Joanne Chang of Flour Bakery + Cafe
Presenting at WheatStalk 2018, held Feb. 27 through March 1 at Johnson & Wales University in Providence, Rhode Island, two of the most successful bakery owners in America shared valuable insights on how to open and manage profitable bakeries. Amy Scherber founded Amy’s Bread in New York City 25 years ago. Joanne Chang opened Flour Bakery + Cafe in 2000 and expanded the business to seven locations throughout Boston.

Scherber grew up in Minneapolis and graduated from St. Olaf College with a degree in economics and psychology.  After three years in marketing, she realized her heart was in cooking and baking and made a bold career change. After culinary school, she worked in top restaurants. 

Her first bakery opened in the Hell’s Kitchen district of Manhattan, starting in a 650-square-foot-space at a monthly rent of $2,000. “That was my low-risk beginning,” she says.

Today, Amy’s Bread operates four traditional locations in New York and has retail spaces in three additional spots: the Museum of the City of New York, the New York Public Library and the New York Public Library for the Performing Arts. About six years ago, they moved baking operations to a 30,000-square-foot facility in Queens. Many wholesale accounts are leading restaurants throughout the city.

“Vision is very important. It is what your business is all about,” Scherber says. “I always say the menu drives everything.”

Writing and updating your business plan is a cornerstone to success. “The most important part of your business plan is definitely the financials,” Chang says. “Nobody wants to work this hard to open a bakery and then close it after three years.”

Amy’s Bread operates as an S corporation, while Flour Bakery is an LLC. “We are an LLC, which combines elements of everything,” Chang says. “It’s simple to start. You pay a couple fees. The profits come straight to you, but the liability can protect you.”

Both Scherber and Chang said they borrowed from friends, family and investors to secure necessary funding to start their businesses.

Amy Scherber of Amy's Bread
“Our first bakery’s startup cost was $300,000 — start to finish to open,” Scherber said. “Part of that was a working capital allowance of $25,000 that we put in the bank.”

A good rule of thumb to follow is projecting your bakery’s first-year sales at three times startup costs. Shoot for 10% profit, and you may be able to pay off startup costs in three to five years.

Do the math on everything. “I do projected sales on a spread sheet with average check and average number of customers for each hour of the day we are open,” Chang says. “You should be able to pay your rent in one day’s sales.”

Eventually (some bakery owners wait a year or more), you as a bakery owner will need to pay yourself a salary. Chang remembers not caring about such money matters in the beginning, but “you will care if you work 10 years and you have nothing to show for it.”

Real estate location is vital, and it’s important to think through your plan, she adds. Scherber lived in Hell’s Kitchen prior to her first bakery opening and recognized the once-dodgy area was growing in popularity. “Real estate is a big issue. Today, it’s harder to find these little quirky places that are up and coming.”

Chang recommends negotiating long leases — a minimum of 10 years with options. “You don’t want the landlord saying after five years that we’re going to double your rent.”

Doing your own thorough research on possible locations is always a good idea, as is contacting a real estate broker to look at 20 or more open spaces. “Get involved and know the spaces,” Scherber says. “Finally, you can find that perfect spot.”

Look closely at potential hidden costs in each building space you investigate. What’s the ventilation like? The water lines? Some spots can save you upwards of $50,000 in renovation costs, Scherber says.

Chang suggests negotiating with landlords on a tenant improvement allowance to cover the costs of improvements.

Calculate your gross monthly rent per square foot, including taxes, insurance and maintenance. Utilities in cities like Boston, Chang says, are extra. Make sure an architect looks at your plan to make sure you can pass the health department inspection.

“Pay a lawyer to look at your lease,” Chang urges. Scherber agrees: “Giving the landlord a lot of your money is never a good idea.”