Rented Kitchen Fee Is This Too High?

Business By notjustcake Updated 31 Mar 2009 , 3:38am by Ladyfish74

notjustcake Posted 30 Mar 2009 , 4:33pm
post #1 of 29

I'm looking into renting this kitchen and we had agreed(nothing signed) that it would be a percentage of my fees that they would keep.
Now they changed their mind and say a flat fee of $500 and 20% of my sales.

This seems a little high would you do it?

They didnt set a limit on the hours I could use it.

Oh we first agreed to do it on a trial run basis 30 to 90 days for $250 a month after that the $500 would kick in.

My husband thinks that I should offer 50% of my sales instead for 6 months to build clintele but still let them make some money.

After the 6 months I will see if I had built enough clintele to cover the $500 but offer 10% of sales instead of 20%

She said they would not negotiate the $500 I feel like I have no other choice and they won't agree to anything I say but I feel they need those $500 or else they wouldn't be asking for them.

Do you think this is worth it???? I guess it helps that the place is like 4 miles from my house!

28 replies
summernoelle Posted 30 Mar 2009 , 4:45pm
post #2 of 29

Seems very high. Are you the only renter? How many hours and days do you get per week? Are utilities included?

SUELA Posted 30 Mar 2009 , 4:49pm
post #3 of 29

$500 seems a good deal, but I think the 20% of sales is high. But I don't know, I don't rent and I have not looked.

To me it would be either a flat fee OR a % of your sales, but not both?

CelebrationCakery Posted 30 Mar 2009 , 4:49pm
post #4 of 29

This sparks a thought for me...what are the going rates to rent a kitchen anyway??? I know location has a lot to do with this but on average what is everyone paying or see in their areas as the average rates??? I haven't ever looked into this...just curious.

notjustcake Posted 30 Mar 2009 , 4:49pm
post #5 of 29

I am the only renter, what I have been told and is I would have the alarm code and key and come when needed and lock the place out

notjustcake Posted 30 Mar 2009 , 4:54pm
post #6 of 29
Quote:
Originally Posted by SUELA

$500 seems a good deal, but I think the 20% of sales is high. But I don't know, I don't rent and I have not looked.

To me it would be either a flat fee OR a % of your sales, but not both?




Yeah I was pretty shocked when she came back with this figure. I know % is good in case I am very good at what I do and use their uitilities longer or at least that's what I think what the % will cover.

If you think about it having an actually bakery overhead is even more but the difference is they have employees this would be a one woman bakery with a $500 overhead per month plus 20% of my profits icon_sad.gif Not sure that I can make that much cake just on one Saturday how many wedding cakes can I deliver? How many will I be able to sale?

handymama Posted 30 Mar 2009 , 4:55pm
post #7 of 29

I don't know where you are, so it's hard to say. I wouldn't rent my kitchen for a penny less than $500, but then now that I think about it I wouldn't rent my bakery, period! Just really like having my own queendom. Would I pay $500 to rent a kitchen if I didn't have my own? No. I'd put that towards renting a space that was just mine, even if I had to do some improvements. The thing you need to ask is: once all of the expenses are accounted for -- and I mean ALL --gas to and from, fast food for the family when you're too busy/tired to cook, childcare?, insurance, accounting, etc. as well as all the cake-related costs, is the end profit/enjoyment worth it? I don't expect to be able to take a paycheck from my bakery for at least the first 2-3 years, maybe longer, because of all of the start-up and ongoing costs. However, my main purpose for doing this is the enjoyment factor, not the money, so I'm ok with that. In fact, if I just break even and then continue to I'd be happy, but it looks like people like my work so I suspect I'll be making a profit at some point! Think it through, especially if you're going to be signing something, and then have an attorney look over the contract before you sign!

-K8memphis Posted 30 Mar 2009 , 5:05pm
post #8 of 29

I'd go $250 per then 20% of cost. Plus I want to see and be assured that they are solvent.

I'm not liking how this doubled from the get go.

There are places around here that go for $450/month but then there's utilities etc.

I'd want my own place.

michellenj Posted 30 Mar 2009 , 5:12pm
post #9 of 29

Are you sure that they want 20% of your total SALES? That is ridiculous. If they want a percentage of sales, I'd offer them 5%. Sometimes you only make a 20% profit on things after all of your costs, so that'd leave you with nothing.

notjustcake Posted 30 Mar 2009 , 5:22pm
post #10 of 29

She said 20% I typed sales but I will check that it is profit not sales

summernoelle Posted 30 Mar 2009 , 5:25pm
post #11 of 29
Quote:
Originally Posted by k8memphis

I'd go $250 per then 20% of cost. Plus I want to see and be assured that they are solvent.

I'm not liking how this doubled from the get go.

There are places around here that go for $450/month but then there's utilities etc.

I'd want my own place.




yes, cost and sales are too very different things. I'm not sure you realize how much money this will cost you and how little you will have in the end. you need to negotiate some more.

notjustcake Posted 30 Mar 2009 , 5:47pm
post #12 of 29

She said they have to have the $500 flat fee.

maybe without any %? that may work.

Wendl Posted 30 Mar 2009 , 6:04pm
post #13 of 29

A friend of mine showed me a place not too far from me the other day. It is the downstairs of an older house in a great area. It has a front room (for cases/meeting space), an office and a full bathroom, includes commercial-sized appliances and a dedicated loading area just outside the door. The upstairs is residential and is rented out to other tenants. There's also half the garage for storage. Power isn't included, but he wants $3,000/month...yeah, three zeroes after the three...!??! Oh, did I mention? There was an obvious water leak issue - the flooring in the vestibule between the front room, the office & bath had a blower on it and the wooden floors were all warped...!??! Um, mold anyone? Health code issues anyone? And the 'appliances' though commercial-grade, were dirty and I couldn't vouch for their efficiency.
If the place had been sparkling, non-flooded and included my living upstairs - it may have been workable (and share dnstairs w/a couple of my cake friends), but $3,000/month as is...!??! Unless ALL of my Houston cake friends went in on it and we were tripping over each other 24/7...we might make rent.
I am going to talk to the local cake artist and see if she would like my help in trade for using her kitchen/baker. She seems to do more buttercream work, and I am a fondant-mostly gal - so all needs could be met. icon_smile.gif
Cheers and good luck on the place!!! And remember if you get a bad feeling, ask questions, don't be afraid to push back for clarification before you sign.
Wendl

alanaj Posted 30 Mar 2009 , 6:34pm
post #14 of 29

I think the 20% is too high as well. I rent a kitchen from a caterer but she is also a friend so it's hard to compare. She also sells my cupcakes and I give her a price break. $500 is a good price but when you start hacking apart your profit to give them a percentage I think you may end up kicking yourself down the road, especially if your business explodes. Flat fees usually work to your advantage, in my experience. Good luck!

notjustcake Posted 30 Mar 2009 , 7:36pm
post #15 of 29

I talked to the lady and she says the flat fee is to off set her overhead including the utilities and the 20% of my sales not profit and the reason why she wants 20% is because she will refer me cake orders. People call her all the time asking for cakes and sends them away but in this case she would referred them to me and have an album with business cards displayed in her shop. She only sales cookies. She will never sale cakes. So she thinks she deservess some of that and I asked her if only 20% of her referrals or ALL my sales and she said all my sales. icon_sad.gif

Wendl Posted 30 Mar 2009 , 7:38pm
post #16 of 29

She should only get a percentage on the referrals from her that actually come through... Not on everything you do! That way, it can be tracked seperately from your usual orders.
Now I'm getting a little 'het up' about the situation...hmmmm!
Wendl

-K8memphis Posted 30 Mar 2009 , 9:17pm
post #17 of 29

For $500 and paying out another 20% of sales you can just about have your own place.

Just say no. These people sound desperate and borderline greedy.

For what I believe you are going to be doing you are going to kill yourself and die broke at this rate.

She's gonna send you referrals so you can work harder to up her percentage what a deal!!

You'll make more money working at a grocery store decorating and you get someone to wash your dishes there plus health insurance!!

FromScratch Posted 30 Mar 2009 , 10:41pm
post #18 of 29

No way... tell her no thanks... getting raped was not on your agenda. For that you could pretty much rent your own place (depending on where you are). I know the idea of getting clients and not having that overhead is tempting, but she is being un reasonable. I'd keep looking if I were you.

cakesondemand Posted 31 Mar 2009 , 12:27am
post #19 of 29

Sounds like she wants you to pay for her rent Run don't walk. Like some have said you can have your own place keep looking it will show up when its time for you to make the leap. I waited until something came up and have been in my own shop for amost 2 yrs now. At first I rented from a food safe church kitchen $50 for the first 4 hrs $10 per hr after that worked great until I built up my client base then I had to go bigger.

OhMyGanache Posted 31 Mar 2009 , 1:43am
post #20 of 29

I would never enter into any such agreement with this person. Tell her if she wants all the profit, to hire you to do cakes instead and let her do all the ordering, the advertising, etc. and pay you a set wage.

She's robbing you. I can't believe her gall. I could see it being an "either/or" situation (whichever would be greater of the $500 or 20%) but to want BOTH fees is absolutely insane.

OhMyGanache Posted 31 Mar 2009 , 1:52am
post #21 of 29

I just did a little bit of math. According to my calculations, if you bring in $1000 in monthly sales, after paying the $500 + 20%, you would be paying $700.

Out of $2000, you pay $900.
$3000 in sales = $1100 to her.
$5000 is $1500 in her pocket.

If you had $5000 in sales, your cut would be $3,500. And what will it cost you to produce $5000 worth of cakes? And what about your other expenses (insurance, ingredients, advertising, vehicle costs, etc.)?

jewelykaye Posted 31 Mar 2009 , 1:53am
post #22 of 29

Yeah, it almost sounds to me like she is thinking, "Well if she is willing to pay this price then it would be worth the hassle of having a tenant."

I was paying $10/hr for the place I rent (which is completely fair) and I was having a hard time making a profit.

Flat rates are great b/c you don't have to worry about your speed as much.

I'm just uneasy with the $500 flat PLUS 20% on everything...

I know you really do want to do this but I would really just keep looking.

summernoelle Posted 31 Mar 2009 , 1:53am
post #23 of 29

Please. You can get your own orders, otherwise you wouldn't be opening up a business. I agree with everyone else-she is greedy. And she has already changed the arrangement once. Run, run away. icon_smile.gif

NuttyNanny Posted 31 Mar 2009 , 2:18am
post #24 of 29

Wendl...$3000!!!!! Holy crap....for filth, leaks, mold, warping. Sounds like a good deal....NOT. Is the landlord nuts?

notjustcake....don't mean to pee on your parade, but it sounds like everyone else says, GREED. Have you looked around to see if maybe you can find a place of your own? Not sure where you live, but there just might be something out there. I just rented a free standing building for $200 for the first 6 months and then rent goes up to $300 a month, it used to be a pizza place and a super nice landlord. It took me awhile but something did finally come along for me so maybe just take a look out there and see what you can find. Good luck.

mom2spunkynbug Posted 31 Mar 2009 , 2:23am
post #25 of 29

I have to agree with everyone else - RUN from this "offer" - she is being way too greedy - that is insane to ask for 20% of your sales! PLUS $500! You obviously do not need her referrals! She's probably just saying that anyway!

Keep your head up & keep looking - something reasonable will come along for you!

jlsheik Posted 31 Mar 2009 , 2:37am
post #26 of 29

Ok...am getting a heck of a deal!! I move in to my rented kitchen on the first. I am paying $50 and 10% She owns the only wedding rental place within 100 miles. Brand new commercial kitchen w/ new appliances.
Run from that deal...of course you might be in a bigger area than me...my town is about 26 thousand people. No other legal place other than walmart and food pyramid.
just my 2 cents...but RUN!

notjustcake Posted 31 Mar 2009 , 3:05am
post #27 of 29

Thank you so much for all your responses, I have made my decision and will be emailing them soon. I read eveyone's calculations and my own and the numbers don't add up even my State Farm Agent told me to run!
Thank you all so much everything if I find something in the future I will post the good news. icon_biggrin.gif

Let_them_eat_cake Posted 31 Mar 2009 , 3:29am
post #28 of 29

I am trying to work out the same arrangement with ANY commercial kitchen in NJ. Churches and VFWs are not allowed. Any ideas about how you obtained a kitchen to take you in? I am getting very discouraged and desperate here....I want to be licensed but can't be until I get a place to rent space from just a few hours a week to start about one day a week until my business gets going. Can anyone help me please????

Ladyfish74 Posted 31 Mar 2009 , 3:38am
post #29 of 29

jlsheik said

Quote:
Quote:

Ok...am getting a heck of a deal!! I move in to my rented kitchen on the first. I am paying $50 and 10% She owns the only wedding rental place within 100 miles. Brand new commercial kitchen w/ new appliances.



Is that 10% on your profit or total sales?

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