How Much Could You Afford To Rent For And Still Make Money?

Business By joenshan Updated 4 Aug 2011 , 6:38pm by robbynjaye

joenshan Posted 3 Dec 2009 , 1:03pm
post #1 of 34

I would appreciate some feedback on this.

I am in SE Pennsylvania/South Jersey area and believe there is a significant need for rental kitchen space. As I read through your posts many of you say that you are in need of a kitchen to rent due to state restrictions on home based kitchens (PA/NJ). However, many of you also say that at $25/hour, you couldn't make any money.

So, how much could you rent a kitchen for and still enjoy a worthwhile profit on your cakes?

Thanks!

33 replies
kse Posted 3 Dec 2009 , 1:16pm
post #2 of 34

I am in Frisco, TX and I am looking into renting a kitchen for $15.00 an hour. Hope this helps.

amberkw Posted 3 Dec 2009 , 1:25pm
post #3 of 34

I don't understand how you rent a kitchen by the hour. Could someone please explain this concept to me? Who's kitchen? And who would rent to someone out of their comercial space? What's in the contract you have to sign? I f you don't have a cake one weekend, do you still owe them for a monthly fee? Seriously. Do people build kitchens just to rent? I am clueless. DH is building a big garage/ shelter & is going to put me a cake kitchen in it. Does anyone know if it needs a separate door from the garage entrance?

joenshan Posted 3 Dec 2009 , 1:39pm
post #4 of 34

Amber, the concept would be to have a commercial building equipped with 6-8 individual commercial kitchen pods (for lack of a better word). With the use of a key card system, your entrance and exit would be clocked and you would pay an hourly rate for the time that you use the kitchen. The kitchen would be open 24/7.

The idea is that, for the home baker, this would be more cost effective and flexible than building a separate kitchen onto your home and buying the expensive equipment. In addition, the rental kitchen facility would have 2 conference rooms that the members could use to consult with potential customers.

joenshan Posted 3 Dec 2009 , 1:40pm
post #5 of 34

bigbie, that does help. How many hours a week do you plan to utilize such a place?

KHalstead Posted 3 Dec 2009 , 1:57pm
post #6 of 34

that sounds really cool joenshan..........almost like a hotel, but with kitchens instead of bedrooms........neat idea!

cylstrial Posted 3 Dec 2009 , 1:57pm
post #7 of 34
Quote:
Originally Posted by joenshan

bigbie, that does help. How many hours a week do you plan to utilize such a place?




I think it would really just depend on how many cake orders you have.

In the beginning there may not be that many orders, because your new.
However, as time goes by and the cake maker makes more cakes, more and more people will want to buy cakes and the cake orders will go up.

Some weeks I'm guessing that you'd be there 40 hours. Others, you may only be there a few weeks.

Bad news is - I'm not in your area. But I thought I would give you my opinion because I am also looking to rent kitchen space.

Hope this helps!

joenshan Posted 3 Dec 2009 , 2:07pm
post #8 of 34

huge help cylstrial. I totally agere with you. In my research, I found that similar facilities offer lower rates for more hours. So for <20/week the rate $25/hour whereas, >20 hours a week, the rate drops to about $16/hr.

My problem with that, though, is that I feel like those starting up are the ones that need the price break! But I guess volume discount is a more logical business model.

cylstrial Posted 3 Dec 2009 , 2:18pm
post #9 of 34

Here's the problem -

Say I'm going to sell a 6" and 8" buttercream cake . So that would be 36 slices. Say you bake at $3.50 a slice and it takes you 4 hours to make the cake. That would be $126.

But at $25 an hour - that would cost the baker $100 in rent. So there literally wouldn't be anything left by the time you pay for the supplies to make the cake and the insurance and other things.

But the issue remains that you're putting in a brand new kitchen and need to have that paid off as well.

So that's the problem at this point. The cake maker could either raise her prices or only do large cakes. (But then large cakes take more time and you might be back at square one making no money).

Have you thought about a set rent? Instead of by the hour?

joenshan Posted 3 Dec 2009 , 2:29pm
post #10 of 34

Exactly, and that's a great point about a flat monthly rate. It's something to think about. It would certainly advantageous for the owner to know they are getting a set amount every month. But is it any better for the baker? I am playing around with rates of $15-$20/hour.

Not to split hairs, but a shrewd baker might use 2 two hours to bake as many cakes as they can and freeze them. Every member would be alotted long term freezer space and each baking pod would have a double commerical convention oven.

Larkin121 Posted 3 Dec 2009 , 5:13pm
post #11 of 34

There are 3 kitchens like that in Western Washington. All three are in the north end, so I am not close enough to use them. I wish someone like you would build one down on my end!

Anyway, thought I'd let you know that 1 of the 3 offers monthly rates starting as low as $300 a month, I believe, but I'm not sure for how many hours. The second doesn't allow bakers (the company is a bakery and I guess they don't want the competition? Only caterers and personal chefs there). The third offers an hourly rate of $25 (4 hour minimum), an 80 hour a month deal for $500 and an unlimited monthly deal of $900 a month.

Personally, I am looking for an hourly option, but that's because I have young children and I'm looking to do this part time for some years to come. I'd be looking for space to use for when I get a booking and not worry about having to pay for a space when I am NOT having orders. However, I realize that is a rare arrangement to come by.

If you offered something like this in your area, I bet it would be very popular. I know that kitchen I mentioned that does the hourly is pretty booked most of the time.

I almost had a deal with a catering company who owned their own kitchen - for $20/hr. That's about the highest I could afford and still make an ok profit. Depends on what your area averages for cake prices, I would think. If people are charging only $2.50 a slice, let's say, then it think they couldn't afford that either.

Best of luck! I think you have a great business idea.

joenshan Posted 3 Dec 2009 , 6:27pm
post #12 of 34

Wow Larkin, thank you. That is great information. I put together a pro forma income statement and I do believe its a solid business plan that would serve an unmet need. Here in southeastern PA, there are 2, one charges $40/hour and the other is about 50 miles away. As a baker, I am certainly sympathetic to the hard work that goes into making cakes and the nominal profit margin. Set up correctly, I believe it could be an affordable option for home bakers. I just have to play around with the pricing, which is why I posted it here. Perhaps a flexible option is the answer, where there would be both an hourly plan and a monthly rate. Hmmm...thanks so much for your great feedback! Keep it coming!

Larkin121 Posted 3 Dec 2009 , 6:34pm
post #13 of 34

I think having both hourly and monthly would be a great idea. That way, as a new baker works her way up in business, she can still have her needs met at your place - if she's getting a lot of orders, it would be more worth her money to rent monthly. So you'd probably get some long term customers that way, as they increase their business and move up to your next rental level!

tracycakes Posted 3 Dec 2009 , 6:42pm
post #14 of 34

I'll jump in because I have a really good deal and my hubby came up with the plan. I rent from a caterer. I pay a small monthly fee regardless of whether I have any cakes or not. Then, I pay a percentage of each cake. I am also not limited in the number of hours I work. I just know that I can't bake during the weekday mornings because they are working then but since I have my own area, I can come in and decorate.

The montly fee covers storage, refrigerator, etc.... just the price you pay for the contract. The percentage then covers extra use of electricity, water, ovens, etc and a the owner of the kitchen should make some money also.

We also had this agreement with a donut shop I rented from and we were both pleased with it. For one, the owner of the kitchen tries to push cakes too since the more you make, they more they make.

amberkw Posted 3 Dec 2009 , 7:02pm
post #15 of 34

tracycakes - Sounds like you have a nice arrangement. There is nothing like that in a small town of 50,000. People would look at you like you were crazy if you asked to use their space. I guess I will have to wait for my corner of the garage.

KHalstead Posted 3 Dec 2009 , 8:51pm
post #16 of 34

[email protected] town of 50,000..........I live in a town of 15,000 and I don't even consider it THAT small.......although it is pretty small!

kiikip Posted 6 Dec 2009 , 2:56am
post #17 of 34

Hi, I live in Sacramento, California and am currently renting space in a commercial kitchen, I pay $200 a month for dry and refridgerater storage of food supplies and a shelf for what ever else(pans, cake boxes,ect.) in addition I pay $20.00 an hour for kitchen use. As mentioned by other posters when you only have a cake that you charge 40-80 bucks for and you take a couple hours to make it then you have no profit this has been the issue for me and so I end up turining down alot of orders because of this and I am missing out on a lot of potential customers, also because this place is not set up to be a retail location I have to deliver all orders. Needless to say I have been looking for a space of my own . Also even though I know alot of people who like me just need a small affordable place to bake/cook /prepare for catering and I live in a state that requires a commercial kitchen for any food related business, this place is the only kitchen for rent in my city. icon_sad.gif

indydebi Posted 6 Dec 2009 , 2:09pm
post #18 of 34
Quote:
Originally Posted by cylstrial

Here's the problem -

Say I'm going to sell a 6" and 8" buttercream cake . So that would be 36 slices. Say you bake at $3.50 a slice and it takes you 4 hours to make the cake. That would be $126.

But at $25 an hour - that would cost the baker $100 in rent. So there literally wouldn't be anything left by the time you pay for the supplies to make the cake and the insurance and other things.

So that's the problem at this point. The cake maker could either raise her prices or only do large cakes. (But then large cakes take more time and you might be back at square one making no money).



Which is why volume is key to being in business. If you're just making 6 and 8" cakes now and then, you're a hobbyist, no matter how you try to dress it up. In a commercial oven, it takes one hour to bake a single 10" round .... and it takes one hour to bake two 10" rounds, four 8" rounds, four 6" rounds, and two 11x15 sheet cakes.

I delivered a 5 tier cake yesterday. Pulling the cakes from the freezer and starting with naked cake and icing that was already made, I had them crumb coated and iced in 1 hour and 57 minutes. Took me less than 30 minutes to slap some scrolls and borders on them. If you have access to a large mixer and a comm'l oven in a comm'l kitchen, the mixing/baking would only take you about 2 hours .... 3 at the absolute most.

So I have 5 hours invested in this cake. At $25/hour = $125 for rent, our of a $400 invoice to the bride.

A much better deal than the $1500/month I pay for my shop plus the loan payment for the equipment!

If you're renting space, the key is productivity. If you're firing up that oven anyway, then fill it with cakes, choosing sizes/shapes that you make frequently. Wrap and freeze them. Like I said, same amount of time to bake one cake as it is to bake 8 cakes. THen when you have an order, you just fly in there, pull them from the freezer and in 2 hours or less, you're done.

PRoductivity and volume. Have that in place and have it mastered or you won't make any money. The good news is that a good commercial kitchen makes it EASY to work more productively. thumbs_up.gif

Larkin121 Posted 6 Dec 2009 , 3:20pm
post #19 of 34

Indy, you have excellent points there. But what about someone like me who wants to strongly market on gourmet and custom flavors? Now, I don't have any experience in the business, so I could be totally wrong, and I know you have immense knowledge in the area. But I'm thinking some cakers like me wouldn't really be able to bake ahead if the strongest selling points is the large diversity of flavors. It's likely that someone ordering from me would want to order coconut cake with pina coloda filling on tier followed by dark chocolate cake followed by strawberry champagne..... while the next bride wants white chocolate cake with strawberry cake. Or something like that. So baking a bunch of chocolate and vanilla ahead of time might not work out in those cases.
BUT... where I do see what you are saying coming in handy would be if you line up several events per week, then you can look ahead and bake all the events on one day... saving time and money. Just takes a while, I'm sure, to build up the clientele to get there. But that, of course, is true of any business - you don't usually just walk in and start profiting. I probably would start out with just an order for a 6 + 8" here and a wedding cake there... but be working up to more orders. I think, too, that a boutique style lower volume high quality business model can work from what I've read on here (thinking of Jamie and FromScratch off the top of my head), just as a very high volume bakery or catering venture can. Just different very different business plans and needs, I'm sure.

Am I rambling? lol. It's a Sunday morning and my kids woke me up at 5am. Sorry if I am making no sense!

indydebi Posted 6 Dec 2009 , 3:46pm
post #20 of 34

If your specialty is customized cakes, including customized flavors, then those are premium priced cakes. I can't, absolutely can't, buy those flavors in a grocery bakery, so this puts you in the pricing-driver's seat.

There is one shop in Indpls that I know of that I can walk in and buy caviar. One time, he was out, and I asked where else I could get some. He had no idea. So no matter what he prices it at, that's what I'm paying. But my buffets with caviar are priced accordingly.

We sometimes "think" that larger orders get a discount. Do they? Or is the larger order the regular price and the smaller order is the "jacked up" price due to overhead costs? It takes the same amount of gas in my van to deliver a buffet for 50 as it does to deliver a buffet for 150. It costs the same to rent a tablecloth, no matter if there is food for 50 or food for 150 on top of it.

If it takes the same amount of mixing/baking time to mix/bake a 8" cake as it does a 6/8/10" wedding cake (I've done it ... it does take the same amount of time), then the cost for the single 8" cake is going to be higher. A 2-layer 8" cake that serves 24 might cost $100 ($4/serving), but a 3-tier to serve 100 would only cost $300 ($3/serving). Did they get a discount for the 100-serving cake? No......they paid a premium for the smaller cake because you had to cover overhead.

This is part of your marketing/business plan. If you're going to be a super customized premium cakery, your pricing must cover that element in addition to the overhead costs. thumbs_up.gif
--------
(edited for 2 typos)

joenshan Posted 7 Dec 2009 , 7:06pm
post #21 of 34

Indydebi, you're brilliant. In case no one has told you that today. The economies of scale is exactly why I think my business model will be a win-win arrangment.

As for the poster that has to pay extra for storage space, that's really unfortunate. My plan (and if I can book each pod 12 hours per week I can do it) is to charge $20 an hour and that would include freezer storage, refrigerator (cold room) storage and a small locker for dry ingredients and supplies.

My biggest challenge right now is reaching my target market. I don't know how to find the people in suburban Philadelphia that need such a facility. Although I have no doubt they are out there.

pattycakesnj Posted 7 Dec 2009 , 7:25pm
post #22 of 34
Quote:
Originally Posted by joenshan

Indydebi, you're brilliant. In case no one has told you that today. The economies of scale is exactly why I think my business model will be a win-win arrangment.

As for the poster that has to pay extra for storage space, that's really unfortunate. My plan (and if I can book each pod 12 hours per week I can do it) is to charge $20 an hour and that would include freezer storage, refrigerator (cold room) storage and a small locker for dry ingredients and supplies.

My biggest challenge right now is reaching my target market. I don't know how to find the people in suburban Philadelphia that need such a facility. Although I have no doubt they are out there.


just google commercial kitchen space to rent and you will find about 5-6 sites that list people that have space to rent or who are looking for space. (most of the posts are people looking for space). The need is so great in my area (NJ) that I am pairing up with someone else on our own space (splitting the rent) and then maybe down the line, renting it to others when we are not there.

joenshan Posted 7 Dec 2009 , 7:39pm
post #23 of 34

Thank you Patty Cakes. I know, New Jersey has some of the toughest restrictions. Long term outlook definitely includes South Jersey. I am 5 minutes from the Commodore Barry Bridge, so I have an advantageous location.

HowCoolGomo1 Posted 7 Dec 2009 , 7:47pm
post #24 of 34

This is a fabulous thread.

My father was just asking me how much I would have to spend on a rental kitchen.

kiikip Posted 7 Dec 2009 , 11:03pm
post #25 of 34

I think that your idea is great, if I only had to pay the hourly or the monthly it would be a perfect arangement. Also as far as finding customers, In Cali the Health dapartment keeps a list of these types of kitchens under "comassary kitchens" ,also when I first found it, it was through a search on craigslist and I often see people listed as looking on craigslist all the time both are free avenues. Good Luck icon_wink.gif

kiikip Posted 7 Dec 2009 , 11:07pm
post #26 of 34

Your idea is great , if I only had to pay a monthly or hourly then that arrangement would work but paying both is the pits. Also when I found this kitchen it was on craigslist and I often see people on craigslist in my city looking for kitchens to rent. Also our health deppartment has a list of these types of kitchens as "comassary kitchens" it just happens that there is just one. Both avenues are free advertisement and I am sure their are plenty of people in your area looking. Good Luck icon_wink.gif

WykdGud Posted 7 Dec 2009 , 11:58pm
post #27 of 34

This is an idea I have also toyed with. Here are the thoughts I had on the subject. I would charge an hourly fee in the $15/hr. range, but also have a monthly minimum (around $200). Lots of people are going to use you to get licensed, and then work from home to save money.

I would enter into a contract that states as soon as the monthly payments stop - you will notify the health department that they are no longer baking from your kitchen.

You want serious businesses who will generate income for you - not hundreds of home bakers who will simply use you for licensing purposes and then you never see a dime afterward.

bettinashoe Posted 8 Dec 2009 , 12:15am
post #28 of 34

I know of a few people who have rented kitchen space from local churches which I had never really thought of as being a viable solution. I was amazed by the facilities that churches have these days! When I was purchasing equipment (used) for my bakery I ended up purchasing a wonderful oven from a large church for $750. It had two full size ovens, 10 burners with a grill on half of them and was in excellent condition. The church was upgrading! When you think about it, most of the church kitchens sit empty the majority of the week!

joenshan Posted 8 Dec 2009 , 9:54am
post #29 of 34

bettinashoe...great point about the church facilities. As you said many people don't know about them and, in my research for rental facilities, they don't put themselves out there. Although they should as it would generate funds for the church.

love2stich Posted 22 Dec 2009 , 5:54pm
post #30 of 34
Quote:
Originally Posted by tracycakes

I'll jump in because I have a really good deal and my hubby came up with the plan. I rent from a caterer. I pay a small monthly fee regardless of whether I have any cakes or not. Then, I pay a percentage of each cake. I am also not limited in the number of hours I work. I just know that I can't bake during the weekday mornings because they are working then but since I have my own area, I can come in and decorate.

The montly fee covers storage, refrigerator, etc.... just the price you pay for the contract. The percentage then covers extra use of electricity, water, ovens, etc and a the owner of the kitchen should make some money also.

We also had this agreement with a donut shop I rented from and we were both pleased with it. For one, the owner of the kitchen tries to push cakes too since the more you make, they more they make.





tracycakes... OMG I am in this exact situation right now... well almost..I just found someone willing to rent me their commercial kitchen in the evenings when they are not in operation and I need to start getting a rental agreement together with my atty. Would it be ok if I picked your brain a little?? Getting this news from the restaurant owner is the best Christmas present I could ever ask for and I just want to make sure as I am planning I have all my bases covered you know??? I will send you a PM if thats ok!!! I love CC - you guys are THE BEST!!!!

Quote by @%username% on %date%

%body%