Business Idea - What Problems Do You Foresee?

Business By Donnawb Updated 18 Sep 2011 , 7:28pm by cakeandpartygirl

Donnawb Posted 18 Sep 2011 , 1:39am
post #1 of 16

I was thinking of opening a cake supply store. The nearest one from my town is an hour away, and every time Im there its packed with people. We do have a Michaels and Hobby Lobby is coming. I have an idea of opening a cake supply store. But, in the back of the store I want to have a fully licensed bakery kitchen and rent out space to people who want to bake and sell cakes legally. The store part can be locked and the people who rent space in the kitchen wouldnt have access to it after hours if they were there baking after hours. What problems to do you see with this? Im just brainstorming. Thanks for your input.

15 replies
cakeandpartygirl Posted 18 Sep 2011 , 1:53am
post #2 of 16

It sounds good to me!! I wish I had a cake decorating store near me!

CindiM Posted 18 Sep 2011 , 2:05am
post #3 of 16

The supply store sounds great!

But the kitchen for others to use, would not work for me. My problem would be, I am really anal about someone using my stuff, breaking my stuff, borrowing my stuff, misplacing my stuff, well you get the idea. I guess I am too attached to my ovens, mixers, freezers, etc. I guess I had to share too much as a child.

Good Luck to you and I hope it works for you.

Donnawb Posted 18 Sep 2011 , 2:11am
post #4 of 16

I would only supply the ovens and stove, counters, refrigerators/freezers, diswasher, and whatever else would be required to get the kitchen licensed by the health department. I would have locked areas for everyone to keep their things.

cakeandpartygirl Posted 18 Sep 2011 , 2:15am
post #5 of 16
Quote:
Originally Posted by CindiM

The supply store sounds great!

But the kitchen for others to use, would not work for me. My problem would be, I am really anal about someone using my stuff, breaking my stuff, borrowing my stuff, misplacing my stuff, well you get the idea. I guess I am too attached to my ovens, mixers, freezers, etc. I guess I had to share too much as a child.

Good Luck to you and I hope it works for you.




Yes that could be a problem! thumbsdown.gif However if the op puts in caged storage units that could be locked it would help alleviate the problem. Also cameras would be good too. The shared commercial kitchen that I used to work at didn't have locked storage, however she had security cameras. We all had to label our ingredients. I see the biggest problem could be with a shared kitchen wouuld be your refrigerated items.

cakeandpartygirl Posted 18 Sep 2011 , 2:20am
post #6 of 16

If you were anywhere near me I would sign up in a heartbeat!!!

JenFailla Posted 18 Sep 2011 , 2:57am
post #7 of 16
Quote:
Originally Posted by cakeandpartygirl

If you were anywhere near me I would sign up in a heartbeat!!!




me too!!!! sounds like a really great idea!

jason_kraft Posted 18 Sep 2011 , 3:32am
post #8 of 16

If executed properly a shared commercial kitchen (the second half of your idea) can be very profitable, since there is really no large-scale competition. Be prepared to invest a lot of up-front capital though, $50-100K or more.

If I were you, I would focus on only the shared commercial kitchen, and significantly scale down or eliminate the retail cake supply store part of your idea. Retail margins are razor thin, and most of your target demographic will either order supplies online for less than you can sell for, or be content with the limited selection available at Michaels and Walmart.

Now a co-op procurement model could be a good value-added service for your shared kitchen, as tenants could pool their buying power to get better prices directly from distributors. This service could even be extended to the general public for a fee with JIT online ordering and pickups by appt to reduce inventory holding costs and labor overhead.

BTW we use a shared commercial kitchen, and it works pretty well. There are assigned shelves in the walk-in fridge and locked dry storage cabinets for supplies and ingredients. There are occasional problems with tenants not cleaning up after themselves or using other tenants' shelves in the fridge, so there is some conflict resolution required on the part of the landlord.

Donnawb Posted 18 Sep 2011 , 2:23pm
post #9 of 16

How much do people pay to rent kitchen space?

cakeandpartygirl Posted 18 Sep 2011 , 2:33pm
post #10 of 16
Quote:
Originally Posted by Donnawb

How much do people pay to rent kitchen space?





It can vary greatly. The one I was using started at 25 per hour and it was reduced based upon if you used it between the hours of 10 pm and 6am and if your weekly hours went up. Honestly it was a lot of money and most of the bakers that worked there had minimum orders. Yes, I was in the red and yes it was very discouraging. There are others that I have seen that pay 10 hourly. Where I live now, there isn't a cottage food law and I have been looking for one and have found it, but its too much money, so much that I might as well as have my own store. icon_eek.gificon_cry.gif

jason_kraft Posted 18 Sep 2011 , 3:01pm
post #11 of 16

Here in the SF bay area rates vary from $15-35/hour depending on volume and whether or not you can prepay for kitchen time (which really helps out the landlord with cash flow, especially in the early stages). The facility we use has three separate kitchen workspaces and a number of prep areas (the hourly charge is slightly lower for prep areas), so at 25% utilization you are looking at about $24K of revenue per month, plus charges for on-site storage.

The most profitable tenants tend to be caterers, at our kitchen there are several caterers who have kitchens booked for several hours every single weekday.

$25/hour may seem like a lot, but if you price appropriately it is still quite possible to make a decent profit with quality products. If there are home bakers in the area (illegal or not) this becomes more difficult but there are ways to succeed if you leverage your position as baking in a certified and inspected kitchen or provide some other competitive advantage. In any case, renting existing kitchen space is still far cheaper than opening your own shop.

Donnawb Posted 18 Sep 2011 , 3:07pm
post #12 of 16

How is the time the kitchen is used regulated, i.e. how would the owner of the kitchen know how long each person is actually using the kitchen? Is it the honor system?

jason_kraft Posted 18 Sep 2011 , 4:56pm
post #13 of 16
Quote:
Originally Posted by Donnawb

How is the time the kitchen is used regulated, i.e. how would the owner of the kitchen know how long each person is actually using the kitchen? Is it the honor system?



There's a calendar posted at the kitchen where tenants can sign up to reserve each kitchen workspace and prep area. There are also cameras so the landlord can audit this if necessary, but for the most part it's on the honor system -- if someone makes a habit of using kitchen space without signing up for it they would probably be kicked out and lose their deposit.

cakeandpartygirl Posted 18 Sep 2011 , 6:39pm
post #14 of 16

For me it was done on-line and they had only 2 kitchens. As far as the time went if you signed up for that time you pretty much were going to have to pay for it whether you used it or not. Each owner had a pass card that unlocked the door which of course the owner of the kitchen could tell who was in there and for how long.
Sorry Jason for you it may be cheaper to rent a commercial kitchen but like I said, for me, I have crunched the numbers and renting the kitchen at their rates didn't work out for me!

jason_kraft Posted 18 Sep 2011 , 7:04pm
post #15 of 16
Quote:
Originally Posted by cakeandpartygirl

Sorry Jason for you it may be cheaper to rent a commercial kitchen but like I said, for me, I have crunched the numbers and renting the kitchen at their rates didn't work out for me!



It's quite possible that due to local economic conditions a commercial kitchen rental is not sustainable for the mainstream market, but there are almost always niche markets that are willing to pay a premium.

Also my point was that renting a commercial kitchen is cheaper than opening your own shop. However if your sales volume increases enough and you can meet monthly fixed overhead costs, opening your own shop winds up being cheaper once your business grows to a certain point.

cakeandpartygirl Posted 18 Sep 2011 , 7:28pm
post #16 of 16
Quote:
Originally Posted by jason_kraft

Quote:
Originally Posted by cakeandpartygirl

Sorry Jason for you it may be cheaper to rent a commercial kitchen but like I said, for me, I have crunched the numbers and renting the kitchen at their rates didn't work out for me!


It's quite possible that due to local economic conditions a commercial kitchen rental is not sustainable for the mainstream market, but there are almost always niche markets that are willing to pay a premium.

Also my point was that renting a commercial kitchen is cheaper than opening your own shop. However if your sales volume increases enough and you can meet monthly fixed overhead costs, opening your own shop winds up being cheaper once your business grows to a certain point.



True, for some however the weekly cost of renting a commercial kitchen was $150 less than the monthly lease amount. That is backwards but it is what it is. icon_confused.gif

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