Investing in a Small Bakery Business

Small bakeries, specialty cake and pastry shops, and artisan bakeries provide many investment opportunities, but competition from large-scale bakeries, restaurants, and in-house supermarket bakeries make pastry and bread businesses risky. Before deciding to start a bakery or invest in one, entrepreneurs must meet competitive challenges, outfit operations with reliable equipment, research the local market, and learn about the baking business.

Bakery investments include full-service facilities, wholesale operations, artistic cake shops, and small artisan bakeries. Wholesale operations can operate almost anywhere, but retail bakeries need exposure, high traffic and easy access. Visit small bakeries, take a baking class, and research demographics to determine what kind of bakery business best matches your personal preferences and local market. Bakeries often sell only foods to go, but some offer table service, sandwiches and beverages. Choose from a dedicated bread bakery, doughnut shop, bagel store, cupcake shop, decorative cake business, or full-service bakery. Invest in a franchise, finance a local bakery, or start your own business.

The bakery business capitalizes on consumer trends and local dining traditions to increase profits. Bakery trends show increased demand for specialty baked goods, handcrafted artisan products, healthy baked goods, and breads for special diets. Nationally, Global Industry Analysts predicts sales of $310 billion by 2015, but your local market could present challenges. Study the neighborhood or nearby wholesale opportunities to assess the demand for baked goods. Upscale communities spend more for artisan loaves or gluten-free products, but depressed neighborhoods might balk at fancier products or higher prices. Wholesalers need high sales volumes because profit margins are smaller to allow retailers to mark up the goods. Your bakery needs easy access for deliveries, room for equipment, and a powerful ventilation system.

You will need licenses and permits to operate a bakery, and even investors should understand the process to ensure their investments won't generate legal problems. Sign regulations, zoning laws, health permits, tax certificates and wholesale licenses apply in most states, so research how to get approved and what expenses are involved. Bakeries often use preservatives and additives in products, especially those destined for store shelves, so your business might fall under Food and Drug Administration regulation. Most states have bureaus of weights and measurements that inspect your weighing and packaging equipment to ensure accuracy.

Study the business plan of any investment carefully, and learn about marketing strategy, projected break-even point, plans to deal with competitors, and the people who will run the operation. If starting your own bakery, write a business plan that covers these issues. Bakeries need sturdy work tables, commercial mixers, deck or convection ovens, slicing machines, refrigeration and freezing equipment, label makers, proofing cabinets, retarders, dough mixers, cooling racks, display cases, dough dividers, and sheet rollers. Duplicate baking pans allow bakers to get new batches ready while foods are baking. You will need to invest in this equipment and any expenses necessary for wholesale or retail sales, so develop a strategy to cover these costs.