You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple step guide to starting your bread bakery. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
STEP 1: Plan your Business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How long it will take you to break even?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a bread bakery?
The costs associated with opening a bread bakery business are substantial yet manageable. In total, business owners can expect to spend between $10,000 and $50,000 up front. This money goes toward:
- securing a kitchen for baking
- purchasing all necessary equipment
- getting ingredients
- marketing the business
- acquiring all necessary permits and insurance
For business owners who have limited startup funds, there are ways to save a lot on the first two expenses.
Many business owners have started bread bakeries in their home, baking in the kitchen. The baked bread is then delivered to wholesale customers or sold at local places that agree to let the bakery set up a table. Alternatively, some cities have commercial kitchens that local businesses can rent by the hour.
To reduce equipment costs, business owners can either rent a commercial kitchen or purchase used equipment. Used kitchen equipment is much more affordable than new items, and it sometimes is just as good. However they acquire it, business owners need access to the following equipment: a mixer, an oven, storage containers, a work surface, baking pans and trays, a refrigerator, a freezer, proof boxes, and baking utensils.
What are the ongoing expenses for a bread bakery?
The ongoing expenses for a bread bakery include the cost of the bakery’s space, utilities, and ingredients. If a business has employees, the profits must also cover their wages.
Who is the target market?
The target market for a bread bakery business is anyone who has some discretionary income. Almost everyone eats bread in some form, but people need some discretionary income to afford certain artisan or sandwich breads.
How does a bread bakery make money?
A bread bakery business makes money by selling loaves of bread. Loaves may be sold retail or wholesale.
How much can you charge customers?
Artisanal breads typically sell for between $5 and $10. Rise & Shine Bakery prices its loaves at $6 or $7 depending on the type, which is representative of many businesses in the industry. Wholesale prices for restaurants and retailers are lower.
How much profit can a bread bakery make?
A bread bakery business won’t normally be a million-dollar venture, but it can provide a handsome income. Columbus Bakery in Syracuse, NY sells a few hundred loaves each weekday and around 1,000 loaves on Saturday and Sundays. The bakery specializes in sandwich (rather than artisanal) bread and charges less than artisanal bakeries. Still, it brings in several thousand dollars each week.
How can you make your business more profitable?
A bread bakery business can increase profits by offering baking classes, publishing a cookbook, or opening a deli. Of these options, opening a deli has the greatest potential, but also carries the most risk.
What will you name your business?
Choosing the right name is very important. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your bread bakery is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
For most small businesses forming an LLC is a great option, but if you still want to weigh all your options check our our article, What Structure Should I Choose for My Business?
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
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.
STEP 5: 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.
STEP 6: 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.
Federal Business Licensing Requirements
There are federal regulations regarding what can and cannot be added to, sold as, and processed with food. Attached is a resource from the Food and Drug Administration detailing the process of starting a food business: How to Start a Food Business
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a break bakery business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
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.
For 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.
Certificate of Occupancy
A bread bakery business is generally run out of a home or commercial kitchen. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO). A CO confirms that all building codes, zoning laws and government regulations have been met.
- If you plan to lease a location:
- It is generally the landlord’s responsibility to obtain a CO.
- Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a bread bakery business.
- After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
- If you plan to purchase or build a location:
- You will be responsible for obtaining a valid CO from a local government authority.
- Review all building codes and zoning requirements for your business’ location to ensure your bread bakery business will be in compliance and able to obtain a CO.
When selling food, you will need licensing from a local health department; all establishments serving food are required to pass a health inspection. Tips for faring well on a health inspections
STEP 7: 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.
STEP 8: 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.
How to promote & market a bread bakery
The best way to market a bread bakery business is by word of mouth. Bread bakeries should make the best possible breads so that people will tell their neighbors and friends. Encouraging online reviews and building social media profiles can also help a business build its local reputation.
Recommended: Get started with local advertising for your business with a $300 credit from Yelp.
How to keep customers coming back
Of course, word of mouth advertising only works after a business has customers. To acquire new customers, a bread bakery can offer free samplings at local retailers where its bread is sold.
STEP 9: Establish your 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.
Start A Bread Bakery In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Anyone who enjoys baking bread may like running a bread bakery business.
This is a business that can be started as a part-time endeavor. Bread ought to be delivered soon after baking to ensure maximum freshness, so business owners shouldn’t plan on baking one day and delivering three days later. Business owners can, however, limit their deliveries to one or two days of the week.
For example, a bread bakery might start out only delivering on Saturdays. That would allow the business owner to bake on Friday nights.
What happens during a typical day at a bread bakery?
A typical day at a bread bakery business involves baking bread, which includes prepping ingredients, actually baking the loaves, and cleaning up equipment. Once baked, the bread is sold in person or delivered to customers.
In most cases, the baking activities start well before dawn so that bread is as fresh as possible.
What are some skills and experiences that will help you build a successful bread bakery?
Bread bakery business owners must both know how to bake bread and how to run a bakery.
Most people who consider this type of business already are good bakers, but anyone’s skills can be further refined. Many bakeries throughout the country offer bread-making classes that can help business owners further improve their breads and add new kinds of breads to their product line. Wide Awake Bakery and Le Pain Quotidien are just two examples of bakeries that offer classes.
There are also classes that teach the business side of running a bread bakery. The Institute of Culinary Education offers a bakery-specific class, and IAP Career College has a Bakery Owner Certificate.
Alternatively, business owners may be able to find a current bread bakery owner who is willing to serve as a mentor. Many bakers who are in other areas (and, therefore, not competitors) will help aspiring business owners, and spending some time with them will yield insights that few classes can provide.
What is the growth potential for a bread bakery?
The necessity to sell only fresh bread limits how large bread bakery businesses can grow. Most bread bakeries have a single kitchen where they bake, and they serve a defined geographic location. For example, Elmore Mountain Bread has a single facility (which isn’t open to the public). Ithaca Bakery has two locations, but bakes all of its bread at just one.
TRUiC's YouTube Channel
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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.
What are some insider tips for jump starting a bread bakery?
Opening a bread bakery business presents two unique demand challenges that many business owners don’t anticipate.
First, bread baking has seasonal highs and lows. Bread bakeries are busiest during the summer and winter holidays. Summer is a time when people are out shopping and eating, and it also is a busy time for catering. The winter holidays are a time when people purchase treats and host events. Spring, fall, and the rest of winter are slower periods that business owners must accordingly plan for.
Second, friends and family will be asking for discounts -- especially if they used to get bread for free. Business owners need to decide whether they will offer a friends and/or family discount, and then any discount must be applied consistently. Bread baker Michelle Green says that true friends and family will understand they can no longer get great discounts because the business must earn a profit.
How and when to build a team
Most bread bakeries start out as one- or two-person operations. Business owners that hire employees usually do so after there’s more demand than they can meet themselves, and when profits support an employee’s salary.