How much does it cost to open a cupcake bakery?
If baking is your passion, it can be tempting to open up a bakery of your own. However, opening a cupcake bakery (or any bakery, for that matter) requires much more than frosting and sprinkles. That's because opening a business requires so many things: starting with the location of your retail space and determining how much you want to spend on equipment like ovens and mixers. But don't worry--opening a cupcake bakery doesn't have to break the bank if you're willing to put in some work up front.
Generally, the more items you plan to offer (or have a large customer base that demands them), the more expensive opening up will be. You'll need to understand how to produce baked goods at scale, project real estate, equipment, and recipe costs, hire staff, and run day-to-day operations. Here, we'll break down how much it costs to open up a new bakery.
Real estate considerations
The location of your bakery will have a significant impact on opening costs. For example, if you're opening up in an urban area, rent can cost anywhere from $20 to over $200 per square foot depending on the neighborhood and its proximity to other bakeries and retail stores. Make sure to do extensive research on real estate trends in your area, and maintain a good relationship with a local real estate agent.
Building out your space
Building out a bakery can cost anywhere from $30,000 to over $100,000 depending on the size and equipment needs of your retail space. It's a good idea to find a space that was previously used for food service, like another bakery, a pizza shop, or a restaurant. This way, you may be able to acquire some equipment, and the layout will likely already make sense with customer areas, prep areas, and cleanup stations as well as a restroom. If you do find a location that's a blank slate and completely empty, you may pay more to build it out, but you will have the most say in the layout which can be beneficial. Keep in mind that you'll need to acquire permits from your locality to ensure the building is up to code, so don't begin opening your store until you've done research on health code and permits required.
Equipment you’ll need
New equipment can cost anywhere from $30,000 to over $250,000 depending on the size of your bakery, but many bakers choose to purchase or lease used equipment as long as it's in good working order. This is one of the most important costs to opening a cupcake bakery. You will need ovens, mixers, refrigeration units to store raw ingredients and finished goods, and other equipment depending on what kind of baked goods you're looking to produce. If you're focusing on bread, or preparing hot food like sandwiches, you'll need more traditional kitchen space like a range and extra storage room for ingredients. If you're focusing on decorating cakes and cupcakes, you'll want to invest in an airbrush, molds, and decorating equipment. Heads up: if you're a home baker without extensive experience, you'd be surprised at how much more there is to consider when you go from baking 12 cupcakes to 5 dozen in a day. Get experience in a number of different types of bakeries to understand how different pieces of equipment work and what you want your focus to be.
Hiring the right staff
While you may be able to handle the bulk of the work upfront, you're going to need support staff at your bakery. Most bakers hire a full-time and part-time staff, as well as administrative help. If you're a pro baker, you may be able to just hire part-time staff for coffee and the cashier, but bear in mind that any day you don't want to work- either because you're sick or want a day off- you won't have any production. Therefore, many bakeries have extra baking help as well as support on administrative tasks, making coffee, and helping customers. The average salary for a bakery owner is $50,000-$60,000 a year, and it's typical to pay part-time workers around $15 per hour. Add benefits like health insurance and 401(k). Remember that all businesses need HR requirements so be sure to research these before opening up shop!
Cost of the cupcake
Recipe costs will depend on the complexity of your baked goods and how often you'll need to buy ingredients for them. For example, if you want to sell cake pops or cookies at an affordable price point, you'll likely need to buy in bulk to decrease costs and increase margins. If you're in an area where you can get away with higher prices, you may be able to invest in more artisan ingredients that might cut into margins. Some ingredients, like flour, butter, and sugar, will be used in almost every recipe, so it's worth looking into buying in bulk from a vendor with whom you have a strong relationship and confidence in their brand. For seasonal ingredients, like certain spices or fruits, you may be able to get deals from the same vendor, or have fun finding ingredients from artisan or local sources. Another major cost that will depend heavily on your opening menu are recipe costs--especially if the majority of items offered by your bakery are unique or more costly than typical store-bought items like bread, muffins, etc. Recipe costs include ingredients for recipes as well as labor expenses during production times (i.e., when bakers make dough).
Get ahead with loss leaders
A loss leader is a product that the company will sell at a very low price in order to drive customers into their store. For example, you may offer drinks for $0.25 or fresh-baked cookies for free with purchase of your cupcakes--giving away one thing while trying to increase sales on another. This can be an effective way at getting customers in the door and increasing loyalty. For example, if you're looking to sell expensive wedding cakes to brides, a sales tactic might be acquiring customers by partnering with a wedding dress shop and providing cheap or free goods to make an introduction. Then, you'll make up for that loss with higher profit margins on more expensive orders, like the cake or a massive cupcake order for the after party.
And the total is...
So there you have it! Depending on the location of your bakery, the equipment you'll need, and the staff you'll need to hire, you're looking at an average of $100,000 to start a bakery. Hopefully, it's become clear that you should do extensive research on every aspect of starting and operating a bakery to ensure you're up to the challenge, and to reduce the chance of being surprised by an unexpected cost. Good luck, and get baking!
Written by Lauren Murdock
Lauren is Mainvest's Content Marketing Manager. She is an expert in marketing strategy and leads content generation for Mainvest.