How Much It Costs to Start a Bakery

Detailed Startup Costs by Bakery Type

It’s important not to overlook any potential permits or licenses, as you might see your costs skyrocket if you fail to acquire the right ones and face fees or fines as a result.

Bakery franchise startup costs vary widely. For instance, it can cost millions of dollars to start a Dunkin Donuts location.

Working Capital Calculation for Bakeries

In addition to the startup costs detailed in the above table, you will need adequate working capital. Working capital is liquid funds, money readily available to pay for day-to-day operations — supplies, bills, employees, and rent. It’s the difference between your company’s assets (cash, unpaid customer bills, inventory) and liabilities (outstanding bills and loans). 

Most business finance experts recommend a minimum of six months of working capital. To calculate your total working capital budget, add up all ongoing costs and subtract your hard setup costs, such as equipment purchase, construction, and initial inventory.

To get a rough estimate, add up your annual budget for all salaries, rent, utilities, supplies, and advertising, then divide it in half to determine six months of working capital. Add this amount to your total startup costs. Not sufficiently funding a new business is one of the biggest mistakes bakery owners make.

How to Open a Bakery in Your State

Thinking about starting a bakery? Learn how to open your own bakery with these step-by-step business guides specifically written for your U.S. state’s requirements. We have bakery guides available for the following states:

• California
• Florida
• Illinois
• New York
• Pennsylvania
• Texas
• Virginia

Bakery Name Ideas

Are you opening a new bakery and need great name ideas? Our list of hundreds of catchy bakery names complete with inspiring logo examples can help you name your baking business. It could also be helpful to walk yourself through our six steps to create the perfect restaurant name.

Factors Affecting Bakery Startup Costs

There are several important factors that can significantly affect your startup costs based on the type of bakery you want to start. We also have a general guide to the pros and cons of starting a bakery that can help you hone in on the specifics of your business.

Storefront vs. Wholesale vs. Online

The costliest startups are those with storefronts due to lease deposits, monthly rent payments, construction costs, permit fees, utilities, employees, labor, and increased insurance premiums.

Wholesale bakeries are also fairly costly to launch because of the need to invest capital in purchasing industrial equipment, leasing warehouse space, and buying large quantities of ingredients.

The least costly are wholly online and home-based bakeries with no brick-and-mortar locations that deliver directly to their customers.

Dining Seating vs. Counter Service

If you open a bakery cafe, offering a dining seating service for your customers increases your startup costs. You need to buy tables, chairs, silverware, and decor, and you may need to hire wait staff. Also, your insurance premiums will increase.

Independent vs. Franchise

Buying a franchise bakery is often the most expensive route to opening your store. For example, it could cost millions of dollars to start a new Dunkin Donuts location. Most independent bakeries can be launched for much less than their franchise counterparts.

Commercial vs. Home-Based

Launching a commercial bakery can be cost-intensive due to industrial equipment purchases. A home-based small bakery can be less expensive to start because you’ll be able to use your existing home kitchen (with modifications as required by your state) and not need to buy as much expensive industrial equipment. You will still have delivery, ingredient, and marketing expenses for your bakery business, but overall, this is an option with lower startup costs.

Six Ways to Reduce Bakery Startup Costs

#1 – Rent Space from an Existing Bakery

A smart way to reduce your startup costs is to lease a space that was formerly a bakery or restaurant and already has some baking equipment installed, such as professional ovens, storage racks, and workbenches. This can reduce your startup budget considerably.

You can also lease space for your bakery from an existing restaurant or perhaps sign up for space in a “ghost kitchen” setup. Sometimes, this can include an arrangement for sharing marketing and delivery costs as well.

#2 – Buy Used Bakery Equipment

Consider buying secondhand equipment instead of brand-new appliances. Many reputable baking equipment suppliers offer top-quality used equipment, often certified with warranties, which will greatly reduce your startup budget. Buying used instead of new is a time-tested method for saving money when acquiring equipment for your business.

Remember that bakery equipment is heavy-duty and durable so it’ll often last for many years. Thus, used equipment can have plenty of functional life left.

#3 – Start Small and Grow

One of the wisest moves for entrepreneurs is to start small and build incrementally. It’s far easier, less costly, and safer to start a smaller business with less equipment, fewer employees, and a small retail space, which all save money on startup costs. Then, invest more capital and expand your operations later as your business grows.

In addition to saving on initial startup costs, you’ll give yourself time to learn what baked goods your customers prefer and which flavors are their favorites. At that point, you can invest more heavily in equipment to expand these best-selling product lines.

#4 – Offer a Narrow Range of Baked Goods

To add to the previous point, reduce the number of items you initially offer to cut your startup costs. This way, you’ll need fewer types of equipment and fewer ingredients on hand, saving you money.

This certainly doesn’t mean you need to have a boring bakery menu. For example, you could offer one type of baked goods, such as cakes, in many different flavors, sizes, and styles to interest your customer base.

#5 – Focus on Bakery Counter Service Only

If you’re starting a brick-and-mortar retail bakery, to reduce your startup costs, open a counter bakery without any restaurant seating. Without a restaurant dining area, you’ll be able to rent a smaller store, have more space to display your baked goods, hire fewer employees, and typically pay fewer insurance premiums.

#6 – Deliver Baked Goods with No Storefront (Wholesale, Online, or Home-Based)

To cut startup costs, you could have no storefront at all. Launch a wholesale delivery-only or home-based bakery that sells baked goods commercially to grocery stores, gourmet markets, farmer market vendors, delis, and restaurants — or directly to consumers online. This dramatically reduces your startup costs because you don’t pay for storefront rent, store employees, or utilities.

Think about opening your bakery as a food truck (check out our list of food truck name ideas). It’ll be less costly than a storefront, plus you can change locations frequently to maximize your exposure to potential customers.

Another way to open a no-storefront bakery is to be based entirely online. You display and sell your baked goods from an e-commerce website and through social media as an online bakery. This is a great way to keep your expenses as low as possible and create a profitable baking business.

Sources for Low-Cost Bakery Equipment

One of the best ways to keep your startup budget lean is to save money on your bakery equipment. Here are some places to find inexpensive bakery restaurant equipment.

• Restaurants going out of business
• Auctions
• Refurbished/damaged appliance sellers
• Garage sales
• Resale stores
• Craigslist
• Freecycle
• Kitchen remodelers
• Apartment property managers
• Schools and hospitals

Restaurant Supply Stores

There are quite a few reputable restaurant supply stores that sell quality equipment for bakeries at reasonable prices due to bulk and wholesale discounts. Here are some of the most affordable and popular restaurant supply sources.

• Webstaurant Store – This major online site offers great prices on bakery equipment, display cases, wholesale baking ingredients, cake decorating supplies, bakery boxes, and packaging.
• ProBAKE – This commercial bakery equipment site offers top-quality bakery machines for commercial bakeries producing bread, pasta, cookies, and pastries. It has good prices on commercial bakery ovens, dough mixers, bowl lifts, and pasta machines plus an extensive selection of used bakery equipment to reduce your startup costs significantly. They also offer financing options for both new and used equipment.
• BakeryEquipment.com – This full-service site ships equipment worldwide, both new and previously owned. They have a wide selection of every type of bakery equipment, including specialty machines for items such as croissants, chocolates, tortillas, and donuts. Plus, they carry a full line of bakeware items, refrigeration and chilling equipment, tables, benches, storage racks, slicers, and baggers.
• Erika Record Baking Equipment – This is another excellent source for baking equipment of all types including for cookies, confectionery, and bread production. They sell both retail and wholesale items such as professional chocolate equipment, mixers, and bakery ovens. They also offer a complete line of certified used equipment with warranties.

Cost-Cutting Startup Tips from Successful Bakery Owners

Get an Accountant to Track Costs Carefully

Michelle Honeman, the owner and founder of Oregon’s “Sugar Mommas’ Bake Shop & Cafe,” recommends:

Before you open your doors, get yourself a bookkeeper (or a skilled administrative assistant) and accountant. I was lucky enough to find someone who was both a bookkeeper and an accountant.

My first year in business in my small town, I did $270,000 in sales. My COGS (cost of goods) was $74,000 and my payroll expense was $122,000. So, what does that tell me? Too much labor, that’s what. And I was able to see everything broken down because my bookkeeper took the time to teach me. Save yourself and get a bookkeeper/accountant!

Save Startup Costs – Negotiate Some Free Rent

Tessa, the baker and dessert enthusiast behind Sweet Bake Shop, recommends:

Ask for some free rent. The worst thing that your potential landlord can say is “no.”

However, it’s completely normal to ask for a month or two of free rent while you make necessary renovations, and most business owners I’ve spoken to about this have said that this is usually met with a “no problem,” especially if the space really needs some work.

Don’t be afraid to ask!

Set Appropriate Prices – Know Your Ingredient Costs

Yolanda, from the baking business experts at BakeCalc.com, suggests:

Once you’ve got your business ready to go, setting prices that are attractive to customers but good for your bottom line can be difficult.

It’s important that you know the expenses that are needed to make each product that you sell. A baking calculator can help you work out how much you’re spending in the production of your goods, including your ingredients, equipment, and time. This can be useful in helping you to set prices that are fair both to you and your customers.

Related Questions:

Is owning a bakery profitable?

Yes, bakeries can be quite profitable. Based on the average profit margin in the bakery industry of 10-15% and the average annual revenue per bakery of $450,000, the typical bakery has around $67,500 in profits per year. 

Profitable bakery owners say that your cost breakdown should be roughly as follows:

Labor – 35%
Overhead (including rent) – 30%
Ingredients – 25%
Profit – 10%

How much money does a bakery make per month?

On average, bakeries have monthly sales revenue of around $37,500, depending on their market and prices. When it comes to salaries for your employees, the U.S. Bureau of Labor reported that the median pay for a baker is roughly $30,000. The job outlook is growing at a faster-than-average 8%.

What equipment is needed to start a small bakery?

Your equipment list will vary depending on your bakery menu items. This startup list for bakery equipment will get you started:

• Mixers
• Overs
• Dough proofers
• Smallwares
• Bakeware
• Dough sheeter
• Bread slicer
• Bagging machine
• Sheet pan racks
• Dry storage
• Refrigerator
• Freezers
• Display case
• Work tables
• Sinks