I am considering an investment in a new bakery which will specialize in supplying high-quality desserts to fine restaurants in a big-city metro area. I have no background in the food industry, so I need unbiased opinions on 2 points in particular to help me decide whether the business is likely to make money: 1)how receptive are fine restaurants to outside suppliers? and 2) how much will the bakery be able to charge the restaurants for products ranging from rather simple fresh fruit pies to elaborate chocolate tortes? I have confidence in the pastry chefs' skills, but I don't know about the market they are aiming at. Thanks in advance if anyone can help me with these questions.

By Cjp724 (Cjp724) on Saturday, April 29, 2000 - 07:44 am: Edit

You should first take a look at the competition in the area and see what they are charging as well as the product line they have. Do the restuarants you plan to target have in house baking programs? If so do they fill all of the restuarants needs or does the restaurant still need to go to the outside for certain products? AS far as how much to charge you need to figure out your raw food cost and what food cost % you want to run in order to cover your expenses. You want to be competitive but not price yourself out of business either.

By W.DeBord on Saturday, April 29, 2000 - 08:35 am: Edit

If your in a major market there are probably dozens of companies already trying to sell to your targeted markets. Find out about those companys prices are, what they make etc... I would guess mark-up would be fairly tight. Alot of wholesale business is based on volume for their profit.

There's always room at the top for great work, just realize this is probably not a new business idea. From time to time most places buy something even if they do have their own bakers.

Most food businesses don't have a pastry chef on staff (they buy most items and make the simplier items them-selfs). The more up-scale the business is, the more likely they do have a pastry chef on staff.

By roger on Saturday, April 29, 2000 - 11:05 am: Edit

Many thanks for the input, Cjp724 and W.Debord. To get specific on pricing, let me give one example. The bakery that wants my backing makes a fantastic chocolate almond cake with a rum icing and layers of chocolate leaves. They say the cost of ingredients is almost $7 (they use expensive chocolate)but they expect to sell it to restaurants at $15 a cake. Other desserts would sell for less, but the same percentage markup. Does this pricing sound realistic? Thanks again.

By roger on Saturday, April 29, 2000 - 11:18 am: Edit

I should have added this info to my last posting: the chocolate cake in question serves 8.
Again, I'm wondering if the $15 sale price to restaurants is reasonable.

By Panini (Panini) on Saturday, April 29, 2000 - 05:29 pm: Edit

RUN! RUN! RUN FOR THE HILLS! ONLY KIDDING! some unsolicited advice. Who knows how many people the cake feeds, let the chefs decide that for them selves.They may want to cut 8 for dinner and 10 for lunch? Presliced tortes cap all $ negotiations. Most chef will go by price per portion. Let them decide.
To me a 50% margin on wholesale products is acceptable for high end products but you will certainly need to off set these with products in the 70-80% range. Yeast products. Depending on your financial situation I would be very skeptable sp? about running a business on a 50.I would not be able to do it. Get a business plan program and start plugging in the figures. overhead,labor, insurance etc.I think you will soon realize that 50% COGS will not do it, they will have to be down around 20-30%
Restaurants were the biggest whips for me. I dropped most of them because I spent more time chasing money than anything else. I'd focus on the bigger contracts, hotels,clubs etc.
Just my 2 cents for what ever it's worth.
Good Luck
Panini

By Seawitch (Seawitch) on Saturday, April 29, 2000 - 09:24 pm: Edit

I'm interested in this conversation, because I am looking into buying a bakery
already doing this (small tourist city). They sell a lot to local bed & breakfast inns
and smaller hotels, who might only have one or two chefs doing all the cooking,
in addition to their restaurant contracts. Also, think of this. You are selling the
cake to them for $15. In a large metro area they are going to get $4.50 - 6.50 a
slice. Panini's right about overhead, etc. I think they would have to sell a whole
lot of product at $15. with a $7.00 cost to make payroll and pay the rent.

By roger on Sunday, April 30, 2000 - 12:07 am: Edit

Thanks all for the friendly advice. I hear clearly that the bakery needs a higher markup than contemplated and that hotels, inns and clubs should be targeted. But kindly tell me: has anyone succeeded in selling cakes to restaurants (or hotels, etc.)for more than $15? If so, how high can you go and how unusual is this? Again, muchas gracias!

By Gerard (Gerard) on Sunday, April 30, 2000 - 05:24 am: Edit

Roger,

Hang on to your money, if they are selling a cake at $15 that cost them $7 they don't know what they are doing , and now they want your money?

To make a wholesale cake at $7 food cost that only serves 8 almost requires throwing money at it. How do they manage to do that??

I wouldn't even think about it.

Cheers, Gerard

By roger on Sunday, April 30, 2000 - 01:08 pm: Edit

Thanks, Gerard, for the realism. (By the way, if you get up at 5 on Sunday, I know why I didn't go into the food business! Seriously, I appreciate the advice.) I was dubious about the investment, but the guys are friends and I wanted to run the idea past the pros. I guess I'll exit the stage with this posting, though there is one lingering question. If my friends tell me they will raise prices to get the needed markup, I still don't have a handle on just how much they can charge restaurants, etc. for supplied desserts. (I know, as advised, the local competition's prices have to be checked out, but I was hoping to benefit from your experience on this point, if anyone cares to venture dollar estimates.) In any case, thanks to all, and good luck to you, Seawitch, with your decision.

By Panini (Panini) on Sunday, April 30, 2000 - 02:08 pm: Edit

Roger,
I don't know if you read my post. But don't run just yet. Gerard tells you not to even think about it. I dissagree. Think about it, they could be sitting on a gold mind, or not.Nobody can tell you what to charge for a cake.
Ask to see the current books. See what they are running COGS. If you do not know enough about it, gather everything up and run it by a CPA. a 100. well spent. Maybe these guys just need some business help. You can stipulate that in your investment. Go back and read some of Gerards posts and you will see that he is pretty down on entreprenurial people. Don't blow it up before you really investigate it.
Your obviously impressed with the product. I've been in the wholesale and retail for some time and it's not all bad. Some may think my style is wrong,having some products at a 50 and some lower.
But it has been very sucessful for me.
Because your guys are working a 50 on that cake does not make them jerks.
My original investor 7 years ago " a friend"
was paid off in 2 years with heafty interest and asks me all the time when we are going to do something else. Just don't mix frienship with business.

By Panini (Panini) on Sunday, April 30, 2000 - 02:19 pm: Edit

Roger,
I missed one of your posts, yes restaurants pay more than 15 dollars for cakes. But it's all up to the individual needs of the rest.
What is the shelf life of the cake?
Can it be frozen?
is it 8"9"10"?
Call all the wholesale bakeries in your area, ask for price lists. See what they are getting. Ask where you can see their product.
There is plenty of wholesale frozen crap out there for alot more than 15. Sweet Streets,Bubbles Bakery, Sysco etc.

Also remember if your going to do volume the labor costs go down. It probably takes the same or a little more time to make 30 tortes than it does to make 20.

By Gerard (Gerard) on Sunday, April 30, 2000 - 02:38 pm: Edit

Roger,
<If my friends tell me they will raise prices to get the needed markup, I still don't have a handle on just how much they can charge restaurants, etc. for supplied desserts. <<

If they say they will just raise their prices run away faster, the problem is food cost not just sale price. They don't have their costs under control, or even seem to suspect its a problem.
It's possible to bring cost per cake down to approx $4 and sell for $12, that would make all the difference in the picture. Do they know how?

Anyone can make a dessert but for wholesale it has to be done with quality and low cost because the buyer/chef first looks at the quality then the cost because they are under constant pressure to control their own cost.

I think they'll suck you in.

Cheers, Gerard

By Panini (Panini) on Sunday, April 30, 2000 - 03:38 pm: Edit

I agree with Gerard here, although in my neck of the woods the buyer/chef looks at price first than quality..I've found that there are very few chef that can tell the difference between American,Swiss,French,Hawaiian chocolate in a finished product. I'm in no way saying cut quality but you can sometimes cut cost if it does not really alter the finished product.
Are these chef already in business? or is this their start-up idea? If this is a start-up idea with no history than you can be sucked in. Talk is cheap.

By roger on Sunday, April 30, 2000 - 10:59 pm: Edit

I have indeed read your postings with great interest, Panini--and everybody else's as well. I will be doing some serious checking of cost controls and what the local market will bear before I put any money on the table. Don't worry too much about me though: we're not talking about my life savings here.
Yes, the business is a start-up, a serious negative. The upside is the chefs are well-trained, have put time in good restaurants, and make a product everybody says is amazing. They are also great salesman (the better to suck me in, right, Gerard?!) So we'll see ...
Glad to run in to such an accommodating group.
My thanks and best wishes to you all.

By Gerard (Gerard) on Monday, May 01, 2000 - 07:23 am: Edit

Chefs well trained, worked in the best restaurants,<< ??
that doesn't sound like the depth of experience they need, at least a couple of yrs in a retail/wholesale bakery is what I would need to make me curious. Anyone can make a gorgeous cake, it takes skill to make profit whilst retaining quality. With the right skill ..quality is free if you put it in the first time.
Call 1 508 655 9991 or 9992, ask for Steve Marcus.
So far he's sunk $1M in his bakery and it has yet to turn a profit, he's not a baker and thats the big catch. He'll tell you ALL about investing in a bakery, he is a lot smarter than you or I but doesn't know the baking side and has tried for 3 yrs to analyse it. I advised him to fire all the pastry chefs, turn it into a restaurant and hire a chef, he'll make profit the first day.
He's a multi-MULTI millionaire and has hired the cream of the crop pastry chefs thru head hunters, they make great pastry but can't make money!!
Thats why I always thought of restaurants and hotels as a trap if pastry chefs intend to open their own shop eventually.

Run, don't walk away because you'll continue to invest more money to protect what you initially sink into it...until its all gone.
If you can find someone like Panini or myself who have a proven PROFIT track record it would be different. Invest in a cafe/bakery instead.

Cheers, Gerard.

By Panini (Panini) on Monday, May 01, 2000 - 03:01 pm: Edit

Yea, he absolutely right. Unfortunatly most of the time if your experience lies within the restaurant and hotels,and you have not been directly responsible to show a profit, chefs seem to think the storeroom will never run out.
I still have not gotten the business part down after 6 years, but I work at it everyday, and I have to say that now I'm probably a better business person than a baker.
Gerard, It sounds like we are going to have to move you to the chefs side.What % of your operation is food now? I did one lunch last week,cold, abbruzzi sandwich,shrimp-black bean and pasta salad,italian grain pie.45 people. Your right, if this is something I had the mise en place on hand it can really be profitable!

By Gerard (Gerard) on Monday, May 01, 2000 - 06:13 pm: Edit

Panini,

<What % of your operation is food now?<<

About the same as you but steady every week 2 or 3 times so far. The desserts really get them.
My partner is graduating nursing school in 2 days and we're ready to start writing menus and taking it to the field. I also mention it to wedding cake customers, I have a croque order for July who has decided to use us for a wedding rehearsal party the night before.I need to photo the croque because I don't want to do anymore of those.
hence the need for a digi camera.
So its a natural for the bakery to feed the catering and the bakery to give us an advantage in the catering.
Besides it a change of pace, easier pace once the organization is figgered out, Helen is VERY good at that and I wouldn't bother if she wasn't here.
As we say in England, Its a doddle.!

Cheers, Gerard

By CountryBaker on Monday, May 01, 2000 - 11:02 pm: Edit

I am from a small southern town and I get from 20 to 22 dollars per 9" three layer cake from restaurants and 15 dollars for pound cakes. I am sure you can get more in a large city. I get from 2 to 5 dollars per dozen for cookies. I get 2.50 per loaf for white, wheat and sourdough bread. My profit is over 50%. But I own my building and all equipment out right. Pound cakes, bread and some cookies are dirt cheap to make. I clear more on some items than I do others but it all equals out. Your overhead is going to be a lot more than mine. You need to consider how many people you are going to be spliting profit with and if you will be depending on this return for part of your income or can put it back into the busness for a couple of years.

By tj on Tuesday, May 02, 2000 - 03:13 pm: Edit

$15 dollars for a pound cake? wholesale ? in a southern town?
where is it ? i think i am going to open a shop there ...

By Panini (Panini) on Tuesday, May 02, 2000 - 04:47 pm: Edit

Yes, I agree! I'm in a southern town but I can't sell pound cake for $15. Good for you! Also I would not mind having a dirt cheap pound cake recipe.
thanks
panini

By CountryBaker on Tuesday, May 02, 2000 - 10:32 pm: Edit

People here in the south swear by their desserts. There are a lot of womens' clubs and they all serve dessert at every meeting. At every meeting of anykind, work, social or what ever, dessert is served with coffee. It doesn't have to be a fancy dessert, but it has to be a good one. People will pay for quality and taste. I got 12 dollars for pound cakes 10 years ago. I cann't believe that the rest of you don't get 15 dollars for them. I am speaking of pound cake baked in a tube pan not a loaf pan.
The restaurants cut 16 slices to a pound cake, they sell for l.75 per slice giving them 28 dollars per cake or a profit of 13 dollars for only cutting and serving. I will post you a cheap recipe tomorrow.

By dessert goddess on Wednesday, May 03, 2000 - 07:49 am: Edit

I work for a caterer who started wholesale baking for the restaurants in our small town in northwest Montana. She's getting $24 for a 10" cheesecake that costs $4.50 to make, 25 cents for a dinner roll that costs 3 cents to make and so on. I am thinking of buying a bakery on the other side of town that is for sale after being open for four months, and, besides having retail with lunch and coffee drinks, custom made cakes, etc., I want to pick up my own wholesale accounts. All your comments have been helpful, but I am still nervous. How do you take the known cost of a product and figure in your overhead? The rent in the new bakery is twice the rent in the caterer's kitchen, but the market won't be a 50 cent dinner roll!

By Gerard (Gerard) on Wednesday, May 03, 2000 - 09:30 am: Edit

"The rent in the new bakery is twice the rent in the caterer's kitchen,"

I like the saying " a cheap rent is the worst bargain in business". Generally its true , unless rent is way way above mkt rate.
If as in your example(the cheesecake) cost can be kept in that sub 25% range and your gross sales are 5-6 times the rent then you should be above the break even point with an employee thrown in.
That would be $10K sales for $2K rent. $10K /mo is only $330 a day, if you can get $200 per day in wholesale then you can see its not difficult to crack the nut.
But for that rent the sales should be $20K mo to be considered healthy. Other factors affect the formula, local pay scales for employees etc.
I would think in your kneck of the woods the pay isn't too high. ..and how much debt are you carrying (is there a loan to pay).
You could compete with that cheesecake by selling them for $16 , make good profit AND get the volume needed. Limit your wholesale variety, instead of increasing the product line variety go find more customers or it will be very difficult to reach critical mass.
I only wholesale croiss, wholesale accounts constantly ask what else we sell, ignore that and just go find more accounts, spread the risk among many accounts, establish minimum for delivery.
The bigger the batch you bake, the lower the labor cost and efficiency increases.
In a nutshell, make the best scone and go sell it to everyone. Many small accounts are safer than 1 big one, use a program such as quickBooks for easy invoicing and account tracking. I just print them on plain computer paper.

By Gerard (Gerard) on Wednesday, May 03, 2000 - 09:45 am: Edit

http://www.chefconnect.com/learningcenter/

There is a startup analysis program for free here, for restaurants and catering but theres others you might want to look at.
Just be wary of OVER analysing everything, I like to keep it simple, keep yer head down and work like nuts.

By Panini (Panini) on Wednesday, May 03, 2000 - 06:13 pm: Edit

Why is the other bakery for sale.After 4 months they might be still be on a float from the bank. Gerard gives you excellent advise.
My questions are on the new bakery side.I'd have the magnifying glass out on the deal.
Gerard, You're open 7 days a week?

By Gerard (Gerard) on Wednesday, May 03, 2000 - 11:48 pm: Edit

I was open 7 daze a week, I decided to almost take mondays off but the wholesale is always 7 days so I'm here anyway. The store is closed Mon but I do delivery at 5:30am , come back and do paperwork (aka ;read the newspaper).

By Panini (Panini) on Thursday, May 04, 2000 - 06:32 pm: Edit

Gerard,
Do you close down at all during the year? Do you vacation? I'm just curious.Were you once opened on Mondays and decided to close? Do you lose business from being closed Mondays?

By Gerard (Gerard) on Friday, May 05, 2000 - 03:37 am: Edit

We closed July and Aug last yr but kept the wholesale going, whilst closed we repainted and did repairs. The wholesale is just enough to stay afloat , retail is gravy.
We don't lose much , most ntl holidays fall on Mondays and wholesale is 7 days a week.
I took a week off last yr but got bored after 3 days and came back. We made more with one catered lunch this week than we lost being closed mon.
We'll probably close again when the heatwaves hit in July or Aug, need to redecorate and redesign the kitchen a bit...maybe get a real freezer.!
Being closed is almost like a vacation, not having to deal with customers or pay counter help.

By Panini (Panini) on Friday, May 05, 2000 - 02:08 pm: Edit

Yea. I understand. Hey, what are you looking for in a freezer.I switched out to 3 door re4ach-ins with the -10 capabilities. The have the cast iron 1 horse copelands. I'll probably never use anything else. Freezing product at -10 -20 deg.is a whole different world.

By Gerard (Gerard) on Friday, May 05, 2000 - 05:38 pm: Edit

Right now I have a chest freezer, that was OK because I don't usually freeze anything, it was only used to store frozen eggs and spinach but with the catering I ought to be freezing batches of scones and catering desserts so I can free up time.
I'd prefer a 2 door.

By Panini (Panini) on Friday, May 05, 2000 - 07:03 pm: Edit

You make your doughs right? You don't freeze puff?
I always freeze scones.They are actually better,I do a white choco w/fresh rasp. Pop them in frozen and the choco stays melted inside.
My three doors are True brand.I'm very happy with them. If you can fit a 3 door than I suggest that because the 2 doors have a 1/2 or 3/4 hs. Where the 3 door has a 1 hsp. comp.

By Gerard (Gerard) on Saturday, May 06, 2000 - 04:19 am: Edit

I make puff as needed, I can make it quicker than it defrosts. I can also get puff in the freezer if I take it off the tray and bag it.
Scones I should make up for the whole week.
I find they freeze better than refrigerate but fresh baked is the best of all. They actually bake better when frozen too but I can't fit a sheetpan in the chest freezer so we just set them up in the machine, my brother mixes a huge batch of dry rub then weighs out what he needs and measures the liquid to match the batch size.
I lost one wholesale customer this week but picked a new one up, thats typical.

By Panini (Panini) on Saturday, May 06, 2000 - 04:49 pm: Edit

Gerard,
are you using butter and cream for scones? We mix and cut for the whole week. bake frozen, its hard to tell the differance.We wash ,sugar and blast them and reduce the temp.
another advantage of the reach in.I have bun racks in 2 doors and shelves in the third. FYI if you order the bun racks. order them seperate from the unit. They will run 250-275 a door,but if you order them in with them, they exchange the shelves ffor the racks.this way I got the shelves ands the racks.

By W.DeBord on Sunday, May 07, 2000 - 08:07 pm: Edit

Panini blast around what temp., increase temp. by how much aprox.?

By Panini (Panini) on Sunday, May 07, 2000 - 09:43 pm: Edit

I wash and dip them in raw sugar.convection oven 400 for 8-10 min and reduce temp to 350 until golden brown.
unsalted butter,sugar,flour,baking powder,heavy cream. I can post a recipe if anyone is interested in trading.

By W.DeBord on Monday, May 08, 2000 - 07:34 am: Edit

I have always baked mine imediately, around 375 to 400 is normal, not a unusual???
What are you normally starting at? Or did I misunderstand your choice of words?


What are you interested in? I have a few that are pretty good...raisin nutmeg, toffee crunch, orange almond I'd trade for something new to me.

By Panini (Panini) on Monday, May 08, 2000 - 02:13 pm: Edit

There is nothing unusual except that you can retard them, cook them this way and not sacrafice to much quality.I'm not really looking for another recipe, mine is a base that I add different garnishes.My best seller is white choco w/fresh rasp. I also use alot of dried fruits.

By MarkG on Monday, May 08, 2000 - 10:32 pm: Edit

My best sellers are a dried cranberry, a honey/pecan and a cheddar. They're all shaped and frozen. I partially thaw before I wash with cream, sprinkle with sugar (cranberry) or pecans and bake in convection at 325.

Mark

By W.DeBord on Tuesday, May 09, 2000 - 08:28 am: Edit

In the mid-west if they aren't sweet like coffeecake forget it. Dried fruits... forget that totally, raisins are as far as they'll go.

So do you think this can be done with most scone recipes (freezing) or have you developed your specific base to work that way?

Wow 325 Mark, mine all are min. 350 or higher?. Is that because they are semi frozen?

By MarkG on Tuesday, May 09, 2000 - 10:00 am: Edit

W: I've got a hot convection oven and tend to bake everything 25 degrees lower.

Mark