Wholesale, Cafe And Renting Their Kitchen

Business By FromScratchSF Updated 5 Apr 2011 , 7:57pm by FromScratchSF

FromScratchSF Posted 18 Feb 2011 , 7:47am
post #1 of 19

Hello Pals! This is long, sorry, but I just spent an hour looking at previous threads and didn't find what I was looking for, and I want to give as much info as possible... or maybe I just don't know how to type shorter posts!

First, I am totally legal in CA. I currently bake out of a rented commercial kitchen, but being honest, I really hate the space, they have very little storage space to offer me, and despite begging for it, they have no freezer space. I've been OK so far being small time, but I'm starting to get really busy, I hate turning down orders, and the baby in my belly is gonna be making her debut in the world in late May. I really wanted to get some cupcake stock built up in the freezer so that I can still attempt to make some money while on "maternity leave", so to speak. I am also entering into a catering truck agreement and will be supplying them with cupcakes weekly. I have already tried to get my own store open, but capital is a major issue despite my fab business plan, and it's crazy expensive to get something going here in SF.

Anyway, as it so happens, I also have a friend that has recently opened a cafe a few blocks from my house. I've been bugging her to let me sell cupcakes out of there but we've been waiting until they get their bearings selling their own food before selling someone else's. Today I had our tasting meeting and it occurred to me that they have all the equipment I'd need to bake there in their off hours, and their off hours are the weekends! So, I throw it out there that hey, let me bake here! They are open to it, obviously if they can make a little money on something that currently makes them no money then bonus to them! I also have a following and get regular calls from people wanting cake/cupcakes right now, or only want to get a few cupcakes at a time. This would allow me to send foot traffic into their cafe to buy my cake without having to order in advance.

I know I want to keep the issues separate (selling out of there and baking out of there). The cafe is not that busy yet so I don't see it being a big money maker for me (or them, at least to start) so I don't want to barter my cake for rental space.

So, here are my questions:

What is a typical profit agreement selling a baked good like a cupcake out of a cafe? I know this is a hard question to put a specific dollar amount on, but is there a standard industry percentage as to the "cut" to the cafe (like 10%)? I want to keep a tight control on my brand and image, so we already decided that all they would be supplying me is the counter space. I'll supply the cake stand/s, display pieces, signs, and packaging for any to-go orders.

Does anyone have a boiler plate wholesale agreement they'd be willing to share? I'll research the State specifics so any contract as a springboard would be awesome.

Is there any pitfalls I should look out for if I do choose to switch from my current baking situation to an off-hour cafe situation? Any stories or experience working in this environment would also be appreciated!

Thank you again for reading, and a bigger THANK YOU for your responses!

Jen

18 replies
FromScratchSF Posted 18 Feb 2011 , 11:19pm
post #2 of 19

No love today? icon_biggrin.gif

Shameless bump.

jason_kraft Posted 19 Feb 2011 , 6:06pm
post #3 of 19

I can't contribute much since we haven't entered into wholesale agreements yet...we've talked to a few upscale grocery stores but they've requested a huge margin (Whole Foods marks up in the 45% range) so the numbers just didn't work, but a small cafe might be more flexible. Instead of thinking about a "cut", you might want to just sell your product to the retailer at a price where you can still make a profit, and let them mark it up to a final price you think would still sell. Good call on separating the kitchen rental from the wholesale agreement, I would definitely get that rental down first, since a good commercial kitchen is hard to find.

Good luck and congrats on the baby!

ninjacaker Posted 20 Feb 2011 , 3:33am
post #4 of 19

I don't have a lot of experience with vampires, but I have hunted werewolves. I shot one once, but by the time I got to it, it had turned back into my neighbor's dog.

scp1127 Posted 20 Feb 2011 , 5:51am
post #5 of 19

FromScratch, just a suggestion... what about actually renting the counter square footage and that's the end of it (plus the kitchen)? This isn't really experience because it is family, but my mother-inlaw owns a shop in town. I purchased a dining room buffet with a hutch (and doors), painted it pink, and it is going in her shop. Since her store is already a craft style consignment shop, this fits in the rental by square footage form. I pay $ per month and a percentage of sales. Because it is rented by me, it is retail, not wholesale, so less red tape. It will be weekends only, so very little, if any, waste. I have not started this yet, but I do know her weekend foot traffic numbers. I doubt she will actually let me pay, but that is the plan. If this goes well, I plan to expand the idea. The good news is that you maintain full control.

FromScratchSF Posted 20 Feb 2011 , 6:22am
post #6 of 19
Quote:
Originally Posted by scp1127

FromScratch, just a suggestion... what about actually renting the counter square footage and that's the end of it (plus the kitchen)? This isn't really experience because it is family, but my mother-inlaw owns a shop in town. I purchased a dining room buffet with a hutch (and doors), painted it pink, and it is going in her shop. Since her store is already a craft style consignment shop, this fits in the rental by square footage form. I pay $ per month and a percentage of sales. Because it is rented by me, it is retail, not wholesale, so less red tape. It will be weekends only, so very little, if any, waste. I have not started this yet, but I do know her weekend foot traffic numbers. I doubt she will actually let me pay, but that is the plan. If this goes well, I plan to expand the idea. The good news is that you maintain full control.




Red tape doing wholesale? I though red tape was the retail part! What red tape? icon_eek.gif You are freaking me out icon_biggrin.gif

I'd rather her purchase X product form me at a wholesale discount and mark up as she wants. All I care about is keeping my branding in place, which I think is pretty normal.

sillywabbitz Posted 20 Feb 2011 , 6:24am
post #7 of 19

It sounds like great opportunith if you have a clear contract on your rental space. I dont think you'll be able to let them price the cupcakes if your regular customers are going to pick stuff up there.Is access to the kitchen only on the weekend going to work for you? Most cake orders are due on Saturday. Even if you do mainly cupcakes, when would you decorate them? Just some things to think about.

scp1127 Posted 20 Feb 2011 , 6:30am
post #8 of 19

FromScratch, in my state, the items must be labeled, I think with an FDA label. Everything else is pretty much the same because we are both in areas with strict requirements to begin with. But check... both states where I do business have separate, additional requirements for wholesale.

FromScratchSF Posted 20 Feb 2011 , 6:52am
post #9 of 19
Quote:
Originally Posted by scp1127

FromScratch, in my state, the items must be labeled, I think with an FDA label. Everything else is pretty much the same because we are both in areas with strict requirements to begin with. But check... both states where I do business have separate, additional requirements for wholesale.




Whoa you worried me there for a minute... If I was selling at a grocery store then yes I'd have to package and label. But this is a restaurant, so I'm pretty sure don't have to do any of that, at least I've never seen any cafe or coffee shop that sells pastries/cakes/cupcakes do that!

FromScratchSF Posted 20 Feb 2011 , 7:00am
post #10 of 19
Quote:
Originally Posted by sillywabbitz

It sounds like great opportunith if you have a clear contract on your rental space. I dont think you'll be able to let them price the cupcakes if your regular customers are going to pick stuff up there.Is access to the kitchen only on the weekend going to work for you? Most cake orders are due on Saturday. Even if you do mainly cupcakes, when would you decorate them? Just some things to think about.




They are only open till 5pm Monday thru Friday, so my baking would be after hours in the evenings and the weekends. I require 24 hours notice on all my cake as it is so I can easily bake in the evening and decorate/package in the morning for pick-up. At least I think. And having cuppies and an occasional cake at the cafe people can pick up what is available whenever they want if they don't want custom.

I can have access during the day to pull stock from the freezer and decorate, just the actual baking has to be done after hours.

Thanks for pointing out things I may have overlooked, keep them coming!

scp1127 Posted 20 Feb 2011 , 7:44am
post #11 of 19

FromScratch, if they are selling their own, it's not wholesale. If you are not directly selling to the final customer, it is wholesale. Just check, I have no idea what the law is in CA. But think about those cookies and fudge, etc., on counters in mom and pop stores. They do have a label. Even gourmet dog treats in MD have a nutritional label when they are wholesaled to a boutique pet store.

FromScratchSF Posted 20 Feb 2011 , 8:25am
post #12 of 19
Quote:
Originally Posted by scp1127

FromScratch, if they are selling their own, it's not wholesale. If you are not directly selling to the final customer, it is wholesale. Just check, I have no idea what the law is in CA. But think about those cookies and fudge, etc., on counters in mom and pop stores. They do have a label. Even gourmet dog treats in MD have a nutritional label when they are wholesaled to a boutique pet store.




?

Closest example I have is, Starbucks has a whole case full of baked goods that they get at a wholeseller. They don't individually package them or label them. You order a muffin out of the case and and they stick it in a bag. They even sell cupcakes now, and those are in the case. Anyway, I'll double check, but I don't think I have the packaging issue you mentioned. I'll let you know what I find out!

FromScratchSF Posted 20 Feb 2011 , 8:38am
post #13 of 19

Ok wait, what authority should I be looking at? State Board of Equalization, Health Department, etc? I can't find anything via google but maybe I'm not looking in the right place...

scp1127 Posted 20 Feb 2011 , 10:12pm
post #14 of 19

For both states, I went to the state health depts. Rather than just giving you the requirements, I find they are both (MD, WV) helpful with the whys. Local HD's don't always have the answer.

FromScratchSF Posted 5 Apr 2011 , 5:02pm
post #15 of 19

Bump - another cafe has contacted me about selling my cupcakes - I did a tasting with them and they want me to DISCOUNT MY PRODUCT BY 63%. I retail my minis for $2 each, they want to only give me $.075 each. This just does not seem right... how could anyone afford to sell wholesale taking a 63% hit? They want 2 dozen minis 3 times a week, delivered of course. I keep doing the math and it doesn't even cover the kitchen rental.

Please, if ANYONE out there sells wholesale please let me know how much you discount your product by. If this is standard (i.e. 60% or more discount) I will no longer be entertaining these requests and stick to what I already do.

jason_kraft Posted 5 Apr 2011 , 5:36pm
post #16 of 19

60% is a little much for a small cafe, for comparison purposes the Whole Foods markup for bakery products is around 45%. For only 6 dozen minis a week I would probably shoot for a 20-30% wholesale discount if they pick up the product, less if delivered.

FromScratchSF Posted 5 Apr 2011 , 5:54pm
post #17 of 19

Thank you Jason!

Jen

Dayti Posted 5 Apr 2011 , 6:09pm
post #18 of 19

OK, I know I am in a completely different continent but I just thought I would share what wholesale prices I sell at. In my Bakery, I sell cupcakes at 2.50. I have 2 wholesale agreements at the moment.
The first place buys them from me at 2.20. They sell them at their 2 stores at 3.75 (maybe I should up my prices, one of their stores is literally 5 minutes from me icon_eek.gificon_biggrin.gif ). They order 6 dozen a week (they also order other baked goods too) and pay delivery on top.
The second place is a fairly new arrangement. They pay me 2.00, and sell at 3.50. They are in another city and come and pick them up when they need them, sometimes they just buy them out of my display case. They are the only cupcake sellers in that city.
For me, both of these are great deals since my cupcakes are my biggest earner margin wise. I worked out the prices with each of the buyers according to what they were going to sell them at. I of course had my absolutely lowest selling price in mind all the time through the discussions, but got nowhere near it.
Good luck!

FromScratchSF Posted 5 Apr 2011 , 7:57pm
post #19 of 19

Thanks Dayti! I knew they were underpricing me by a bunch. I think they want to sell my minis for less then what I sell them for, which makes NO sense to me - I mean, I do just fine selling at the retail price I've set, and I didn't just pick a number out of the sky, I priced myself based on my ingredients, time, overhead... why would they want to lower it? This is a pretty hipster cafe too, where the cool people go and order $12 turkey sandwiches and $4 cups of coffee - so it's not like I'm trying to sell gourmet at Wal Mart!

Anyway thank you!

Jen

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