Some of you might already know that I am in the very beginning stages of research and planning for a cupcake shop. I'm researching the competition in the area that I would like to open, and there is one other cupcake shop in the area, about five miles away. The town has a population of about 50,000. The area I would like to open in is in the heart of the shoping district. The other shop is more on the outskirts of town. Hubby thinks I'm crazy and one town doesnt need two cupcake shops and I should start researching other areas? What do ya'll think? Is there more than one cupcake shop/bakery in your town?
It's not what do we think. All answers will be in a business plan. You must make an analysis of the competition and the gather income demographic data. You need all of your costs from construction to daily operating expenses. I have done business plans for a living when I owned a marketing company, and I am doing my own now. I already have a commercial kitchen and just want a small storefront. The business plan stage has already taken months just for this addition and I may not be ready until spring.
I have been in business all my life and it is difficult to gather the data. Until you can do this on your own with the HD code, go through the planning commission, price out all materials, get quotes from contractors, know everything about employee law, have an accountant, know all products, and know your overhead down to calculating the oven cost per hour and the climate control vs. the insulation of the building, know output for covering costs, man hours needed, and finally the profit, you don't have the answer and we can't provide it.
Most buildouts will be $50k to $100k and you will not be able to get a loan for this. You will need cash or solid collateral.
Not trying to be the dark cloud, but this is reality and I only listed about 10% of what you need to know. Start with your health department. Remember 85% of new businesses fail in the first year. There is a reason this number is so high. Lack of experience, poor planning, and lack of adequate cash.
I appreciate the input. I am just begining to gather information to put together for a business plan, and your post has really helped with some of the things that will need to be included and what I need to research. I'm not able to do anything but plan right now, as my husband is still in the military. We have an option for our loan through the VA, but I want to be prepared when we are ready to take the next step.
I know of 4 cupcake shops in town, 2 of them are on one side of town 5 mins. apart. On the other side of town, the other 2 are in the exact same area with a walking distance of 5 mins. One in each area are more succesful then the other. The one that are 5 mins. walking distance, one has a better location right on the main street, with the other on a side street. The one on the main street is more busy. As far as the other 2, one is in a very popular shopping area, the other one does better in a side street, slow shopping area. Why? They have a way better product.
You might want to check your local college to see if they offer SBA (Small Business Administration) classes. They can very helpful with developing your business plan. I took them and they helped, but they also told me that it would be worthless when I went to the bank (and it was). Prepare to pony up some collateral (house/land) for your startup costs.
Also, have you considered getting a job at one of these cupcake shops? I don't know how much you know about running a cupcake business (or business in general) but nothing beats learning on someone else's dime. I worked in a pastry shop for 8 months before I started my own business and it really changed my ideas on what I wanted my business to be and how I wanted to run it.
Lastly, and I don't want to rain on your parade either, but I have a great fear that the "cupcake only" shop could be a passing fad. We have had 2 (both failed) in my town, but the next town over has 3 that seem to do well. Nothing wrong with selling cupcakes, but you might want to diversify a little by also offering birthday / celebration / wedding cakes.
HTH and best of luck!!
Good luck to you! I'm sorry if this is negative, but you really do need to watch your competition, but don't obsess. Not everyone is a GROWN UP and willing to let other bakers co-exist.
Example~ this week, a local competitor (whom I've never bothered or badmouthed) had her MOM leave a nasty comment on my business facebook page. Once I confirmed it wasn't a customer or "fan" I clicked her profile, expecting it to be locked...it was public and low and behold on her wall was a status link to my competitor's page promoting her flyer...AND the baker (real name)was listed as her daugther!!!
I took the high road and didn't identify the baker responsible, but it told me quite a lot about this person. There's such a thing as healthy competition, and then there are those who believe only they should/can serve 60+ thousand people!!! She wasn't really a threat to me, as my work is completely different, more specialized and customized...apparently I'm a threat to her. Well, bravo to her for gaining precious facebook "likes" at my expense...I'd rather gain fans legitimately.
I'm an optimist, so I'm hoping that in other parts of the country most bakers respect one another, instead of biting the hand the occasionally feeds them <referrals>. Best of luck to you.
We had a customer come in yesterday - very rude to my counter people, very loud and obnoxious complaining about everything. After the girls finally got rid of her, another customer in the bakery told them that the loudmouth works at a competitor across town. She recognized her. Yes, we're better than you are. Yes, we do more business. Deal with it and don't harass my 8.00/hr help.
Wow. She's got nothing better to do with her time then come into your store and hassle your staff? What a troll.
I don't understand bakers like that. I would think you'd want to get along with the competition. It benefits everyone. I couldn't tell you how much $$$ we've made in our business when the competition didn't have the know how to do a job and passed the client along to us. And we've done the same for them. It's better to have friends then enemies.
It's better to have friends then enemies.
This is true, but unfortunately it's impossible to be friends with some people. They would rather slit your throat than talk to you if they think you might possibly be a threat. In some cases (like mine) they'll find out sooner or later (when their business folds...again) that you can't treat people that way, customers don't like it and charging pennies for a cake is counter productive.