How to start selling baked goods from home

How to Start a Baking Business

Whether you’re passionate about creating decoratively frosted cakes or artisan sourdough loaves, you must create an action plan for turning your passion for baking into a business. Discover the steps of opening a bakery below.

The baker in you wants to spend your days making chewy cookies and decadent cakes. The entrepreneur in you wants to be your own boss and call the shots. But the realist in you knows that you may not have the resources or the time to start your own retail bakery.

The solution could be a home-based bakery!

This type of small business lets you bake to your heart’s content, be your own boss, and work from home, instead of leasing an expensive storefront and hiring a squad of employees.

If you’re trying to figure out how to start a bakery business from home, you’re in the right place. Here’s a step-by-step guide to turning your home kitchen into a small-batch production powerhouse.

Whether you dream of opening a donut shop or a boulangerie, starting a bakery allows you to serve niche markets and express culinary creativity without taking on the financial burden of opening a restaurant. You can even start your bakery business from home before investing in a commercial space. While bakeries are comparatively accessible foodservice businesses, they present unique challenges. From writing a bakery business plan to getting funding and filing for permits, we walk you through each step of opening a bakery.

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Not Sure If You’ve Got the Skills to Start a Home Baking Business?

A home bakery is a business, just like a retail bakery. While it has its own set of rules and regulations, it must still abide by the same principles of great baking, customer service, cost control, and marketing.

5 Steps to Starting a Bakery Business From Home

• Create your business entity and acquire the proper licenses.
• Plan the bakery menu.
• Get the right equipment and supplies.
• Review your overhead costs and price your products accordingly.
• Start baking!

If you’re not sure if you have all of these skills, it may be time to invest in an education by attending pastry school to help you with both the pastry and business skills. With Escoffier’s online program in baking and pastry, you can earn a diploma or an associate degree—from home—in less than 60 weeks!

*Information may not reflect every student’s experience. Results and outcomes may be based on several factors, such as geographical region or previous experience.

Steps to start selling baked good from home

• Create a business plan
• Know the legal requirements of running a home business
• Get business insurance
• Register an LLC
• Check the tax regulations
• Choose your baking niche
• Determine how you will sell your products

While you might be hard-pressed to find someone who doesn’t love to eat baked goods, finding someone who loves doing the baking is another story. But for some people, not only is baking a creative outlet and a great stress reliever, it’s also a great business opportunity.

Although the traditional brick-and-mortar bakery has its merits, starting at home is a good way to get rolling, as there’s a low barrier to entry. You can launch your business faster by using your home kitchen and all its baking utensils.

There are also fewer expenses required to start. Without the need to rent a property or build a bakery, the bulk of your budget can go toward buying quality ingredients and marketing your business.

The ideal home-based bakery e-commerce solution

Create an online store for your business with Jotform Store Builder – no coding experience needed! Enable customers to place orders and make payments online.

Ovenly founders Agatha Kulaga and Erin Patinkin started in their Brooklyn home before growing to a company with over 70 employees. They are proof that learning how to start selling baked goods from home can be profitable if you have the blueprint for success.

In this piece, we’ll explain the steps you need to take to start a home-based baked goods business.

Obtain Loans and Startup Capital

When starting a bakery, there are many costs that you’ll need to consider, such as leasing a commercial space, getting insurance, outfitting your space with equipment, hiring and training staff, stocking your kitchen, and paying for utilities. As a result, you’ll need to have a significant amount of money available to cover these costs. Additionally, it may take a few months after opening for your bakery to become profitable, so you’ll need cash on hand to cover costs for several months after opening.

If you’re wondering how to open a bakery with no money, you’ll need to take out loans. There are three common ways business owners get funding: commercial loans, business lines of credit, and small business loans.

Cost to Open a Bakery

Bakery startup costs range between $10,000 and $50,000. The vast startup cost price range reflects the diverse array of bakeries. How much money you need to start a bakery depends on its location, equipment, staffing requirements, and menu items.

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A bakery specializes in making and selling baked goods. Like any business that serves food to the public, bakery owners will need a variety of legal documents in place to run the business legally and successfully. These documents ensure compliance with state and federal regulations, protect the business and customers, and establish clear expectations between the bakery and its clients.

Here are ten legal documents that a bakery may need:

• Business License. Most states and jurisdictions will require a bakery to obtain a business license from the local government to operate legally. The business license confirms that the bakery has the necessary permits to operate and complies with local laws and regulations.
• Service Agreement. A service agreement is a contract between the bakery and its clients. A service agreement may be used when the bakery creates a custom order for a client like a wedding cake. This legal contract will outline the
  terms and conditions
  of the services to be provided including the scope of work, costs, payment terms, and the obligations of both parties.
• Lease Agreement. It is common for a bakery to rent a commercial space to house the business. A lease agreement outlines the terms and conditions of the
  rental agreement
  between the bakery and the property owner. The lease agreement should include the cost of rent, the duration of the lease, and permitted use of the space.
• Supplier Contracts. Bakeries need to have supplier contracts, sometimes called vendor contracts, in place with their suppliers to ensure the timely delivery of the ingredients and goods needed for baking. Supplier contracts should outline the terms and conditions of the relationship between the bakery and the vendor, including the price of the products, the delivery schedule, and quality of goods.
• Employee Contracts. If the bakery hires workers, it is encouraged to have an employee contract in place. This legal agreement establishes the terms and conditions of employment, including compensation, benefits, and job duties. A bakery employee contract may also include a non-compete or
  confidentiality agreement
  to protect trade secrets like special recipes and baking methods.
• Liability Waiver. A liability waiver is a legal document, usually signed by customers, that releases the bakery from legal responsibility in the event of property damage or personal injury.
• Intellectual Property Rights Agreements. Bakery owners may create original recipes, product names, logos, and other
  intellectual property
  that need to be protected by law. Intellectual property rights agreements can help protect the bakery’s intellectual property from infringement and ensure that the bakery has the right to use and license its intellectual property.
• Privacy Policy. If the bakery has a website or app used for placing orders or making payments, it should have a privacy policy in place. The privacy policy explains to the customer how the business collects and uses personal data like payment information.
• Food Safety and Handling Policies. Bakeries must comply with federal, state, and local regulations related to food safety and handling. The bakery should have food safety and handling policies in place that address issues like proper food storage, handling, preparation, and cooking temperatures. These policies should be documented and available to employees in an employee handbook.

When opening a bakery, it is important to consult with an attorney to find out what documents you need to run your business. Some documents are required by law and other documents ensure good business practices and protect all parties involved in transactions. An attorney will be familiar with local laws that govern bakeries and can provide
legal document drafting
services

How to start selling baked goods from home

If you’re serious about baking more than a few buns on the weekend, you should create a business plan that details how you’ll manage your time, finances, and inventory, and how you’ll market and sell your products. This plan will serve as a guide you can refer to as you scale, making it easier to keep operations on track.

Know the legal requirements of running a home business

Overlooking the laws and regulations on home businesses is a recipe for disaster, especially when it comes to food service, as you could incur huge fines. You may need a permit or license to sell homemade food, so check with your local government and state health department before proceeding.

Get business insurance

While you’re working from home, it’s crucial to have a business insurance policy to safeguard against potential mishaps. Whether it’s a fire in the kitchen or an angry customer claiming ill effects from a bad batch, having insurance will give you financial protection and peace of mind.

Register an LLC

A limited liability company (LLC) is a business structure that offers business owners limited liability protection and pass-through taxation, which enables the owners to declare business taxes on their personal tax returns. However, if a limited liability company goes into debt, the debtors cannot lay claim to the owners’ personal possessions.

This venture into baking might start as a hobby for spare cash, but it’s best to do things by the book so you don’t lose your home in a lawsuit. Set up a limited liability company to protect your personal assets.

Check the tax regulations

A sales tax permit is often free, but you may need to pay taxes on sales or food items. Refer to local business information websites or your state government to determine what tax you need to pay. By putting money aside each month, you can collect enough to cover your annual sales tax bill when the time comes to file your business tax return.

Choose your baking niche

While you may be tempted to offer as many items as possible, it’s better to limit your offerings in the beginning. Focus on one or two items that are your specialty, and make them better than any of your competitors’ similar offerings.

Finding a niche — like gluten-free bagels or vegan cookies, for example — allows you to stand out as a specialist and makes it easier to make a name for yourself among a small, dedicated customer group.

Determine how you will sell your products

When you don’t have a traditional brick-and-mortar bakery, you have to think outside the box for selling your delicious goods. Will you head to the local farmers market every Saturday or rely on your friends and family to spread the word about your new venture?

While these options can bring in some sales, another option that may be more fruitful is selling baked goods through your own online store. This way, you can reach a wider audience that extends beyond word-of-mouth or in-person encounters.

If you’ve never built an online store before, the thought of setting one up might seem daunting. Jotform Store Builder is an excellent option for online bakery businesses because it’s so easy to use and doesn’t require any coding experience.

Here’s how Jotform Store Builder enables you to sell baked goods from home:

• It provides a helpful starting point. With over 100+ industry-specific store templates, you don’t have to start your online store from scratch. Instead, you can choose a store template that meets your business needs. Simply drag and drop your logo, list your products and pricing, and change the app icon and color scheme to personalize it.
• It makes adding useful functionality easy. Jotform Store Builder offers over 80 widgets to add whatever functionality you need — product lists, images, and videos, for instance — so your online store is engaging and comprehensive.
• It gives you important operational tools. Every online order is stored in Jotform Tables, where it’s easy to track and manage details. You can also create reports to better understand your customers and sales patterns, such as  seasonal trends.

How to start a bakery in 12 steps

There are multiple bakery formats that you can choose from. There are even some options without the overhead of a pricey store location. These are a few bakery formats worth considering, but feel free to get creative.

• This format is the most typical and recognizable format of a bakery, and it has its benefits. Very little space is required in the front of the bakery if you simply offer a counter that customers can order from. (Of course, you’ll still need space in the back for your kitchen.) Usually, there is no dining space, which keeps this type of bakery a lean and efficient operation. But this format does limit your options for serving food and keeping customers on-site where they might order more food and drinks over time.
• Bakery and cafe hybrid. This option has plenty of seating for customers, which can allow you the space you need to serve meals if you want to expand past baked goods. Even if you don’t, you can still add seating if you want to encourage customers to stick around for a while. You may want to add coffee or tea to the menu, as well. Plus, if you offer comfy seats and free Wi-Fi, you’ll likely find success amongst the working crowd.
• Starting a food truck is a cost-effective venue for opening a bakery and can help you reach a variety of customers. Take your baked goods along for the ride and park your food trucks at street fairs, by offices and at special events. Generally, you won’t have the space to bake in the truck. But you can easily pack up your truck with baked goods you made in your home or commercial kitchen space.
• Not ready to make the leap into renting spaces or buying industrial-sized equipment? Keep things simple and opt to start a bakery from home instead. You’ll require less startup capital and can easily sell your goods online, at local farmers markets, or offer catering services. You may even be able to make deals with local coffee shops or cafes to sell your goods in their locations by offering them a cut of the profits.

Write a business plan

Writing a bakery business plan is hard work, but it’s a step that will help guide you and provide focus. A business plan can also show stakeholders, such as investors, lenders and potential partners, where your business is heading.

• . The executive summary should outline your business’s purpose, where it currently stands, where you see your business in three to five years and why your business will succeed.
• Products and services. Provide a detailed look at exactly what your business will be selling. When you’re starting a bakery, this section can look at your menu and how the bakery format you chose in the first step will serve your customers.
• Marketing and sales plan. Explain how you’ll market and sell your bakery to customers.
• Financial plan and projections. You should provide at least three years of financial projections as well as any financial data from your business’s past performance. You’ll want to prove that you have a plan to take your bakery from an idea to a profitable enterprise.

All in all, your bakery business plan will be a lot of information to pull together, but completing this document will ensure that you have a strategy to develop and grow your business.

Choose a Business Entity

As you’re writing your bakery business plan, particularly the business organization section, the question of how you plan to structure your business will likely come up. Choosing a is an important step to starting a bakery (or any business). You may want to consult a business attorney, accountant or another resource to help you decide what type of business entity to form, as this decision will affect your taxes, legal responsibilities and more.

• Unincorporated business that either has one owner or is jointly owned by a married couple.
• Unincorporated business with multiple owners.
• Limited liability company. Also known as an LLC; registered business with limited liability for all of its members.
• Incorporated business; most common types being an S corporation or C corporation.

Choose a Business Name

You may have already decided on a , but if you haven’t yet, now is the time. Once you have an idea of what you’d like your business name to be, you’ll need to make sure it hasn’t already been taken by another business.

A quick Google search should be your first step. You can also search for trademark filings with the U.S. Patent and Trademark Office. Finally, a secretary of state business search will uncover if another business in your state is operating under your dream name.

If your budget permits, you can also hire an attorney to do this research on your behalf. You’ll save a lot of time and have some added peace of mind that you are legally safe to move forward with the name of your choice.

Find the right location

The next step in learning how to start a bakery is narrowing down your search for the right . If you’re opening a brick-and-mortar location, finding a commercial real estate agent who specializes in finding business spaces for purchase or rent can make your search much easier. Try to find someone who primarily assists the tenants, not the landlords, with the rental process.

You’ll want to make sure your agent has years of experience in your chosen community — that way, they’ll know what fair prices are and the best locations. They may even be able to help you find a restaurant lease that comes with some of the required bakery equipment like large refrigerators or ovens. Make sure the space you rent comes with plenty of room to store equipment and extra baking supplies.

If you’re more interested in the food truck route, you won’t need a real estate agent to help you with that. There are specialty car dealers online and in person that sell food trucks and trucks that can be adapted into food trucks.

To get a better deal, you may want to search for a used food truck on websites like Craigslist. Or, you might ask your local food truck owners, they may be looking to sell their own truck or know of other owners who are.

Get the appropriate licenses and permits

Each state will have different regulations, so you must check with your local government to see what business licenses and permits you’ll need to start a bakery in your area.

• Sales privilege license. If you’re opening a retail location, you’ll probably need a sales privilege license. This type of license will be necessary to sell your goods in a retail format. This allows your company to collect your state’s sales tax alongside what your goods cost.
• Food handler’s license. Any business that handles food will need a food handler’s license or a food and safety certificate. You will need to prove that you have the proper knowledge regarding food handling and storage. The owner will need this license as will any employees who assist in the cooking of your baked goods.
• If you choose to pursue a catering-style bakery business, then you may need a catering or food vendor license. This generally applies if you make the food yourself and deliver it, not if you prepare the food in the client’s kitchen.
• Kitchen health and safety inspection. Any kitchen space will need to pass a health and safety inspection in order to be properly certified. Researching these rules is especially important if you want to learn how to start a bakery from home.
• Zoning laws and permits. If you’re running a bakery out of residential space, you’ll want to review your local zoning laws to see if you can operate a business out of your home. In this case, other permits may be necessary. For example, a permit may be required if anyone is coming to your home to pick up food.
• Homeowner association rules. If you want to start a bakery from home, you’ll need to check the homeowner association rules and regulations first to make sure that operating a business out of your home is allowed. This is more commonly an issue that affects those who live in townhomes or condos.

Register for taxes and obtain an EIN

All businesses have varying tax, licensing and employer requirements. Learning about these requirements before you start a bakery will help you avoid costly and time-consuming mistakes. Your chosen business entity, as well as some other factors, will affect the business taxes you’ll be responsible for paying. If you haven’t already, it’s a good idea to consult a tax professional to make sure you’re aware of your tax responsibility and on track to file the appropriate paperwork on time.

If you plan on hiring employees to help you run your bakery, you’ll also need to apply for an employer identification number, also known as an EIN or business tax ID number. You can do this through the IRS and this number will be used when filing your business’s income tax return or payroll tax return, as well as when you’re opening a business bank account, credit card or filing for a business loan.

Even if you don’t need to obtain an EIN — sole proprietorships and single-member LLCs without employees are the only businesses that don’t — there are still benefits of getting an EIN you should consider.

Brand your bakery

Ask yourself, what story do you want your brand to tell? Then use that story to guide each of your branding decisions. Your story should be unique.

You want a name and logo that is immediately recognizable. The same goes for your decor and packaging.

Establishing social media pages for your bakery is also crucial to getting the word out about your new business while building your brand at the same time.

Separate your business finances

Starting a bakery can feel like a very personal affair, but you should do your best to separate your business and personal finances. One of the best ways to do this is by opening a business bank account. For some businesses, this step may be legally required.

When you open your business bank account, you’ll have to decide if you want a business checking or a business savings account. Usually, new businesses will be best served by a account. Businesses that are more established, and have plenty of cash on hand, will probably prefer a business savings account so their money can grow with interest.

Either way, it’s best to have some form of a business bank account to keep your business finances organized and running smoothly. The last thing you need to worry about is confusing your personal expenses with your business ones come tax season.

Another way to help keep your business and personal expenses separate is to obtain a business credit card. While you have several options available to you, you may also consider a business credit card with a 0% introductory annual percentage rate offer, which can be particularly helpful to cover any initial startup costs of your bakery. Keep in mind, though, you will need to make sure you have a plan to pay off your balance by the time the introductory offer ends for this to be a beneficial tool.

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Decide on your menu

That way, when everyone is over the latest trend, they know they can still come to you for their favorite classics. Ansel now has multiple bakery locations in New York, Los Angeles and London and sells new inventions (like frozen s’mores) and timeless baked goods.

Obtain bakery equipment

To turn your bakery into a legitimate, profitable business, you’ll need commercial-grade bakery equipment to help you churn out all those baked items out without your tools breaking down in the process.

What equipment is needed to start a bakery? You may need to obtain:

Price your products

When you’re trying to price your food products, it’s important to remember that pricing is determined by your expenses, operating costs, taxes and the market. To calculate the pricing of your baked goods, therefore, you’ll first need to figure out your monthly business operating costs. This will help you calculate how much you’ll need to make to cover the total cost to run your business.

Then, you’ll have to divide your production costs and overhead costs into your operating costs. Production costs take everything into account that’s needed to produce your baked items, such as ingredients and equipment. Overhead costs are expenses that are not direct costs — think advertising, accounting, labor, etc.

Once you’ve figured out your breakeven point and the production costs per baked good, you’ll be able to come up with pricing. For example, let’s say you own a cupcake business and it costs you $2,000 a month to operate your bakery. You project to sell 250 cupcakes per month.

To figure out how much you should charge per cupcake, you can divide the number of projected cupcakes into your monthly operating costs. If you divide 2,000 by 250 you should get eight. This means you should be charging $8 per cupcake just to cover overhead expenses.

Now, let’s factor in production costs. Let’s say each cupcake costs you $5 to produce. Add this cost to the minimum cost to cover your operating expenses (eight plus five) and you should get $13, which represents the minimum amount you should charge to cover your total operating expenses.

You can then decide how much profit you want to make and add that to the price of each baked good.

Set the atmosphere

The last step in learning how to start a bakery is customizing your space. If you choose to go with a storefront or cafe-style bakery, it’s time to amp up the atmosphere.

When it comes to the atmosphere, there are a few tricks of the trade that will help you create a successful bakery. For example, put your most eye-catching baked goods (like those fancy frosted cakes) at eye level in your display shelf. Less exciting staples like bread can take up some of the space on the lower levels of your display or behind the counter.

When you’re setting the atmosphere, creating a good first impression is key. Just like a well-designed restaurant has a stellar entrance area, find a way to make that tempting freshly baked cookie smell waft into the entryway of your bakery.

Similarly, you can invest in plush couches, cozy decor and oversized coffee mugs. Make sure your customers feel at home. As the owner, get to know your customers. It’s important to train all of your staff members to be equally friendly. And of course, a free sample or two never hurts.

This article originally appeared on JustBusiness, a subsidiary of NerdWallet.

Plan Your Bakery Menu

Once you understand the rules and regulations and have your company set up, you can start the fun part!

Many home-based bakeries make cookies, breads, muffins, cupcakes, or cakes. As your own boss, you can choose to make whatever you like best (and choose not to make anything that you don’t enjoy). Auguste Escoffier School of Culinary Arts baking and pastry student Katie Sualog makes legendary biscotti in her home-based bakery!

Make sure to keep local laws in mind while planning your menu! Remember, in most cases the end-product must be shelf-stable, so anything that requires refrigeration is usually not an option.

One of the best things about a home bakery is that they’re flexible. Let’s say you go to the farmers market one weekend to sell pre-cut slices of banana bread. You hear from a few people that they love your banana bread, and wish they could buy a whole loaf! Well that’s easy for you—next weekend, you can offer both slices and whole loaves for those who want them, versus having to stick to a predetermined menu. You can also switch things up whenever you like, experimenting with different ingredients or scaling back when things get a bit too busy.

Not sure what to bake? An education in Baking & Pastry Arts from Escoffier introduces students to many different types of baked goods. And with the online program, students can practice their techniques right in their home kitchens—perfect for the aspiring home-based baker.

Obtain Bakery Licenses and Permits

The foodservice industry is heavily regulated on a federal, state, and local level, and there are some bakery licenses and permits you need to start your baking business. The types of permits you’ll need will vary depending on your location, so be sure to check your local laws and regulations to see if there are any specific laws that apply to your new business.

Write a Bakery Business Plan

The first step in opening your new establishment should be to write a bakery business plan. The business plan is an integral part of starting a bakery business because it lays out what type of bakery you want to open, how it’s going to be structured, what sort of products you’re going to sell, marketing strategies, and financial projections. There are seven main sections to a bakery business plan:

• Executive Summary
• Company Overview and Description
• Market Analysis
• Business Offerings
• Management Plan and Ownership Structure
• Marketing and Advertising Strategy
• Financial Projections

Your business plan serves as the foundation for your business, and a strong plan can help you get funding and make the process of opening a new bakery easy.

Ready, Set, Bake!

Bake plenty of your best treats, package them nicely, and head out to sell! Most home bakers sell their goods onsite at events like farmers markets and county fairs. Check your local and state regulations for where you can and can’t sell home-based bakery goods.

You may (depending on state regulations) also be able to sell your baked goods online. If this applies to you, a simple website can let customers place orders throughout the week that you can deliver whenever it’s convenient for them. Be sure to include a disclaimer about how far in advance customers need to place orders to ensure they’re delivered on time.

Promote Your Home Baking Business

Showing up with baked goods ready to sell is a start. But with some marketing and promotion, you can get people excited about finding your stand at the local farmer’s market.

Do You Need a Culinary Degree to Open a Bakery?

You don’t have to have a culinary degree or a bachelor’s degree in business to own a bakery. However, having hands-on experience or academic knowledge of both the baking and business management aspects of owning a bakery will help you succeed. Having a formal education may help you attract investors and banks to garner the startup capital you need to open your bakery. Consider getting a certification from the Retail Bakers of America (RBA). The RBA certification verifies your knowledge, skills, and abilities without the hefty time and financial commitment of culinary school.

Lease a Commercial Bakery Space

Once you’ve secured funding, you can start looking for a commercial space for your bakery. The type of commercial space you need depends on the type of bakery you’re opening. For example, if you’re opening a food truck bakery, you’ll need to purchase the truck and you may want to look into renting space in a commissary kitchen.

Retail bakeries will want to look for a space in a central location close to their target demographic that also has a front-of-house area. Because wholesale bakeries sell their products to businesses rather than customers, they can be located farther from the city center or populated areas.

Best Place to Open a Bakery

• Demographics
• Accessibility
• Proximity to Suppliers
• Competition
• Size and Space Requirements
• Health Regulations and Zoning
• Safety and Crime Rates

Once you’ve found a suitable location for your business, you can hire a lawyer to draw up and negotiate a lease with the landlord. To protect yourself from any potential issues when negotiating a lease, be sure to specify the length of the lease, any raises in rent that might be included, who will pay for potential renovations, and any utilities that are covered.

Market and Advertise Your Bakery

Before you open your bakery to the public, you must conduct some marketing and advertising campaigns to get the word out and create buzz. You can break your bakery marketing strategy into five general steps:

• Write a market analysis. Your market analysis is a summary of your market research, and it should go in your bakery’s business plan. It should include information such as the average income level in your area, discretionary spending among your target market, and your competitor’s prices.
• Determine how you want to advertise your business. There are many ways you can advertise your bakery and each has its benefits. If you’re in an urban area, using signs is a great and affordable option. Consider traditional advertising tactics, such as newspaper advertisements and flyers.
• Create a social media presence. Social media marketing is a great way to interact with your customers, create buzz, and advertise your grand opening and other events. Additionally, many people will look for your bakery’s website and social media accounts before deciding if they want to visit, so make sure that you have an active online presence.

Many of these tactics apply to retail bakeries, but marketing tactics differ for wholesale bakeries. Wholesale bakeries should focus on competitor analysis and research where local restaurants and grocery stores source their baked goods. Then, they can reach out and try to make a deal.

Learn about small-business loans

While there are many bakery business models, they all fall under one of two umbrella categories: retail and wholesale. Retail and wholesale bakeries make similar products, but they have different needs and customer bases.

Opening and Operating a Retail Bakery

Retail bakeries are the most common type of bakery; they sell baked goods and loaves of bread directly to customers. Retail bakeries come in many different forms, and they often specialize in a particular type of baked good. They require both front- and back-of-house space.

Types of Retail Bakeries

Discover the most popular retail bakery business models below:

• Bakery Cafe – This type of bakery is a combination of a bakery and cafe, and they typically sell baked goods like bread, pastries, and cookies. They also pair their baked goods with coffee and tea. Bakery cafes typically have a dining space where customers can sit and eat.
• Counter Service – While counter service bakeries have a front-of-house, most do not have a dining space. Instead, they have a counter where guests can order freshly baked goods to take home.
• Bakery Food Trucks – Rather than using a brick-and-mortar store, food truck bakeries sell their products from a mobile truck. Due to the small space, many bakery food trucks do not bake in their truck, instead opting to bake their products ahead of time in a commissary kitchen or home bakery.
• Specialty Bakeries – A specialty bakery typically focuses on one type of baked good, such as wedding cakes, cupcakes, or gluten-free items. This type of bakery can excel because they offer niche products that customers either cannot find elsewhere or that are better than the products offered at less-specialized bakeries.
• Home Bakeries – This type of bakery is becoming more common, especially because you don’t need a lot of startup capital or culinary experience to open a home bakery. Home bakeries typically market their products online and then ship them to customers. Many home bakeries are also very niche or offer twists on classic baked goods.

Opening and Operating a Wholesale Bakery

The other main type of bakery is a wholesale bakery. Rather than selling their products directly to customers, wholesale bakeries market their baked goods to businesses like grocery stores, restaurants, delis, and cafes.

Because wholesale bakeries have to meet the demands of commercial customers, they are typically larger than retail bakeries. Wholesale bakeries don’t need to have a front-of-house or a desirable, high-traffic location. However, wholesale bakeries must produce high volumes of baked goods. This requires a large space and lots of baking equipment, resulting in higher startup costs.

Hire and Train Bakery Staff

The size of your staff will depend on the scale and style of your bakery. A locally owned and operated bakery with just one location is likely to have a short chain of command. Retail bakeries must hire and train front-of-house staff to take orders and work the cash register. However, most of your bakery staff will work in the back-of-house, preparing your baked goods.

Your bakery should have at least one or two employees that have formal training or bakery experience to oversee the actual baking process. You may also want to hire unskilled workers for washing dishes, mixing ingredients, packaging products, and doing other tasks that don’t require previous experience or expertise.

Some bakeries will also need professional pastry chefs and personnel to complete delicate and specialized tasks. For example, bakeries that bake wedding cakes should look for experienced cake decorators. Bakeries that offer artisan breads should consider hiring someone who specializes in bread baking.

Make Sure You’re Legally Set Before Doing Anything Else

A home-based bakery is a business, which means it’s still subject to state and local laws around food, business licensing, and taxes. Additionally, there are nuanced laws surrounding the sale of food items from one’s home.

Here are some general guidelines, but since laws vary from location to location, make sure to consult your local food and business regulatory agencies before moving forward!

Learn Your Local Cottage Food Laws

Home bakeries are generally covered by a section of law called cottage food. This classification separates home-based bakeries from commercial or retail operations that have designated storefronts or production kitchens. Commercial bakeries have to meet certain requirements for equipment and sanitation, while cottage-food operations are exempt from many of those rules.

To make sure these home-based food businesses don’t get too large (in order to prevent large-scale operations from skirting the regulations of a retail bakery), cottage bakeries usually have a sales limitation. They also have rules regarding who you can sell to. A cottage bakery is generally for direct-to-consumer sales only, so you couldn’t sell to a local grocery store or bakery.

The first step in the process is to assess the rules where you live. Your state and local health departments should be able to provide additional information on your area’s cottage food laws.

Create a Business Entity and Get Licensed

When you start a home baking business, there are other legal issues to consider before you tie on your apron. Some states require you to carry a business license to operate your home bakery. You may need a food manager license from the health department as well, depending on your state.

You should also set up a business entity, like a limited liability company (LLC). Setting up a company, versus operating your business as an individual or sole proprietor, protects your personal assets from legal liability in the event of a lawsuit. You may also need an insurance policy. Make sure you check with a cottage food expert and/or an attorney for advice on the best way to proceed.

Organize Your Finances and Plan for Taxes

One of the cardinal rules in business is to always keep your business banking separate from your personal banking. This means setting up a separate business bank account, which you can do once you’ve created your company.

You may also have to charge sales tax and/or food tax on the items you sell. You’ll need to keep careful track of your sales and document their breakdowns so you can ensure you pay the proper amount of local and state taxes.

Host a Grand Opening

The final step in opening a bakery is to host your grand opening and welcome customers to your business. A successful grand opening can get your new bakery off to a good start and help generate loyal customers. You should advertise your grand opening to create interest and alert your target audience that your bakery is open for business.

One great way to get customers in your bakery for your grand opening is to offer discounts and specials. For example, you can offer discounts for the first 100 people to visit. Another option is to give customers who order a dozen cupcakes one cupcake for free. You can also offer free samples to encourage customers to make purchases and expose them to more of your products.

Order Bakery Equipment

The equipment that your bakery will need depends on what type of baked goods you will be preparing. For example, you may need specific pastry supplies to create French pastries. While the specific equipment may change depending on the size and type of your bakery, there are several purposes you need to fill:

• Dough Preparation – This includes equipment like commercial mixers, work tables for kneading, dough dividers, dough sheeters, and dough scales. You may also need holding cabinets, proofing cabinets, retarder/proofer combos, and refrigerators to prepare your dough.
• Storage – Storage is important for keeping your kitchen organized. Your bakery will require shelving and storage racks. If you’re working with bulky bags of flour and sugar, you should invest in trucks, dollies, and carts to move large bags around your kitchen.
• Baking Equipment – Convection ovens are a great all-purpose piece of bakery equipment because they provide dry heat and bake evenly. If you’re preparing a lot of artisan bread, you may want to choose a deck oven to give your products a crispy base. Wholesale bakeries may be looking for high-output ovens, such as roll-in rack ovens or revolving ovens.
• Display and Sales Equipment – Choosing the right display cases for your baked goods can help boost your sales. You can choose self-service or full-service cases, and there are refrigerated and unrefrigerated options, depending on your needs. In addition to your display cases, be sure to also choose stylish boxes and packaging for your baked goods.
• Cleaning and Warewashing Supplies – A 3-compartment sink is the centerpiece of any cleaning station. You must also order hand washing stations for your employees, disposable gloves, cleaning chemicals, sponges, scrubbers, and other essential cleaning items.

Bakery Smallwares

In addition to your large equipment, you must stock your bakery with smallwares, such as mixing bowls, storage boxes, whisks, bread knives, and aprons. We compiled a list of essential bakery equipment to ensure you don’t forget anything.

You can download the opening a bakery checklist PDF below:

Download Baker Smallwares Checklist PDF

A solid marketing strategy is the icing on the cake

For example, with Jotform Store Builder, you can create QR codes that link back to your online store. Add these codes to flyers and business cards to spread the word about your new bakery business and make it easy for customers to find your store online.

You can also stir up interest with enticing photos and memorable branding. With the right marketing strategy and the tools to support it, your business is more likely to grow and thrive.

Layout Your Bakery

After securing a location and deciding what equipment is needed to start your new bakery, you can plan your bakery kitchen organization. If your bakery has a front-of-house area, you will need to design a floor plan. Learn how to lay out your bakery kitchen and storefront below.

Commercial Bakery Kitchen Layout

Every bakery kitchen requires four sections: cleaning, storage, food preparation, and meal cooking. Bakery cafes and bakeries with a front-of-house area will also have a service station, where they deliver food to customers. The ideal bakery kitchen layout is determined by the space and the placement of water and gas lines. Organize your bakery kitchen so the four sections flow together and measure your space to make sure you have enough room for your bakery equipment before finalizing your kitchen plan.

You will want to lay out your kitchen based on the logical flow of food through the baking process. This starts with the storage area and then goes to the food preparation and meal cooking sections. Once you’ve prepared your baked goods, you can serve them to your customers, package them for display, or ship them to online customers. Finally, your dirty dishes, pots, and pans will end up at the cleaning station.

Commercial Bakery Storefront Layout

Some bakeries will have a front-of-house area where customers can browse their selection of baked goods. Optimizing your bakery floor plan for ideal product placement and customer comfort prompts purchases.

Bakery Layout

There are four main bakery layouts, each with its own unique benefits.

• Straight Bakery Floor Plan – Your bakery display cases are organized in straight lines to make it easy for customers to browse.
• Angular Bakery Floor Plan – This floor plan uses curved displays to create an upscale presentation.
• Diagonal Bakery Floor Plan – A diagonal floor plan allows customers to flow through your bakery.
• Mixed Bakery Floor Plan – Maximize your space by using a combination of all the bakery floor plans.

Price Your Baked Goods to Ensure Profitability

Pricing your baked goods takes much more than simply looking at what your competitors charge and doing the same. Your baked goods must cover your costs of ingredients, labor, and additional overhead like business fees and farmers market fees, with some still left over for profit. But how do you figure out all of those numbers?

Calculate Your Food Costs

Build a spreadsheet of each ingredient that you use, plus the cost of each in common denominations. For example, you could list the costs of:

• a pound of flour
• a pound of sugar
• a dozen eggs
• a stick of butter
• a tin of baking soda
• and so on.

Then, use that information to calculate the food cost of each recipe.

Maybe you plan to sell cupcakes. Based on your spreadsheet, you can calculate the cost of the flour, sugar, baking soda, vanilla, eggs, etc. that go into your recipe for a single batch. If a dozen eggs cost $3 and you use two eggs in your recipe, you’ll know that the cost of those two eggs is $.50.

Let’s estimate that your cost per batch of cupcakes is $5.00. Then, divide that total batch cost by the number of cupcakes in a batch. For a $5.00 batch that yields 24 cupcakes, your cost per cupcake would be $0.21 $5.00/24 cupcakes = $0.21 per cupcake. Remember, this is only the cost of the ingredients required to make the goods.

Calculate Your Labor Cost

Next, assess how long it takes you to make a batch of those cupcakes. Perhaps it takes you two total hours to mix the batter, bake, decorate, and package two dozen cupcakes.

How much could you expect to be paid hourly if you worked in a bakery? Let’s say you would be paid $15 per hour. So a total batch of your cupcakes is worth $30 of your time.

Now, we can figure out the labor per cupcake. Divide the total dollar value of your time by the number of cupcakes. $30/24 cupcakes = $1.25 labor per cupcake.

Calculate Your Overhead Costs

Consider what other expenses you’ll incur for your business. This could include fixed costs like farmers market fees and a monthly website. It also includes variable fees that change based on how much you sell (like labels and packaging costs) plus cooking needs (think parchment paper and cupcake liners.)

These values can be hard to estimate before you have some experience and know approximately how many items you’ll sell per month, but do your best to estimate a total monthly overhead, and divide it by the number of items you expect to sell per month. When getting your start, you may want to under-estimate your sales so you don’t dig yourself into a hole from the get-go.

For easy math, let’s say your monthly costs are $100, and you sell 400 items per month, for an overhead cost of $0.25/item. $100 overhead/400 items = $0.25 per item.

Assess Your Cost of Goods Sold

Cost of goods sold (referred to in the industry as COGS) is the total cost of producing all the items you plan to sell. Add each of these individual costs up to get your cost of goods for a single cupcake!

In our example: $0.21 food cost + $1.25 labor cost + $0.25 overhead costs = $1.71 per cupcake.

Now you have an absolute baseline for your sales price. Anything under $1.71 and you’ll lose money on every cupcake. Anything over $1.71 and you’ll make money on every cupcake.

To get your shop’s COGS, repeat this process for each item you sell.

Get Your Equipment and Supplies

Once you know what you’ll be making, you can get what you need to execute your offerings. Whether that’s assorted cake or muffin tins, bread tins, cupcake wrappers, piping bags and tips—make sure you have everything ready to go and a place to store it all.

Some states’ cottage food laws require that you keep your bakery equipment separate from your personal kitchen equipment, so keep those extra space needs in mind. Make sure to track the cost of all of your supplies, so you can account for them when you price your menu and do your taxes.