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Bagels are a classic breakfast food that became famous in New York City but are now enjoyed throughout the country. A bagel shop business provides bagels, which are a convenient, tasty and filling meal, to patrons for breakfast and lunch. In addition to bagels, most bagel shops also have beverages and sides, so customers can get a complete meal quickly.
Who is this business right for?
Anyone who is passionate about food and enjoys serving other people may be well-suited for opening a bagel shop business. The business involves lots of hands-on work making bagels and brewing coffee, and business owners are regularly serving and interacting with customers.
Because bagels are mainly eaten for breakfast and lunch, bagel shops are open during the morning and, sometimes, early afternoon. Owners should be prepared to work almost every morning, although they may close one day a week so they can have a day off. Additionally, many owners close their businesses for holidays.
What happens during a typical day at a bagel shop?
A bagel shop business owner starts their day in the early morning making bagels, brewing coffee and preparing other food items. As the morning progresses, business picks up and business owners transition from prepping foods and drinks to serving customers. As business slows later in the day, work usually focuses on cleaning and getting ready for the next day (although any customers that come in while the business is open are still served).
What is the target market?
An ideal customer for a bagel shop business is someone who eats breakfast but doesn’t have much time. Bagels are a quick, satisfying food. Bagel shops often appeal to both people with lots of discretionary income and those on tighter budgets, because bagels are relatively inexpensive.
How does a bagel shop make money?
A bagel shop business makes money by selling bagels, other food items and beverages to customers. Some businesses may also cater events.
What is the growth potential for a bagel shop?
A bagel shop business can be as small as a single location or as big as a national chain. Many successful bagel shops are regional, having a few locations in a particular area.
What are some skills and experiences that will help you build a successful bagel shop?
Bagel business owners should, first and foremost, know how to make bagels. Many companies sell bagels wholesale that can be baked in-store, which is relatively easy to do. Business owners that want to bake their own bagels, however, should take a bagel-making course to learn the craft. There are many companies that offer short classes on bagel making. Sour Flour and the International Culinary Center are two companies that hold workshops.
Business owners should also be familiar with how to manage their workflow and employees. Visiting other bagel shops and observing how they run their operations is a free way to get some insights. Bagel shop owners in other cities may be willing to sit down and talk, as a bagel shop in a different city won’t create competition for them.
What are the costs involved in opening a bagel shop?
The startup costs for a bagel shop usually total tens of thousands of dollars. Some of the largest expenses include rent, equipment costs and employee salaries (if hiring employees). Other expenses include bagel-making supplies, expenses for other foods and beverages, supplies to put bagels in and cups.
Business owners who want to keep their startup costs minimal can find a small retail location so their rent is lower. A small location will also make it easier to grab items for customers, so business owners may be able to do all the work themselves and might not need to hire an employee. Purchasing used equipment, which costs substantially less than new, can also provide significant savings.
What are the steps to start a bagel shop?
Once you're ready to start your bagel shop, follow these steps to ensure that your business is legally compliant and avoid wasting time and money as your business grows:
- Plan your business. A clear plan is essential for success as an entrepreneur. A few important topics to consider are your initial costs, your target market, and how long it will take you to break even.
- Form a legal entity. Establishing a legal business entity prevents you from being personally liable if your bagel shop is sued.
- Register for taxes. You will need to register for a variety of state and federal taxes before you can open for business.
- Open a business bank account. A dedicated checking account for your bagel shop keeps your finances organized and makes your business appear more professional to your customers.
- Set up business accounting. Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
- Obtain necessary permits and licenses. Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
- Get business insurance. Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
- Define your brand. Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
- Establish a web presence. A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers. Save 15% when you create a business website with Weebly.
Select your state below for an in-depth guide on completing each of these steps in your home state.
Where can I find a business mentor?
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
How to promote & market a bagel shop
All marketing efforts should be focused on residents, workers and commuters who are in the area that a bagel shop serves, which can be fairly small. Signs help draw attention to a business.
To get people in the door initially, business owners can go to nearby businesses with coupons for free bagels or coffee. Giving away free items will encourage people to visit, and word will quickly spread if people like what they have.
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How to keep customers coming back
A bagel shop business can set itself apart by making authentic bagels. Many places, including coffee shops, grocery stores and diners, offer bagels. These are often frozen products that are thawed, though. A fresh-baked bagel will taste much better, and many people will specifically seek out great bagels. For this reason, business owners should take a bagel-making course.
How and when to build a team
A small bagel shop business can be run with just one person, but it involves a lot of work. As soon as possible, at least one employee should be hired to help expedite service during busy hours and relieve the owner of some day-to-day duties.
The next person hired is usually someone who can bake, although they may also perform other duties. Once a baker is hired and trained, the owner can take an occasional day off.
Depending on how big and busy a bagel shop is, it may be necessary to hire additional employees. A bagel shop business may have anywhere from just a few to a dozen or more employees.
According to PayScale, a baker at a bagel shop makes an average wage of $11.24 an hour. A cashier who doesn’t bake bagels earns about $8.85 per hour. Other employees’ wages may range between these two figures, depending on the level of responsibility that an employee has.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a bagel shop. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
In particular, most states require retail businesses such as bagel shops to obtain a seller’s permit. A seller’s permit enables states to record and collect taxes from goods (and sometimes service) sales.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
In addition, certain local licensing or regulatory requirements apply. For example, a bagel shop will need licensing from a local health department. Once a license is obtained, bagel shops will be randomly inspected by the local health department on a regular basis. These inspections will check for compliance with local health laws, typically related to prevention of food contamination.
For more information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
Maintain Personal Asset Protection
Don’t think that just forming an LLC, or any other type of business, will save your personal assets in case of a lawsuit or other matter by itself.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your LLC is sued. In business law, this is referred to as piercing your corporate veil.
Two of the simplest steps that will protect your business, and yourself, are to:
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
How much can you charge customers?
An article by Serious Eats looked at the price of a bagel at several bagel chains in New York (and Dunkin’ Donuts). A plain bagel ranged in price from $1.80 to $3.00, and a bagel with cream cheese ranged from $1.65 to $4.50. Prices elsewhere might be slightly lower, as New York City is known both for its bagels and high prices.
The other foods and beverages sold by bagel shops, such as fresh fruit, yogurt, coffee and tea usually cost about the same as a bagel or a bagel with cream cheese.
What are the ongoing expenses for a bagel shop?
The ongoing expenses for a bagel business include rent, licensing fees, employees’ salaries, costs for bagel-making supplies and other foods, costs for beverages, and costs for serving supplies.
How much profit can a bagel shop make?
How much a bagel shop business can make depends on how many customers a business serves in a day, week, month or year. For this reason, location selection is extremely important when starting up a bagel shop. In order to succeed, a shop should be located in a busy area.
How can you make your business more profitable?
A bagel shop business can increase its profitability by upselling customers. Featuring bagel sandwiches, which sell for more than a bagel with cream cheese, and offering other options, like espresso beverages and granola, can increase the average ticket price.