Presenting at WheatStalk 2018 recently, 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, while Joanne Chang opened Flour Bakery + Cafe in 2000 and expanded the business to seven locations throughout Boston.
In the following slides, Scherber and Chang share some of the tips to success when starting a bakery.
A business plan is your blueprint to success. Every detail of your business should be mapped out — on paper — including short- and long-term financial goals and even business succession plans.
Make a detailed list of what products you are going to make, what your costs are going to be, and how you are going to sell. “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.”
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.”
Real estate location is vital, and it’s important to think through your plan. 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.”