Searching for the right bakery location can be difficult for many soon-to-be bakery owners. Many fall in love with great little store fronts in downtown locations or in trendy neighborhoods brimming with community life, however, many don't realize that the rent for these types of properties are generally high, and may not have adequate space. Although a prime, high traffic location is very important for your bakery's success avoiding high rent prices is too. To make sure you don't overpay on rent always create a budget before looking for your bakery's location.
A bakery has a multitude of expenses including leased equipment, utilities, employee salaries, and inventory. Because these are only slightly manageable costs, a bakery owner should never pay more than 8% of their gross sales in annual rent. Paying anything higher for your bakery's rent can force you into a very limited budget which can be detrimental for your bakery's growth and expansion. Paying high rent prices will also leave you unable to pay for new equipment, repairs, and even employee raises which are all key if you want to have a successful bakery.
Follow the steps below to determine what your bakery should spend on your monthly rent:
- Project your bakery's annual sales (don not fib on this simply because you want a more pricey location. It will only hurt you in the future.)
- Multiply that number by both .05 and .08
- Now divide each number by 12
- The two numbers shown represent your bakery's budget for rent.
When you first begin your hunt for bakery locations only look at locations whose rent is 5% or below your bakery's projected annual gross sales. If you can't find anything in that price range that fits your bakery’s needs, start looking at places whose rent is 6% of your bakery's annual gross sales. Just be smart and patient. Don't jump on the first location you find especially if the rent is high. Continue shopping around.
Be a responsible bakery owner when you begin looking for your bakery's perfect location. Stick to your budget. When you first meet with a real estate agent or just start driving around town yourself, create a list of everything you want in a bakery and then write your budget amount up top. This will help you remain focused on your budget while you are looking, and will help prevent you from overspending.