Leases, Square Footage & Permits...oh My! (Long)

Business By babeebk Updated 21 Feb 2009 , 4:42am by TheCornerBakery

babeebk Posted 17 Feb 2009 , 3:59pm
post #1 of 12

I've been toying with the idea of going legal and opening up a shop for a few years. I always enjoyed baking as a hobby and have been rather hesitant about taking it on as a job because once it becomes work I feel like the joy of it will be lost. But the economy has forced me to take another serious look at going into business for myself. I survived the first two rounds of layoffs at my company...but I'm not so confident that I will make it through the next round coming up. I have a bit of money saved up that I could either use to start my business or keep as a emergency fund should I be downsized.

I've done some exploratory research over the last few weeks into what it takes to open a bakery. I've even looked at some commercial real estate and drafted a business plan. I had a meeting with one of the health inspectors in town and he thought my business idea was a good one and even referred me to two available spaces where I could potentially open a store.

One is a raw space where I would have to build out the kitchen. It's only 750sq feet but it's on a busy street with ok parking and high visability right in the center of town. It's location right across the street from the movie theatre would get lots of foot traffic. The second space is a former indian restaurant (that just closed its doors in December) - already built out as a commercial kitchen. I would just have to move in, decorate and open for business. The second space is a freestanding building adjacent to a parking lot, one block from the town center. It's 1200 square feet and has enough capacity for dining in.

My husband says I should just go for it! My parents and siblings are supportive of the idea too. They've all offered moral and financial support. To think, this idea was born out of fear of losing my job but I could actually be quitting my job to open a cupcake bakery.

So, for those of you with storefront businesses...I'd love to read about your experiences. How large is your shop? Did you build-out a raw space or did you move into an existing kitchen? How much were your overall start up costs? If you built out, how long did it take? Did you have to pay rent while doing the construction work? How long is your lease? Is yours triple net or gross? What are your monthly operating expenses on top of your rent? How long did it take you to be profitable? Did you buy or lease your equipment? Did you buy new or used? Did you have to buy a grease trap? Is a commercial sized mixer really necessary or will a few Artisan's suffice? I know these are a ton of questions but any answers provided will be greatly appreciated.

Thanks.

11 replies
littlecake Posted 17 Feb 2009 , 4:52pm
post #2 of 12

I have about 1100 square feet, I think I could do what I do in 750 though.

My place was a beauty shop before I got it, so a lot of the plumbing was already there.

28K start up...in 02, so it would prolly be more now.

Paid rent while doing build out...it took 6 weeks....cost 3K, we did all the work ourselves, so it was pretty inexpensive.

we were in the black in just a few months, it didn't take me years to make a profit, but I didn't have as much invested as some others.

I bought new and used.
Had to have a greasetrap...and you really do want one, even if they don't tell you to, the shortening set up in the handsink drain...really bad, when roto rooter come....what they dug out of it was the consistancy of soap...and it was deep.

I have a 30 quart mixer, a 20 would prolly do, but you'd have to make more batches of icing on the weekend with a 20...i usually fill mine 3 times on saturday...and at least 2 times on a slow saturday.

if you just had a couple little mixers it would be a real pain, a couple years ago i broke my wrist, and had to use the small mixer...it was a real pain, everything took so long to do, and as you know, saving time is the name of the game.

Good Luck!

cuteums Posted 17 Feb 2009 , 9:41pm
post #3 of 12

I'm looking into all of this and I too am scared of losing money. If anyone can post any info they would like to share, I would appreciate it too. Thanks for asking this question.

indydebi Posted 17 Feb 2009 , 10:07pm
post #4 of 12

Mine is similar to littlecakes .....

I started with an empty box and had to do a 100% build out. The estimated $12,000 job that would be done in 10 days ended up being $28,000 and 10+ weeks.

What contributed to the delay:
- 6 weeks for the architect to get drawings done and approved and to the state so building permits could be issued.
- We were doing this in November, so holidays played a part in delay time.
- Also in November was an election and all the city staff were busy cleaning out their desks instead of issuing permits.
- My contractor called and said there were 10 permits ahead of me to be issued. Silly me, I thought this meant they had to type out 10 permits, which should take .... what? ..... a day or two? nah ..... I guess the quota is one per day because it took 10 days to get permits. My contractor kept apologizing ... said he had NO idea my town was so hard to work with to get a permit.

We got 3 months free rent for the build out, but half of that was eaten up by the architect; then another 2 weeks (give or take) for permits to be issued. Yes, we paid rent starting on month 4. And the utilities.

I have slightly under 1100 square feet and it's about 60/40 kitchen/front office space.

Yes, get a grease trap and be sure it's included in the equipment and installation quote (add $1000 for an unplanned grease trap!)

I have a 20 qt mixer that works fine for me, but agree with littlecake ... you DON'T want a bunch of small ones. Get a bigger one so you can get the job done. Also keep this story in mind: My kitchen designer insisted I get an $800 commercial grade microwave instead of a $149 one from Sam's. She told me she had a client who had a fire. There was a non-commercial microwave. EVEN THO' THE MICROWAVE HAD NOTHING TO DO WITH THE FIRE, the insurance company denied the claim because of "improper equipment". Make your insurance agent your best friend!

Have an attorney review your lease. Mine found a couple of things that we changed and one big thing we couldn't change but had a big concern about (we came to a middle-of-the-road agreement).

Mine is triple net. Also dont' forget to add in the add'l fees, such as property taxes, general maintenance, pylon sign fee, etc., that the landlord will bill you in addition to the rent.

My operating expenses would be significantly different than yours since i also cater. I run a 6 burner stove, a food warmer, a good-size walk in refrigerator, a heat booster for the commercial dishwasher.

All of my equipment is new except for the walk-in refrigerator (a GREAT deal at $1200!); my 20-qt mixer; my comm'l dishwasher (a $15K dishwasher that I got for about half-price). I worked with a kitchen designer who was able to get me great pricing on most everything ..... to the point that she was able to get me a couple of pieces that I didn't have on my wish-list.

cuteums Posted 18 Feb 2009 , 5:22am
post #5 of 12

Debi, thanks for all the info. Did the 28K include the price of all of your equipment? Just wondering. Your info will be very helpful to me.

indydebi Posted 18 Feb 2009 , 11:59am
post #6 of 12

Oh ... no, the equipment was an add'l $45K.

ElectricCook Posted 18 Feb 2009 , 12:52pm
post #7 of 12

Just another thing to think about. Lady that I know opened a bakery in town and had to get a sign that was approved by the town.

It took six weeks to get a new one. She had already ordered a sign, paid for it and had it installed. Guess what happened to the money already spent? The town told her she should have contacted them and not listened to the landlord. They had changed the rules and the old business were grandfahered.

She is on a busy street but, without the sign no one knew she was open for business. She had word of mouth traffic which was great but, the new sign helped alot. She specializes for her bakery and people in my town like what she has to sell.

babeebk Posted 18 Feb 2009 , 5:09pm
post #8 of 12

littlecakes and indydebi, thanks so much for your insights.

I just finished a meeting with the health inspector...great guy! He's been so helpful to me up to this point.

We've decided to proceed with the former restaurant space. I contacted the broker who is trying to set up a meeting with the former restaurant owner to see if he's interested in selling off some of his equipment (he's having some serious cash flow problems at the moment so the broker thinks he'll be more than willing to sell me his stuff). If the price is right we'll save a ton on sourcing and purchasing new/used equipment and having it installed. I'm mainly interested in his sinks and possibly the under counter refrigerator.

I'd really like to do this without borrowing money from a bank. I've already tapped my family for loans and have about $30k to start with. I'm sincerely hoping that I can open up for MUCH less. My original plan was to sell only cupcakes but offer custom cake orders. I'm considering a menu expansion to utilize the full functionality of the kitchen space. I don't want to over extend too soon.

I appreciate the insights from you business owners. Please keep the responses coming. I'm particularly interested in reading the experiences of those that are in the cupcake business. And if any of you offer teas and coffees in your establishment, I'd love to hear from you as well. I love CC! icon_smile.gif

Chef_Stef Posted 18 Feb 2009 , 10:16pm
post #9 of 12

We're in the process of signing a lease to purchase and doing a build-out in an existing new construction empty unit, 930 sq ft, where they finish to our specs, with no increase in price except equipment, which we're finding on our own rather than finance in.

An existing space will be nice for you, without much to change.

We meet next week with the builder hopefully to sketch out where utilities and water stubs will go, and I've submitted floor plans and equip lists and am waiting to get a meeting with the HD to see what needs to go where.

Got a beautiful used convection oven on ebay for about 8K less than new, so I'm delighted with that. We're rounding up everything else used here and there and finding deals, but it takes time.

I use a 6-qt and 4-qt KA mixer for all my cakes, but I do custom wedding cakes on a more or less one-at-a-time basis, so a big mixer doesn't make sense for me. I never make more than about a double batch of anything at once, so I'm skipping that for now.

Keep us posted, and I'll do the same.

TheCornerBakery Posted 19 Feb 2009 , 10:57pm
post #10 of 12

Hi to all,
I have a space of 600 sq ft that is a perfect space in the middle of an affluent city next to the post office icon_lol.gif

I took it from a dancewear retail store to a bakery setup.

The whole process took 6 weeks and it cost around $50,000 with all things totaled

I got a SBA loan for $25,000 and my rent is $900

I am having a great time and there are pros and cons to home vs storefront which have been discussed at great lengths here on CC.

It took a year to bust out but 2009 is going to be a great year.

Good Luck and Happy Baking
Michael

babeebk Posted 20 Feb 2009 , 5:19pm
post #11 of 12

I've really been trying to do this without any debt...how did you get an SBA loan? I thought food service businesses can't get a loan unless they've been established for 2-3 years??? icon_confused.gif

TheCornerBakery Posted 21 Feb 2009 , 4:42am
post #12 of 12

To answer your question on the SBA loan..

SBA loans are given by banks not the SBA. Most people have a misconception on these loans. The truth is that the SBA is only a guarantor of a loan of 80-90%. It is the local or national bank that actually grants the loan.

In my case I have had 3 SBA loans one for $45,000 one for $55,000 and my cake studion for $25,000.

I owned a Italian restaurant for 7 years so I built up a relationship with the bank that handled my loans for my restaurant and I just went back for a smaller loan with a solid business plan.

If there is a SCORE office in your town Please go to it and ask tons of questions.

SCORE is a group of retired executives that give back to the community in a form of mentoring.

I have used them extensively in terms of marketing and getting a grip on the business end of cake decoratoring.

Happy Baking
Michael

Quote by @%username% on %date%

%body%