible parts during cleaning and maintenance and deal with every little problem instantly. If some parts are worn, loose or need lubricating, handle it promptly.

⑤Prepare Spare Parts

Prepare some spare parts so that you can replace the broken one quickly, saving time and decreasing losses.


Chapter 5 Upcoming Bakery Trade Shows

Trade shows enable people to communicate face to face. It also provides opportunities to research your industry and build long-lasting relationships within your industry. Here are upcoming bakery trade shows in 2022 and 2023 for your reference.

NameThemeMemberTimeCountry
IBIEBaking industry trade fairprofessional visitors and general public17. – 21. September 2022USA
Bibac PlusTrade fair for the bakery tradeprofessional visitors only25. – 28. September 2022Belgium
südbackTrade fair for the bakers and confectionersprofessional visitors only22. – 25. October 2022Germany
CAKE&BAKEInternational fair for creative bakingprofessional visitors and general public18. – 19. March 2023Germany
FamebaTrade fair for bakers, butcher and caterersprofessional visitors only25. – 26. March 2023Germany
ibaThe world’s leading trade fair for the baking and confectionery industryprofessional visitors only22. – 26. October 2023Germany
SachsenbackTrade fair for bakers and confectionersprofessional visitors only13. – 15. April 2024Germany

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