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.

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

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.

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.

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

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.

How much do people pay to rent kitchen space?

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.

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?

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!