Advice On Partnering With Another Business Owner

Business By jmr531 Updated 15 Nov 2010 , 7:16pm by icesk8ermom

jmr531 Posted 5 Nov 2010 , 5:20pm
post #1 of 7

While in the process of searching for a kitchen to start my custom cake business, I came across a cafe owner who is interested in "partnering" somehow. We haven't had a chance to talk about the arrangement, so I don't yet know what his ideas are, but before I do I'd like to have a clear picture of what I want. He owns a small coffee shop around the corner from where I live and is opening a new cafe nearby where he will be making fresh crepes and offering baked goods. He mentioned possibly having me make cakes for the cafe and maybe even the other baked goods (croissants, muffins, etc).

Do any of you have similar arrangements with other business owners? If so, what are the terms of the arrangement and how are you compensated for your time/products?

Thank you very much for your advice.

6 replies
costumeczar Posted 5 Nov 2010 , 6:51pm
post #2 of 7

If you're using their kitchen and they're selling what you make in their shop, you need to make sure that you're being treated like either a contractor or an employee, and check the terms of each to make sure that they're paying your employment taxes the right way. If it's a partnership where you're working there, then it's possible that the IRS would say you're actually an employee. If you're consigning merchandise and baking it in a different kitchen, that's another story.

Some people try to get out of paying SS taxes and other employment taxes by calling people contractors when they're actually be employees under the IRS definition.

If you're just thinking of baking things in a different licensed kitchen and consigning them, I'd personally recommend that you sell them to him for resale, not put them in the shop and take a percentage of the sale if they sell. That way he will have to deal with anything that doesn't sell and you won't be stuck with unsold goods. He might not want to do that, though!

Whatever you decide, get it in writing!!!!!

jmr531 Posted 6 Nov 2010 , 1:29am
post #3 of 7

Thanks costumeczar. I don't think I want to be hired a his employee, especially since he would be relying on me to provide recipes. I've worked really hard gathering and perfecting my recipes, so I'm not going to just hand them over to anyone. I might suggest selling him items for resale, but you're right, he may not want to do that. The more I talk to him, the more it sounds like he wants a baker to provide a high volume of baked goods, and although I may get there at some point, I originally just wanted to start small and focus on custom cakes at first. In any case, if we can't work out an arrangement, I'll just politely say "thanks but no thanks." If we do come up with something that works for both of us, I'll definitely get it in writing.

What about giving him a percentage of any custom cake orders that come from his shop? Does anyone have that type of arrangement? If so, how much do you give the other business?

Chef_Stef Posted 6 Nov 2010 , 11:30pm
post #4 of 7

About the most I'd be willing to do in this type of scenario (IF I had time, which I don't, unless I clone myself), is to sell them X amount of cupcakes (or muffins, or whatever) on a daily or weekly basis. That way, they're a customer, it's a sale for you, and you're not partners.

I personally would never, ever have a partner or even a 'percent-of-sales' agreement. Things DO get misunderstood, and there's not enough Advil in the world for that kind of headache.

If he wants to refer to you, great. Tell him in return that you'll refer all your coffee-drinking, cafe-seeking customers back to him...

mombabytiger Posted 7 Nov 2010 , 2:09pm
post #5 of 7

I am considering doing something similar with a restaurant owner. Using part of his restaurant to house a bakery/cafe. That way I get to use his license, inspections, etc. We haven't worked out the details yet. I don't want to be his employee.

costumeczar Posted 7 Nov 2010 , 4:43pm
post #6 of 7
Originally Posted by mombabytiger

I am considering doing something similar with a restaurant owner. Using part of his restaurant to house a bakery/cafe. That way I get to use his license, inspections, etc. We haven't worked out the details yet. I don't want to be his employee.

I'd check on that...If you're not his employee then you might still have to have your own business license and inspection. If you're filing taxes separate from him then I'd think that you'd be treated as a separate business even if you're using the same facility.

icesk8ermom Posted 15 Nov 2010 , 7:16pm
post #7 of 7

I have a deal with a local bagel shop near me; I cook in the evening when they are closed. I use their kitchen, business license, resale number etc. They pretty much already have all the things I need to bake and will order ANYTHING I want. They do marketing and everything for me; I pay nothing out of my pocket! We do a 50-50 split on the profits. I can do whatever I want.

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