The prices of your bakery's products are calculated by factoring in your competitor’s prices and your cost-of-goods. 30% of each of your bakery's item prices should come from the cost of the product itself. So a product that cost your bakery $1.00 to produce should cost at least $3.00 in order for your bakery to receive a profit from that item.
Expenses that Should Be Considered When Pricing
A bakery survives solely on the breads, pastries, and desserts it sells. Your breads, sticky buns, coffee cakes, and pies pay for everything your bakery needs to survive so choosing adequate and appropriate pricing is key for your bakery's success. When pricing your menu, remember that your bakery's menu items need to cover outside and inside costs of running a bakery including the:
- Cost of paper materials
- Cost of Labor
- Cost of Operations (rent, utilities, equipment)
- Salaries of Employees
When It's Okay to Have Higher Prices at Your Bakery
Your bakery doesn't need to be the cheapest bakery in town to compete with your local competition. If your bakery is offering higher quality items than its competition, it can still have higher prices and can still succeed with those higher prices. Other factors that can put your bakery ahead of its competition while also allowing for higher pricing include:
- Large Portions
- Naturally-Raised Products
- Fair Trade Products
- Signature Items
Remember that food prices can change during certain items throughout the year. Because some of the prime ingredients for making bakery items are governed by yearly crops, it is important to price your menu accordingly so that if the cost of flour goes up due to a drought, your bakery will not suffer from the higher cost of goods.
Your bakery's profit margins need to be your primary focus when you are determining correct menu pricing. Make sure that your bakery's menu prices will cover all your expenses such as lawyer and accountant fees, rent, and even employee salaries, and will allow you to maintain a positive annual budget. Don’t sell yourself short or overcharge your customers. Simply provide superb products at reasonable prices and you will have a constant flow of customers walking through the doors of your bakery each and every day.