How to open a bakery: A comprehensive guide

Whether it’s a Danish pastry for breakfast, or a sausage roll for lunch, baked goods are a staple part of the modern British diet. Baking is now a multi-million pound industry, with current growth set at 2% per annum, and a further 5% for artisanal baked goods according to the Craft Bakers Association. With the right work ethic and the correct preparations, you could be next in line to take a piece of that pie.

Maybe your passion is for hearty pasties, artisan pâtisserie, or even a good old white loaf. Whatever the target of your affections, we’ve got some tips to help you on your way to business success:

  1. Creating a business plan
  2. Location
  3. Business Licensing and registration
  4. Obtaining the right insurance
  5. Equipment
  6. Employees
  7. Marketing your business

create a business plan: what type of bakery are you looking to open?

The first step when launching any business is solid market research — what’s already on offer in your field and how can you counter or improve upon it?

When entering a market as wide-ranging and competitive as baking, you’ll firstly want to consider the type of bakery you want to run. This will have an impact on operating costs, so it’s worth thinking carefully about what each will entail.

For instance, as a coffee shop bakery, you’ll be managing not only a production kitchen where your delectable bakes will be created, but also a front of house seating area where customers can enjoy their baked goods with a hot drink. This can be a great way to supplement the income you generate from your baked goods, but will require a greater upfront investment in terms of business licencing and front of house staff.

Perhaps you’d rather operate a retail bakery, where customers take away your baked treats to eat elsewhere. Here, you’ll still be operating both a production kitchen and front of house counter, but licensing will differ as the food is not being consumed on site. This, alongside the lack of seating area, could keep your upfront costs down.

Another option is a wholesale bakery. You won’t have to worry about a customer-facing unit as part of your premises, and there’ll also be no need for front of house staff. However, you’ll have to invest more in delivery arrangements, as well as the means to mass-produce your goods in a short period of time to meet the demand. This may mean more investment in delivery staff and kitchen machinery. You’ll also have to develop relationships with local businesses to whom you’ll supply your product.

 

What do I need to include in my business plan?

Once you’ve considered the type of bakery you want to operate, it’s time to put pen to paper and create a business plan. This should include:

  • What type of business you want to run
  • The products you’ll serve
  • Your budget
  • Funding
  • Pricing
  • The premises that you’ll run your business from
  • Branding
  • Marketing and advertising
  • Staffing

Carefully consider the demand

As mentioned, the baked goods market is a behemoth with potential competitors growing by the month. That’s why it’s important to consider exactly who you are selling to and whether the demand for your product is truly there.

Where would you ideally like to open your bakery? Is it in a small town or in a large city? Near a station or along a parade of shops in a residential area? While you don’t need to have the perfect plot in mind at this stage, having a rough idea of where you’d want to be based will help you to analyse the demographics of the area and who will likely be your target customers. 

Next, consider your unique selling point – what makes your bakery different from the others? Is your focus on grandiose, elaborately decorated celebration cakes for customers with disposable cash, or is your goal the hungry commuter, looking for quick and easy takeaway pastries? Think carefully about your prospective target market and seek out that special something that appeals specifically to their tastes.

You’ll also need to analyse your potential competition. What products are other local bakeries offering? What type of business are they running? There may be a profitable niche in the market waiting for you to fill it.

 

find the right premises to lease

The right location can make or break a business, especially in the food industry where footfall is integral. Now that you’ve decided who your target demographic is and how you’re going to appeal to them, you’ll want to pick a location that complements that focus.

Your premises are likely to be the most expensive aspect of launching your business, with rent or a mortgage on an appropriate venue ranging from £1000 – £5000 per month on average.

With that in mind, think about how much space you need. A coffee shop bakery will require a lot more space to fit the store front and seating area, compared to a delivery-based wholesale bakery, where you may only require a kitchen, so it’s worth considering what equipment and furniture you’ll need and where it will go.

Once you’ve found a potential premises with enough space, you’ll need to consider the costs involved with getting it up to scratch. Are the necessary utilities (running water, electricity, etc.) readily available, or will further work be required? Do you need to do a complete renovation to perfect your branding and attain your desired atmosphere, or are there only small, cosmetic tweaks involved?

It’s important to be honest about your budget and what you can realistically afford. Conveyancing or having a solicitor oversee the leasing process can run you into the £400 – £1500 range depending on the length and scale of the work needed, so all these small things can add up to big numbers. Make sure to factor them into your plan.

LICENSING AND REGISTRATION

All businesses need to be registered with HMRC and Companies House under a business type, whether that’s a sole trader, limited company, or partnership. However, when it comes to food, there are a few more things to consider. It’s vital that the local authority knows that you’re selling to the public, so that they can offer food preparation inspections and give you a rating based on cleanliness and preparation, which will need to be displayed clearly to customers on site.

You’ll also need to make sure that your premises are in the correct use class for your needs. For a retail bakery fulfilling takeaway orders, this would be class A1 but, if customers are sitting in, you’ll need class A3. This can be changed by contacting the Local Planning Authority.

Bear in mind that everything will need to be registered at least 28 days before you start trading food to customers.

Costs involved in starting a bakery

As with any business, there are start up costs that need to be covered. Your main cost will likely be the upfront costs of any equipment that you require, as well as things like company registration fees and initial branding and marketing costs. In addition, you’ll also be faced with regular outgoings on a monthly or annual basis, such as:

  • Rent for commercial premises
  • Utilities
  • Employees
  • Ingredients and stock
  • Insurance
  • Marketing
  • Licensing fees

You must also make sure that you have a food premises licence so that you’re able to serve food to the public. This is especially true if you are using eggs or dairy on site, due to the risk of harmful bacteria in some raw products. It’s also worth considering whether you’ll want to play music in your shop and, if so, you’ll need to pay for a music licence, along with the relevant licence fee.

Get the right insurance

As well as licensing, you’ll also need to make sure that you have the correct insurance covers in place for your bakery. Insurance is integral for protecting you financially against any accidents that may occur on your premises, and it can also protect you against any claims made against you or your business. Since not all insurance policies offer the same covers, some of the ones you may want to consider for your bakery are:

  • Public liability insurance: This is the base cover you’ll need for any business. It protects you in the event a claim is made against you by a third party who suffers injuries or illnesses as a direct result of your business, whether it’s accidental or not
  • Employers liability insurance: This insurance cover is a legal requirement if you employ staff and protects you and your business in the event a staff member suffers illness or injury on the job
  • Business interruption insurance: Unfortunately, there may be circumstances where you might need to close your business for a length of time. This particular cover ensures that you make a claim for any revenue you lose during this time, even if it’s only for a brief period
  • Business contents insurance: Whether it’s your equipment, stock, or anything else that’s kept in your premises, if they’re lost, damaged, or stolen, this will cover the cost of any repairs or replacements
  • Business buildings insurance: Fire, floods, and other hazards can cause great damage to the structure of the building in which your bakery is housed, but this will keep you financially protected and even extends to a complete rebuild

To ensure you have the right insurance covers in place for your specific business, it’s worth looking at specialist insurance policies designed for bakeries and shops:

  • Bakery Insurance: This specialised insurance will cover common risks involved in operating a bakery, complete with all the covers you should need to protect your business
  • Shop Insurance: Designed specifically for retail premises like shops, this tailored insurance policy will contain all the insurance covers you’ll need for running this type of business

BUYING EQUIPMENT

One of the greater upfront costs you’ll face is equipment, so it’s worth carefully considering exactly what you’ll need to fully operate your bakery. Remember, the kitchen is where the magic happens so getting the right tools in for the job is essential. These could include:

  • Commercial oven 
  • Microwave
  • Fridges
  • Mixers, blenders and processors
  • Bakeware and cookware
  • Measuring jugs
  • Mixing bowls
  • Rolling pins
  • Cooling trays and racks
  • Cash register
  • Card reader
  • Telephone

It’s also worth considering if you’re going to be serving drinks. If so, you may also want to think about purchasing an espresso or beans-to-cup machine for coffee, and a water boiler so that any other hot drinks can be made to order quickly and efficiently. You may also consider fridges in the shop front for cold drinks.

Speaking of the shop front, what will it look like? How will you display your baked masterpieces? Will you need display cases? Trays? Cake stands? Again, these are all things that will need to be factored into your budget.

HIRING YOUR WORK FORCE

Unless you’re planning to go it alone, you’ll need a competent workforce alongside you to help your bakery flourish.

Firstly, think about how many employees you’ll need. What are you expecting demand to be like? If you’re facing the busy commuter rush daily, you may need more front of house staff than if you were running a neighbourhood bakery in a small, sleepy village. If you’re running a wholesale bakery pumping out huge orders every week, you’ll need to bring in more kitchen staff to keep up with production demands, and enough delivery staff to keep orders running on time. Plan accordingly in line with the type of bakery you want to run.

Then, consider whether your staff will need any training. This will likely be true of kitchen staff who will be using professional equipment, but is also the same for front of house staff such as cashiers or baristas if you’re serving hot drinks. It’s also recommended that anyone working in or around the kitchen takes a course in food hygiene and handling.

MARKETING

What good is it creating the best product around if nobody knows about it? Marketing and promotion are an essential for any commercial business, but the correct approach is key.

Consider carefully how and where you will be marketing your business. Is your focus on the local community, or are you looking to pull in customers from surrounding areas using an online marketing campaign and social media?

It’s also worth considering a website — there are a ton of great website builder tools out there to help and, with Google paid ads, you could attract customers by bidding to place ads on the first page of Google. With so many options, it might seem a little daunting, so it may be worth contacting a marketing agency to see how they can assist, if you don’t want to go it alone.

Depending on your choice, marketing costs can differ greatly and could become quite expensive. However, as a wise man once said, with great (monetary) risk, comes the potential for great reward — in this case, lots of new customers.

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