1. Identify the type of bakery you want to open
As a first step, organize your thoughts about the kind of bakery business you want to own and operate, and you should think about the ‘real’ reasons why you want to start a bakery and become your own boss. You need to answer these questions honestly and objectively if you want to understand the risks and rewards of starting your own bakery. You need to truly understand the difficult tasks that lie ahead of you.
Anyone owning a bakery operation will tell you how much anxiety and work you will have to face… and it’s also a big financial risk. It would be very beneficial for you to first speak with other bakery owners, entrepreneurs or business consultants, your accountant, your banker, your lawyer, your family members, your potential investors, and your life partner. These discussions will help you prepare yourself mentally before you start your new bakery.
You must first decide what type of bakery operation you want to start, and then what kind of bakery goods you want to offer. Once you have decided to go ahead with your plan, there are a couple of options you can choose from – starting from scratch, take over an existing bakery, or maybe you would like to franchise your bakery operation in the future. If you decide to start from scratch, there are mainly four main areas that you can choose when it comes to starting a new bakery business. Try to figure which option is right for you from the list below.
Counter service bakery: You can have a small commercial storefront space where customers can just walk in and choose all kinds of bakery items over a counter. This is mainly a bakery store where your staff would tend to your customers. Think about the kind of baked goods you will be selling. Will you offer conventional bakery items, or special niche products such as no sugar added/sugar-free products, fat free/low fat items, dairy- and egg-free, gluten-free, trans fat, probiotics, Kosher, all natural, vegan, and organic products?
Sit-down bakery: As you know many types of bakeries nowadays are trying to attract more customers and make more money by offering a café-like establishment. This is the ideal situation for customers wanting some quick lunches as well as refreshments with their baked goods. You will obviously need extra space to accommodate tables and chairs where they can eat.
Online bakery: This is an excellent way to start your own business if you have less capital, and it’s also the best place for customers to buy baked goods without leaving their home. Just remember that running a business from home has its advantages and disadvantages. Don’t forget that your home would have to be zoned and pass health and fire inspections, as the rules are not the same as if you were to conduct bake sales for some special events (and believe me when I say that you may even have to apply for a “special occasions food permit” from your local health department). You should definitely not operate or maintain a food premise without first calling your regional health department.
Specialty service bakery: If you are planning to specialize in a certain type of baked goods such as wedding and birthday cakes, or other types of personalized and unique bakery products that would need to be pre-ordered, then a specialty service may be your best option. This type of operation can be run from your rented space or from your home. You may consider taking some college courses and gain a formal qualification in cake decorating.
2. Get the proper business legal papers, permits and licenses
Will you form a corporation, partnership or limited liability company? You will need help from a professional accountant and a lawyer; I really advise you to get true professionals to help you out at the beginning so that you don’t make mistakes. You will also have to pick a great name for your bakery, and once this is done, you want to make sure that this name is not already used by someone else.
Then you will not only have to apply for a HST/GST tax registration. You may also have to find a web hosting company to register your domain name and host your future website.
Whether you operate a storefront or an online bakery business, a business license is required for any business where food is stored, prepared, packaged, manufactured, labelled, or sold for human consumption. Depending on your region, you may need a separate licence for a wholesale or retail baking business. As a new business owner, you are responsible for ensuring that your bakery products and services are safe, and your employees work in a healthy, safe environment. Just remember, as a bakery owner, your obligations include a duty to instruct, inform and supervise your workers in order to protect their health and safety. You will need to contact your local health department to understand the laws and to stay within your legal rights. Your local health authority will arrange an inspection of the premises, equipment and processes to make sure that your bakery business is complying with municipal, provincial and federal legislation. You will need to look into liability insurance.
You will also need to find out about the latest standards that apply to food labelling and advertising in Canada. Canadian consumers want to make informed choices about healthy and safe food products. Health Canada, and the Canadian Food Inspection Agency share the responsibility for Canadian food labeling requirement, and you want to make sure that your labels meet these requirements. Many municipalities have licences specific to food handling or food preparation.
Remember, in order to do business in Canada, and to comply with government regulations, it is your responsibility, as a new business owner, to obtain all required business licences and permits from different levels of government.
3. Write a solid bakery business plan
You may think that writing a business plan is a waste of time, but writing a comprehensive and accurate business plan is the most critical part of starting your new bakery. Writing a business plan will also help you to analyze every aspect and last detail of opening your new business, and it will also force you to look at the business from every angle. It is tremendously easy to go well beyond your original budget estimates and this is why your plan should cover the following:
- Description, concept, mission, name and logo of your bakery
- Purchasing a building or leasing a space
- Building space/size needed as well as flexibility for future expansion
- Design/building/construction/renovation costs
- Licenses and permits
- Financial projections – start-up costs and expense projections, capital requirements budget, rent, supplies, salaries, revenue, break even analysis
- Parking, freeway accessibility, foot traffic estimation, etc.
- Cost re: accountant, attorney, designer, general contractor, consultant, PR and marketing
- Location and hours of operation
- Large equipment/appliances including installation costs
- Countertops, workspaces, lighting, flooring, and seating
- Computer and cash register system, software, POS system, telephone, website, and other overhead costs
- Staff, friends and family discount policy
- Type of service style
- Bakery specific theme, niche, specialty and custom-made items, special recipes, catering, and type of bakery goods/menu
- Inventory, cost of ingredients and packaging
- Baked goods, coffee, beverages, lunches prices and special promotions
- Recruit staff for production and sales, benefits, job description and training
- Transportation and delivery/distribution service
- Target market/audience – resident demographics in your geographical area
- Marketing, publicity, newspaper or flyers advertising, online and social media presence, and grand opening promotion
- Other locations and franchise opportunity
Stay tuned for part 2 of my reality check checklist and you’ll be one step closer to a growing business.