How to Start a Bakery

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 sold to businesses like grocery stores, restaurants, delis, and cafes.

Retail bakeries sell their baked goods directly to customers. They are the most common type of bakery. Retail bakeries typically have lower startup costs compared to wholesale bakeries, as they require a smaller space and less baking equipment.

Research the types of business entities you can start in your state, and decide on one that meets your needs. In general, there are five main options:

• Sole proprietorship: This business is started by an individual owner-operator. The sole proprietor and their business are regarded as a single entity.
• General partnership: Two or more individuals start a business together where liabilities are incurred personally.
• Limited partnership: This business structure is made up of at least one general partner (who typically manages the business) and a limited partner who accepts no personal liability for debts.
• Limited Liability Company (LLC): An LLC is more formal than a partnership in that articles of organization need to be filed. Owners can elect to pay personal income tax instead of corporate income tax.
• Corporation: A corporation is the most formal business structure. Owners hire a board of directors to make major business decisions, and the board hires officers to run the company.

Make a list of the names that you like and then search for them in the United States Patent and Trademark Office's (USPTO) trademark database. This will highlight whether anyone has trademarked the exact names or close variations thereof. You should also check whether the names are available to use in your state.

In most states, you can register your favorite name with your Secretary of State. Simply search for your Secretary of State's website and follow the directions provided.

Visit the USPTO website to trademark your business name.

Describe your business and list your goals, as well as what sets you apart from other bakeries.

Describe how you plan to launch your business. For example, you could host an opening sale and advertise by handing out flyers.

Let investors know how you plan to earn money from your bakery. Selling baked goods would be your primary revenue source, but you may also choose to sell merchandise or beverages.

List the job titles and names of the individuals who are part of the management team.

Discuss who your ideal customers are and describe their spending habits.

Describe which channels you will use to promote your business. For example, you may choose to advertise on social media, offer loyalty cards, or put flyers in local mailboxes.

Identify the strengths, weaknesses, opportunities, and threats (SWOT) related to your business.

List the top three bakeries that you would identify as your competition. Explain how your bakeries are similar as well as what makes your business unique.

List your sources of revenue, revenue projections, and startup expenses.

Let investors know how you plan to grow your business. For example, you could open another bakery or hire more staff members.

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 way to get funding for a bakery is by securing commercial and/or 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.

Small business loans are specifically meant 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.

Business lines of credit work similar to a credit card. Upon approval, you can use credit up to a certain amount and are only charged for the amount that you use. You have more access to credit once you pay off the existing balance. Note, however, that business lines of credit do not allow you access to as much money as some loans.

You can ask friends and family for help with funding through websites like GoFundMe or by approaching them directly.

The commercial space that you require is determined by the type of bakery you wish to open. Wholesale bakeries can be located further 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:

• Demographics.
• Foot traffic.
• Accessibility.
• Proximity to suppliers.
• Competition.
• Size and space requirements.
• Health regulations and zoning.
• Safety and crime rates.

Your bakery will likely require a food service license. This will be issued by your city’s health department to confirm that your bakery is operating in accordance with food safety regulations.

There are a variety of permits that might be required depending on your location. These may include an electrical permit, plumbing permit, signs and awning permit, patio permit, dumpster placement permit, or food handler’s permit.

When creating the layout for the back-of-house area, you will need four main sections: cleaning, storage, food preparation, and baking. 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.

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 move through the bakery.
• The mixed floor plan combines all floor plans listed above to maximize the space.

Essential bakery equipment includes:

• Shelving, which serves as storage space for ingredients, supplies, plates, 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.

• Refrigerators.

• Utensils including dough cutters, flour sifters, and spatulas. You'll also need cutlery and crockery if customers will be eating at the bakery.

• Pans for preparing, moving, and displaying the baked goods.

• Donut fryers with accessories are required if donuts are included on 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 point of sale (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.

It may be best to hire some equipment instead of purchasing it because of how expensive baking equipment can be. There are several items that a bakery relies on heavily, such as commercial ovens and stand mixers. If your business does not have much funding, renting these staples may allow you to use more high-end and reliable machinery.

Items like utensils and crockery should be bought since they are not very expensive and can be broken easily.

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 IRS to recognize who an employee works for when they file their income tax at the end of the year.

One of the most important parts of starting any business is hiring. Some roles you may need to fill include:

• Bakers.
• Food service worker.
• Food service runner.
• Food preparation worker.
• Server.
• Dishwasher.
• Cashier.

You can use free job posting sites like Indeed and Glassdoor to advertise your vacancies. You can also use social media platforms like LinkedIn and Facebook to post your job descriptions.

You may want all staff to sign non-disclosure agreements (NDAs) 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-disclosure and non-compete clauses.

Form I-9 verifies that employees are allowed to work in the U.S. Employers keep this form on file instead of submitting it.

Research which posters you are required to display in your workplace. There are both federal and state-specific workplace posters you may need to display.

Most states require employers to report new hires. Find out where you need to report new hires, as many states have a short period in which you need to report new employees.

Consider whether traditional newspapers, Google search results, social media, word-of-mouth, radio, or other forms of reaching an audience are right for you and within your budget.

These could include a certain number of followers on your business social media accounts and achievable sales targets for the month.

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.

Use 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 for "Where is the nearest bakery?" or "What's the best bakery near me?" and scan through the results.

Let people in your immediate vicinity know about your launch by advertising in a local newspaper or handing out flyers.

Consider 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 baked goods, discounts for the first hundred customers, or free samples.