How to Open a Bakery

Written by Dave Lavinsky

How to Open a Bakery



How to Open a Bakery

If you’re looking to open or start a Bakery, you’ve come to the right place. Since we’re going to show you exactly how to do it.

We’ll start with key Bakery industry fundamentals like how big the industry is, what the key segments are, and how revenues and profits are generated.

Then we’ll discuss keys to not only starting a Bakery, but succeeding in it!

Before we continue, here’s where you can access your bakery business plan template since having a plan will be key to your success.

How Big is the Bakery Industry?

IBISWorld reports the Bakery industry has had relatively flat growth over the past five years, only growing at an average annual rate of 0.8%. In 2016, the industry’s 26,570 businesses are forecast to see $40.1 billion in collective revenue.

What are the Key Segments of the Bakery Industry?

Bread accounts for over half of industry revenue. This includes fresh, packaged, refrigerated and frozen loaf breads; dinner rolls; bagels; and savory pastries.

The remainder of industry revenue is generated from desserts such as pies, cakes, cupcakes, brownies, and sweet pastries.

What External Factors Affect the Bakery Industry?

A number of factors affect the performance of the Bakery industry. These drivers include:

Per capita wheat flour consumption – Fad diets and health concerns typically result in consumers cutting down on bread consumption. And since wheat flour is the principle ingredient in bread, wheat flour consumption is a good proxy for bread consumption.

Healthy eating index – Fad diets aside, Americans are becoming more and more conscious of the ingredients found in their food. Consumers are gravitating toward more natural and healthy foods, which results in avoiding foods that are high in fats, sugars, and carbohydrates.

Per capita disposable income – When income rises, consumers are more likely to purchase premium products such as freshly-made bread and pastries.

World price of wheat – When wheat prices go up, bakeries must choose between raising prices to compensate for the rise in cost and potentially losing customers to lower-priced competitors.


Who are the Key Competitors in the Bakery Industry?

The Bakery industry includes both large commercial bakeries and smaller retail bakeries. Therefore, only two companies have any significant market share: Grupo Bimbo (Entenmann’s, Bimbo, Tia Rosa, Oroweat, Brownberry, and Sara Lee brands) has a 16.5% marketshare; and Flowers Foods (Nature’s Own, ButterKrust, Cobblestone Mill, Mrs. Freshley’s, Tasty, Dandee, and Country Hearth brands) has a 9.8% marketshare.

What are the Key Customer Segments in the Bakery Industry?

The largest customer segment in the Bakery industry is Supermarkets and Grocery Stores, followed by Food Service, Hospitality, and Institutional Customers. Other segments include cafes, coffee shops, convenience stores, and exports

What are the Key Costs in the Bakery Industry?

Purchases are the greatest expense for Bakeries, and account for over 40% of revenue. In addition to rising basic ingredient prices, consumers are demanding more premium and expensive ingredients.

Wages are also a major expense, due to the labor-intensive nature of the industry.

Transportation and distribution costs can be significant for commercial bakeries. Retail bakeries, however, typically do not have these costs.

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What are the Keys to Launching a New Bakery?

  1. Decide what type of Bakery you want to open: Counter Service Bakery, Specialty Service Bakery (e.g. a cupcake shop), Sit-Down Bakery, Online Bakery, etc.
  2. Research your competition. Know what your competitors are selling, for how much, and then make sure you plan to offer something they don’t.
  3. Find a great location. New bakeries tend to be more successful when they locate in or near new developments, and in high-traffic areas. It’s also important to find a location that isn’t in another bakery’s catchment area.
  4. Have a business plan. This will help you set goals and give you a roadmap for achieving those goals. It will also help if you plan to approach potential investors.
  5. Legal considerations. Find out the Health and Safety regulations for running your bakery. You will need to know the specifics of the regulations covering your equipment before you purchase or install anything. Obtain the required licenses and certifications.
  6. Develop recipes and/or perfect your technique for baking high-quality products. The quality of your products will be the ultimate basis of your bakery’s success. If you cut corners on ingredients, the customers will be able to tell.


What are the typical startup costs for a new Bakery?

Initial startup costs:

  • Building lease or purchase and renovation
  • Equipment and professional installation
  • Store fixtures and office equipment and supplies
  • Licensing

Ongoing expenses:

  • Ingredients
  • Wages
  • Marketing
  • Leases for building and/or equipment
  • Equipment and building maintenance


Additional resources in the Bakery Industry

For additional information on the Bakery industry, consider these industry resources:


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