Commercial Kitchen Renting...... Help

Business By hollyheartscuppycakes Updated 3 Apr 2014 , 8:00pm by KaraLynL

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Normita Posted 17 Nov 2010 , 5:58am
post #31 of 59
Quote:
Originally Posted by jasonkraft

$1000/month in overhead is pretty high for a bakery with low-to-moderate volume operating out of a rented commercial kitchen. Our overhead (in the SF bay area) is roughly $500/month including rent (40 hours of kitchen time a month with on-site storage), insurance, and license fees.




I'm sorry I'm new to all this as I am just a hobby baker. But to clarify....you only pay $500 a month for rental space which includes insurance and fees?

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ladyonzlake Posted 17 Nov 2010 , 3:27pm
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See www.creativekitchenworks.biz

It's $500.00 for 80 hours a month...I'm not sure what insurance and fees you are referring to.

Your business liability insurance is separate and I don't know what fees everyone is referring to.

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-K8memphis Posted 17 Nov 2010 , 3:50pm
post #33 of 59

The breakdown I did upthread was just to show the kind of output $17 an hour needs to have to stay afloat. It works out to a tremendous overhead if it carried out to more and more hours. You can simply get a better rate if you work more hours but I was just highlighting how high $17/hour is.

To me that's more of a make 100 jars of pasta sauce or jelly or something in a coupla hours. Sell it for $5 a jar. $100 for ingredients, $50 packaging, $34 for the kitchen--you'll clear some money. $17 an hour is not a good number to me to pop out designer cake.

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jason_kraft Posted 17 Nov 2010 , 3:58pm
post #34 of 59
Quote:
Originally Posted by Normita

Quote:
Originally Posted by jasonkraft

$1000/month in overhead is pretty high for a bakery with low-to-moderate volume operating out of a rented commercial kitchen. Our overhead (in the SF bay area) is roughly $500/month including rent (40 hours of kitchen time a month with on-site storage), insurance, and license fees.



I'm sorry I'm new to all this as I am just a hobby baker. But to clarify....you only pay $500 a month for rental space which includes insurance and fees?



Our rent works out to about $420/month, this includes utilities. Liability insurance is $35/month ($425/year), our business license is $4/month ($50/year) and the CA LLC tax is $66/month ($800/year). CA has a high LLC tax, most other states are much lower.

To clarify, only the rent check is paid to the commercial kitchen, the rest of the bills are from the insurance company, city hall, and the CA secretary of state, respectively.

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jason_kraft Posted 17 Nov 2010 , 4:10pm
post #35 of 59
Quote:
Originally Posted by -K8memphis

The breakdown I did upthread was just to show the kind of output $17 an hour needs to have to stay afloat.



We typically make about $500 worth of product in 8 hours (4 hours baking one day, 4 hours decorating the next day). Even if we did pay $17/hour, that would only be $136 in rent.

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ladyonzlake Posted 17 Nov 2010 , 6:53pm
post #36 of 59

K8memphis~I have actually thought of getting my own kitchen and renting it out to 1 or 2 people to cover costs.

Hollyhearts~I don't know if making cupcakes would cover your costs unless you did wholesale but that might be tough doing it part time. I do mostly wedding cakes so in my peak months I bring in up to $5000.00 a month and my low months only $1000.00. I don't have employees but there are additonal costs and I'll list mine below:

Rent: $500.00 a month
Health Cert: $500.00 annually
Food Handlers: $10.00 biannually
Insurance: $500.00 annually
LLC Business License: $66.00 annually (costs around $200 or $300 to set up)
Advertising: $1060.00 annually
and then your ingrediedents and supplies

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ladyonzlake Posted 17 Nov 2010 , 6:55pm
post #37 of 59

Oh and I forgot the annual city tax which runs me about $60.00. If you're not in the city limits this won't apply to you.

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-K8memphis Posted 19 Nov 2010 , 4:46pm
post #38 of 59
Quote:
Originally Posted by jasonkraft

Quote:
Originally Posted by -K8memphis

The breakdown I did upthread was just to show the kind of output $17 an hour needs to have to stay afloat.


We typically make about $500 worth of product in 8 hours (4 hours baking one day, 4 hours decorating the next day). Even if we did pay $17/hour, that would only be $136 in rent.




So 8 hours to pay for pure kitchen time is a fairly reasonable 26% of the take. But it takes much more than eight hours to bring this all to pass. For example if you have two 45 minute consults--there goes half a work day--so you don't schedule that or the shopping or anything else during the kitchen time of course.

A pastry chef's wage might be $15 an hour give or take. I'd guess your ingredient cost to be higher than average due to the special dietary challenges?

So the accounting, marketing, delivery, shopping, consultations all come out of other time. Plus someone to answer the phone, wash dishes, buy paper towels and clean up. There's not much for equipment or improvement.

Having your utilities including in the hourly rental is really nice.

It's certainly doable but if one were by them self it would be nearly impossible to make anything. If it's two people then at least one of them is working for free all of the time and the other is working for free part of the time.

It's a penny business.

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Larkin121 Posted 19 Nov 2010 , 5:06pm
post #39 of 59

I'm in WA state and I had the same trouble as you, finding and affordable option to get started. I've been keeping an eye out for about a year and a half and I finally found something for me that I'll be starting in January. I happened to meet a restaurant owner who will rent her space to me in her off hours (after 4pm on weekdays and anytime on weekends), on a pay as I go basis. I pay when I reach 80 hours of use, and it's $450 for 80 hours. This is an amazing deal because my biggest issue was not having to pay a set monthly fee since I have small children and want to start part time and lead up to a bigger business when they start school. Because of this set up, I won't be acquiring debt each month if I don't sell enough cakes.... Obviously there's an up front cost for licensing and then a minimal monthly insurance fee, but it's nothing like $500 a month in rent.

I suggest looking for options such as this. They are not common, but I completely believe that if you keep your eyes and ears open and network as much as possible, you can find someone. Spread the word to family and friends and see who knows a restaurant owner, caterer, etc. Somebody may be more than willing to help you get a start AND make themselves a little extra cash by renting to you. And then price accordingly... be sure you know all of your costs including the rent, insurance, licensing fees, etc and make sure you can still make enough profit.

My place is an hour drive from me, but it's worth it to get a foot in the door. I hope to eventually either find a place to rent monthly nearby when I can do bigger volume and more hours or to build a commercial kitchen on my property.

Best of luck!

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hollyheartscuppycakes Posted 19 Nov 2010 , 5:14pm
post #40 of 59

Larkin121- That's awesome! If I could find something like a resturant willing to let me do after hours baking that would be a perfect setup. I will keep my eyes and ears open for sure. Where in WA are you?

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Larkin121 Posted 19 Nov 2010 , 5:16pm
post #41 of 59

Pierce County. My kitchen will be in Thurston County, though.

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hollyheartscuppycakes Posted 19 Nov 2010 , 5:21pm
post #42 of 59

Skagit County here. Good luck with your baking!!!!

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jason_kraft Posted 19 Nov 2010 , 6:14pm
post #43 of 59
Quote:
Originally Posted by -K8memphis

So 8 hours to pay for pure kitchen time is a fairly reasonable 26% of the take. But it takes much more than eight hours to bring this all to pass. For example if you have two 45 minute consults--there goes half a work day--so you don't schedule that or the shopping or anything else during the kitchen time of course.



Actually it doesn't take much more than 8 hours to complete those orders. There is some overhead (which I as the business manager take care of at my home office while my wife does the baking/decorating), but that usually involves a 2 minute phone conversation or (in most cases) replying to an email. The only in-person consults we do are tastings for wedding cakes, which the customer pays for separately. Delivery time is also charged back to the customer.

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I'd guess your ingredient cost to be higher than average due to the special dietary challenges?



For gluten-free cakes the cost is slightly higher due to specialty flours and gums (which is reflected in higher prices for GF items), but for vegan cakes the cost is either the same or lower, since we aren't impacted by the rising price of eggs. Soy-free used to be much more expensive until we found soy-free shortening available in bulk...but SF frosting is more difficult to work with so the price is higher to compensate for increased labor.

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So the accounting, marketing, delivery, shopping, consultations all come out of other time.



You're correct that the accounting and marketing is pretty much unpaid, but I handle that in my spare time (I also work full-time in IT), and to be honest it really doesn't take that much time...maybe a few minutes a day entering invoices and receipts into QuickBooks, and 30 minutes/year for the corporate tax return.

I really don't spend any time -- or money -- on marketing other than updating the web site (which takes maybe 15 minutes/month); our customers, Yelp, and Google take care of that for us. Procurement takes maybe an 2 hours/month, as we get most of our items from a restaurant supply store (and shipped from Amazon, which takes no time on my part).

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Plus someone to answer the phone



We have Google Voice set up so our home phone rings during business hours, again this is maybe 10-15 minutes/day on average, most of which involves telling customers that we can't have a cake ready for tomorrow and we don't have a retail shop. icon_razz.gif

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wash dishes, buy paper towels and clean up.



The 8 hours/week includes cleanup time at the commercial kitchen. I consider things like paper towels and bleach part of ingredient costs.

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It's certainly doable but if one were by them self it would be nearly impossible to make anything. If it's two people then at least one of them is working for free all of the time and the other is working for free part of the time.



If my wife had a business degree and was willing to take care of the business side of things as well as baking and decorating, I have no doubt that she could handle the business manager role as well. If you add up all the time I spend on the business per week it's probably in the 2-3 hour range.

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-K8memphis Posted 19 Nov 2010 , 7:09pm
post #44 of 59

Jason--yes you seem incredibly organized. I'm sure you all do well. It's a very nice recipe of the pastry chef and the business chef.

I Love your product. Families with food allergies are very eager to keep things as mainstreamed as possible for their munchkins and it's almost impossible to find suitable alternatives.

But still by and large people do not make much money doing this. The overhead in general is high and the money they do make if they make any is hard earned. Those few minutes here and there add up to less and less profit. Do you mind putting in the time? No because you are delivering a great service and product. Are you making much money. Nope.

There's been a concerted effort to dumb down professional baking and it's worked over the decades. Wilton is big and tons of Mom & Pop bakeries are out of business or they morphed into something else and serve lunch too or something.

I still toy with the idea of setting up and renting out a commercial kitchen...

Idea for you--how do your cakes freeze? We have a permanent Farmer's Market type grocery store here. They have different vendors in there and some have nice freezers with their product in there for sale. Could you incorporate something like this in your present location or is there a FM like that around there? Does your stuff freeze well or does it have to stay so far away from all the other stuff? If it was packaged right would that work?

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jason_kraft Posted 19 Nov 2010 , 7:46pm
post #45 of 59
Quote:
Originally Posted by -K8memphis

But still by and large people do not make much money doing this.



I don't know if I would make that generalization. Like any startup business, you will probably lose money in the beginning, but once you ramp up demand and optimize your processes it can be a very lucrative business. After about 2 years in business we are bringing in more net per hour than a pastry chef position working for an existing bakery...and this is from serving a relatively downmarket customer base compared to many other people here. Any business with a competitive advantage should be able to do the same, the trick is finding something that differentiates you from the crowd.

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Wilton is big and tons of Mom & Pop bakeries are out of business or they morphed into something else and serve lunch too or something.



There's a reason for that. If we had a retail store and the related overhead, we would be out of business too, but these days a more virtual business model with greater flexibility and low overhead is relatively easy to set up (once you find rental space), even in states where commercial home baking is not allowed.

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Idea for you--how do your cakes freeze? We have a permanent Farmer's Market type grocery store here.



We are looking into farmer's markets and selling wholesale, and our cakes do freeze pretty well, but right now we don't have time to expand our business...we're having a baby in March so we're already starting to dial down the number of orders we accept in anticipation for putting the business on hold for a few months next year.

The problem with wholesale is that you just don't make as much per unit, and if you are already at capacity it doesn't make sense to reject higher-profit DTC orders to fulfill wholesale obligations. Farmer's Markets around here have already met their quota of bakeries, and to be honest the amount of work required to prepare product and staff the booth with relatively low-margin items would be better served just making cakes.

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-K8memphis Posted 19 Nov 2010 , 8:03pm
post #46 of 59

Oh I'm so happy for the little Jr/Jr-ette coming along!
Mutlitplied Congratulations!!!

Well yeah but your wholesale is really retail--ramp up the price because you'll be loosing some to stale dating too.

Jason, are you counting all your work hours though??? Hmm???

There's a lot of tricks to it and a lot of unruly ducks that won't stay in line. Too bad I never found the right formula for me huh. Oh well. Jason, I'm glad it was relatively easy for you. It has not been so for moi.

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-K8memphis Posted 19 Nov 2010 , 8:11pm
post #47 of 59

But yeah no, find a place where you could plug in a freezer and folks could just buy from that. A gourmet shop or something. Just a thought.

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jason_kraft Posted 19 Nov 2010 , 8:12pm
post #48 of 59
Quote:
Originally Posted by -K8memphis

Oh I'm so happy for the little Jr/Jr-ette coming along!
Mutlitplied Congratulations!!!



Thanks!

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Well yeah but your wholesale is really retail--ramp up the price because you'll be loosing some to stale dating too.



Unfortunately even high-end retailers like Whole Foods and boutique grocery stores aren't willing to pay our ramped-up wholesale prices.

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Jason, are you counting all your work hours though??? Hmm???



Yes, I'm including the 2-3 hours/week I spend on business-related matters.

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jason_kraft Posted 19 Nov 2010 , 8:15pm
post #49 of 59
Quote:
Originally Posted by -K8memphis

But yeah no, find a place where you could plug in a freezer and folks could just buy from that. A gourmet shop or something. Just a thought.



I was actually working on a business plan for an idea similar to that, I plan to revisit that some time next year. Retailing is a very tough business to be in so I'm unsure if the numbers will work out.

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-K8memphis Posted 19 Nov 2010 , 8:24pm
post #50 of 59

I think the word I've left out is consignment. Not even sell to the owner. Just rent the space to set a freezer. Yes retail is especially brutal these days.

Hey what about a restaurant???!!!

We've got a real cool place here called Trolley Stop that sells local produce in the back and has little unmanned vendor spaces lining the walls.

Just a thought.
Wish you the best in all endeavors especially the bun in the oven.

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kickasscakes Posted 23 Dec 2010 , 6:03am
post #51 of 59

I have just had an offer from a local shop in town. The chef/owner wants 10 percent of the retail costs of the cake, and that is it. I am thinking that is a sweet deal, no?

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sweetreasures Posted 23 Dec 2010 , 9:01pm
post #52 of 59

Sounds like a sweet deal, yes?

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-K8memphis Posted 23 Dec 2010 , 11:02pm
post #53 of 59
Quote:
Originally Posted by snowbuns

I have just had an offer from a local shop in town. The chef/owner wants 10 percent of the retail costs of the cake, and that is it. I am thinking that is a sweet deal, no?




Maybe--what do you get for 10% of the retail price?
So product has to sell for him to be paid?
If you had to toss something that stale dated--he would not get paid?
You got a good grip on your pricing?
What kind of baking are you doing?

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kickasscakes Posted 24 Dec 2010 , 5:08am
post #54 of 59

I do custom cakes, built to order. I am not sure what you mean by stale dated... And I give them 10 percent of the profit. So if I sell a cake for 200 they get 20 dollars. All supplies are my own cost. My min is 100 dollars, and charge 4 dollars a serving, or more depending on the intricacy of the design... And sculpted is more too, of course.

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-K8memphis Posted 24 Dec 2010 , 1:20pm
post #55 of 59

I meant like if you do wrapped cookies for sale--if they get too old and stuff like that. But you do decorated cakes to order so that's not a factor.

They are not getting 10% of your profit--they are getting 10% of your price--that's quite a numerical difference.

I mean do you get to use their facilities? Do you get cold storage in the frige away from cut onions and in the freezer and somewhere to put your stuff and a work area at a convenient time for you when the kitchen isn't 100 degrees? What are you getting for the 10%?

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ladyonzlake Posted 24 Dec 2010 , 4:03pm
post #56 of 59

I think it's a great deal! Congrats!

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kickasscakes Posted 28 Dec 2010 , 5:25am
post #57 of 59

For the ten percent (of the retail price) I am getting a commercial kitchen space. I will have freezer, walk in fridge space, and prep area. The rest still needs to be agreed upon, as we have agreed to talk more after the holidays. Any suggestions on how to negotioate would be gladly taken icon_smile.gif

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KaraLynL Posted 3 Apr 2014 , 7:59pm
post #58 of 59

may i ask where you rent at?

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KaraLynL Posted 3 Apr 2014 , 8:00pm
post #59 of 59

Quote:

Originally Posted by tutucutecakes 

I don't live in your area but I rent a commercial kitchen for my business in Virginia. To be honest, your success totally depends on your market. We do pretty well in our business because there isn't very much competition with prices as competitive as ours in our area. Have you scoped out your area for major competition? That could help/hinder your monthly goal of income. If you find a commercial kitchen that is both affordable AND allows you to walk away every month with a good amount of money in your pocket to me, it's totally worth all the time and frustration. However, it IS like having another baby in the family so make sure you're ready! Good luck to you! icon_smile.gif


may i ask where you rent?

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