Hey Everyone! I have a few questions. I think I may have finally found the right kitchen to rent. Every time I think I've found it, something falls through but this time I really think I found it. I met with a caterer this morning literally 2 mins from my house! She has two ovens plus a convection oven, a large mixer and one kitchenaid. Everything I need. Through all my searches, I never contacted them because they're really upscale and I figured they'd never give me the time of day but she did and she's super nice. Anyway, she's leaving it up to me as to how to work out our arrangement. She doesn't do cakes and wants to be able market her business as one stop shopping and be able to say yes we have a baker on staff, I can do it all start to finish (like Indydebi!). so we talked about trading services, I would make her cakes and in exchange use her kitchen for my personal biz too or I could just pay her a flat rate to rent her kitchen and she would buy my cakes wholesale from me. I don't really know what to do. Any advice? No one around me is renting theirs kitchens out so I don't even know what "market rate" would be and neither did she. One other note, she's the exclusive caterer for a winery nearby, they do alot of weddings, 75 guests max so I was thinking I could offer to do a couple 75 serving wedding cakes per year but I don't know how many or if that makes sense. My line of thinking is that it doesn't cost me too much to make a cake, I'd have to seriously cruch #'s but off the top of my head I could probably make the cake for $50 in materials. She could turn around and sell that for $375, minimally decorated. If I gave her a few of those per year, I think it would make sense for both of us. But being unexperienced, I may be naive in my thinking. If anyone has any thoughts they'd like to share, I would greatly appreciate it! I need to get back to her ASAP.

THANK YOU!!!!

I don't know much about this kind of stuff because I have been looking for a kitchen too myself and have been having a lot of problems, By the way congratulations, but I would think you would want to pay her to use her kitchen and have she buy the cakes from you. I also think $50 is a little too cheep did you add inn labor, cause if she is going to make $375 on one of your cakes would you not want to make a little more. just my opinion. HTH

Thanks Allison, $50 would be approximately how much it would cost for me to make the cake just in ingredients, not factoring my labor. The advantage for me is I would have minimal out of pockets expenses to rent her kitchen and she would be "paid" by selling my cake.

hmm...if you are renting her kitchen then it is your biz and your biz only, right? I mean, then you are not an employee and wouldn't have to "sell" your cakes to her whether it was wholesale or not.

also, i have heard of people doing the exchange of services but then that sounds like you are working for them.

I agree with Uniqueask about the $50 for the cake...then you are not getting any money at all for your time.

This sounds like a really good opportunity but you have to write down exactly what YOU would want and find out all your cost of supplies plus how much you want to get paid per hour. Does this deal include electricity and such? you would have to factor that in...factor in marketing; as in business cards or advertisements. if you work FOR her then you probably wouldn't have to get inspected and get a license. but if you want it to be your own biz then you need to find out how much that costs. add all those things up and see how many cakes you are going to need to do per month to cover those costs and you will probably start figuring out how much you want to get paid.

I just had to do a feasibility study for a class and it was VERY eye opening. don't let all that info discourage you...use it to find out exactly what you want!

Good Luck!

Keep in mind that if it is going to be YOUR cake biz then you will have to have a business license AND a Gil policy if someone gets sick on your cake. Her insurance will not cover you.
Tracy

Sounds like a really good opportunity. I would love to be able to do this, and I get what you are saying, in exchange for the use of her kitchen you would make a couple of wedding cakes a year for her, free of charge. Which in turn she would be able to sell for around $375 a piece. I get why this would be the easiest way for you, it would be for me too. Less out of pocket expense. Sounds like a great idea. But if you only do three cakes a year for her she will be getting the equivalent of just over $1000 a year, $85 a month to rent her kitchen. Does she rent her space? Is that even going to make a dent in her expenses? ie, enough to make it worth it for her?

see now that's where I'm having trouble. paulstonia summed up the scenario I'm thinking of exactly, except I wasn't thinking of giving her only 3 cakes, I was thinking more along the lines of 6 or maybe even more. that's where I come to you guys for help, what do you think is fair? it's minimal $$ out of pocket on my part (which is a major concern of my hubby). I will NOT be working for her, I'd be more like a vendor to her. the advantage to her is that she can present it to her clients as if I were her employee, she wants to be able to say she has a baker on staff, she's full service catering, etc etc. the client doesn't need to know I'm not actually working for her. I would do tastings with her also and she said I'm free to use the tasting room for my own personal clients as well, just to schedule it in advance. She said in the beginning, not to worry about the utilities. If it came to a point where I needed the kitchen more than a few hours per week and she noticed an increase in her utilities then we would talk about it. And I do plan on obtaining my own license and insurance. She's really a very sweet person, she was in my shoes 8 yrs ago before she bought her shop. She basically converted her condo into a catering facility. Her father owns a restaurant supply so they gutted her kitchen and put commercial stuff in and she worked under the radar until she saved enough money to buy her current spot so she understands the spot I'm in right now.
Thanks for all of your input so far!!!

Well Stephanie! This sounds like the ideal situation for you! you sound like you are all set and prepared...I wish I could get a opportunity like this one day. Hope everything works out for you! Keep us posted

I think the scenario you are discussing would really depend on how many weddings she did a month with the winery. And also how many hours you would need in the kitchen for the first year.

Let's just say you were full time and paying for the incidentals as well (utilities/water, etc), so you gave her enough to cover that time. That would be 6 cakes a month..and she would earn $2250 a month on your cakes, if she sells them at $375. Granted, you spent $600 plus 48 hours labor. (6 cakes at 8 hours on each cake, for $50 in supplies on each cake).

Which does sound like a good scenario BUT...when I see that $2250....dang that sure does sound like a lot of money!! It would be towards rent anyway, if you paid directly...but still.

On the other hand...what if you can't make a cake for the weekend that she needs it. Will you just pay her the cash difference?

I mean really...for the first year...I would probably do a set up like that. It's easier to give away my time that fork over $2200. Especially since it is hard to get the word out and build clientele. If she has no problem making her client order cakes from her...then it could work out.

It might be best if you paid a certain amount up front, so you would be a couple of months ahead on the rent. Of course if it doesn't work out make sure you get the "deposit" back.

As a kitchen owner (who is willing to rent out the downtime), I would want a nice, clean split. I would want a rent check from you each month and I would want to pay you for the cakes. It just keeps it clean and simple. It prevents the feelings on either side that may spring up down the road if one starts to feel they are being taken advantage of.

Such as .... your business expands and you're using the kitchen a lot more than anticipated, so she feels shorted by what she's getting in return. Or she is so successful with booking wedding cakes, and you end up so busy making HER cakes, that you have no time to build your business, so you feel frustrated because you're not achieving what you were after.

This is a major investment for both of you. You don't do business strictly on a touch-feely feel-good thing between "friends". It's not personal ... it's business.

Work out an agreement and set it up like a business agreement where all exchanges of value are quantifiable and compensated.

No matter what she might charge you for rent, it's still probably less than what you'd pay if you had to get your own place and your own equipment. (Pssst!! I paid $45K for my equipment).

Yes it certainly is hard to start forking out rent for something when I'm not even sure I'll have any customers that's why I like the scenario of giving her cakes. She does approximately 6 events per weekend over the summer. During the winter she is slower. I will definitely make it clear that i may need to decline cakes at times. In the event she has too many cakes for me to handle, I do have people I can call upon to help me. But to start I would only need the kitchen a few hours per month.

so here's an idea: I'll give her 8 free cakes per year, that will be approx. $400 out of pocket for me plus my time and $3000 for her. And then possibly offer her a percentage of every cake she refers to me.

Hey Debi, now you have my head spinning. You brought up some really good points. I was thinking of saying that regardless of what agreement we come to, this covers use of your kitchen for maybe 20 hours per month that way if it goes beyond that, we can work out something to cover the extra usage. I guess I can't really get my head around ever being to the point of having to decline a cake but you're right. if she has me making too many cakes, I have no chance of ever building my own business so I definitely need to make sure the limits are clear on both sides. Thanks!!!!

If she has no idea either, offer her $10. If it's not agreeable to her, she might come back with $15. If so, you're still $5 ahead because you're not paying $20!

1. You need a business plan.
2. You need to consult an accountant. I think I'd rather pay rent and have a business expense.
3. This "loosey-goosey-ness has disaster written all over it. None of this "if it goes over 20 hours per week" or "if the utilities increase" stuff. Define everything before you set a foot in the door.
4. This is a business relationship. Biz-ness.
5. See item #1.

Do a straight business transaction. No trading etc. You rent for x amount per hour/month period.

I cannot stress enough the importance of a business plan, but one thing most business plans do no include is the exit plan. Make sure when all is said and done, how will you "break up"? Will it be a thirty day notice? What about cakes that are already on the books?

This is a great opportunity for you, good luck.

Thanks everyone!

I was curious about this insurance thing? How much do you need when "renting" a space and where do you go for it? this is the one thing I have not figured out yet before making up my actual business plan.

Thanks!

I'm not entirely sure either but I'm going to call my insurance agent on Monday and get some information from him. We have business and umbrella policies in place for another company we have so I'm assuming something along that lines but specific to a food business. If I find out anything, I'll let you know. If anyone else has any other info, it would be greatly appreciated!