You'd think all cake shops would be successful because of the need, for lack of a better word, for cakes for the special occasions we constantly celebrate.

Why is it that so many cake shops fail, as has been said by fellow CCM's?

The failure rate for *all* kinds of new food-related businesses is very high. This is to a great degree due to the fact that many people who go into business by opening a restaurant, bakery, or cake shop do this because they have a talent with food preparation, not with business management.

Managing a business involves a lot of skills completely unrelated to food preparation, and many people just don't know what they are getting into.

Another thing is that starting a business is quite expensive, and a significant outlay must be given before the doors even open. It may take months or longer to build a loyal customer base, and in the meantime, the bills accrued along the way must be paid. It would be even worse than for a typical business, if your product (food) was quite perishable.

A cake store would be particularly vulnerable, because they would either have to rely on dummies/photos to convince people that they should order cakes (and not be able to take advantage of impulse/last moment buyers) or bake cakes which will not be good for very long.

I'm sure that CC'ers who are in the 'biz' can give even more reasons.

RedPanda

People (customers) like convinience and a lot of them are cheap or don't realize that there is more to cake decorating than 8 inch rounds and 1/4 sheets. I actually had a lady call the other day asking about our cakes. I work for Costco and all we do is 1/2 sheets, and she said, "no, I need something smaller." I told her the only other cake we did was a 10 inch round 4 layer fudge cake and it is not decorated like the sheets. She said she just needed a "bakery cake" whatever that meant and I said we don't do anything smaller and she said, "well, for some reason I was under the impression that you did birthday cakes there." Um.....

Some bakeries might fail because the owner focuses on the cakes and forgets about the "business" part. Paperwork, filing, taxes, bookkeeping, payroll, bills, rent, etc. Advertising is another issue. As we all have been learning through these discussions, some states make it quite difficult to run a bakery as a sole proprietor. Even if you get a business loan, the overhead of a bakery is very high and it takes a long time to see "black".

Location is the biggest factor. At home you are limited. Renting space you are limited. If you are the only employee, you are limited. There are lots of bakeries that are succesful, but I am sure at one point, they all felt the same way.

Many people think this business is easy. Once you step out of your home kitchen and go into a retail/commercial location everything changes. Food is one of the hardest businesses. I can't tell you how many hours I spend at the shop. I regularly have customers tell me they took a decorating class and know how to decorate a cake. Yet they are in my shop ordering a cake. I just smile now adays cuz there is a reason they ain't doing their own cake. Their cakes are ugly! They don't want to be embarrassed. One guy makes cakes and when he has a party he comes to me cuz he said mine are better.

Another reason cake shops fail is because they are afraid to charge! or afraid to raise their prices when everything goes up. I called a competitor of mine, who closed their shop after 3 years complaining that people won't pay for quality, to find out what they were charging for a 6"& 10" round fun design-tiered cake. He said it would cost $37.00, I was shocked and understand why he couldn't pay his bills. My cake starts at $100. for the same/similar design. You have to make money or you can't survive.

The People today who will most likely support a specialty cake shop don't want the same old hokey stuff grandma made back in the 70's (sorry!) they want to be fashionable and show off for the most part. These people will spend money, you have to show them why your talent is worth something. People are having parties for any reason these days.

I strongly believe the only reason I have lasted 11 years in a commercial setting is because I pray about business decisions, Yes Jesus is my guide.

Lora

Did you begin your business by yourself?

I need to clarify.

Did you begin the as a one-man/woman business or did you hire others as well?

I agree that any small business will fail if the owner knows nothing about running a business, bookkeeping, taxes, etc. Working in the commercial lendng area of a bank, I see what folks have to go thru just for a loan, nevermind having the business knowledge/sense to have their own business. Truthfully, too much headache for me to own my own business, as glamorous as it may sound; would rather just collect a paycheck and let someone else worry about the details. For years folks said I should have my own business with my sewing & crafts, but again knowing what starting and running a business involves, would take the fun out of what I was creating. My cake/cookie decorating & sales is just for family, friends and co-workers - this will never be a "real" business entity.

pretty much ditto on what everyone said.
Especially what Redpanda said about 'all' (most lol) food service establishments.

Business plan. Two most important words for anyone, and also applies to small business/homebased business owners. I don't know why it is that smaller businesses dont think they need one. But a lot of people just dont have the knowledge, as was mentioned, of the business side of starting a business. I've heard it in this town so many times because we are heavily resource based but that is dwindling and I hear so many people say 'oh I think it would be fun to open a scrapbook supply store.' With no research done to find out if there is even a market for that kind of thing in town. Or maybe (small town example) there are already 4 other such stores in town.

The effort involved in writing a business plan is somewhat extensive,but it's not hard. There are TONS of resources out there to help get through it. But it is absolutely worth the effort. It may be that the business plan/research shows that it is not a good business to get into. So that might be depressing, but to ignore that would end in business failure.

The other thing that was mentioned- which is all part of the business plan, is pricing. I've seen it here- I see the frustration at potential customers expecting a gourmet cake at buffet prices and some of your prices coming down to try and win those customers over. But you have to value your craft first of all (different topic lol) enough not to undersell yourself. But pricing is also a huge part of a business plan. People who know the difference between gourmet cake and storebought cake will pay the higher price if they want a gourmet cake. Lowering the price wont attract those people and it wont make for financial success either. You know what you're in business for and who you cater to.

well that's gone on too long lol. I'm not really allowed to advertise business lol so I wont and there are lots of others here who have a wealth of information also. If you want resources vis a vis business planning etc, feel free to pm me. I can't decorate cakes worth a damn but I have 15 years of marketing/business planning experience LOL.

The other side of the coin is (a story about) a lady who owned a cake store not far from us -- she had a religious belief of not working on Saturday, which is fine but it is also a busy day at the cake stores. She wasn't open at night (I think she closed at 5.) Many cake decorators go to the store after work. Her location was awful -- in a strip mall off a major road which was hidden by trees and very hard to get to. And when you did get there, her prices were soooo high that it was ultimately cheaper to buy online even with the shipping. Needless to say she didn't last long. We have another cake store not too far from us, they have an excellent selection and high prices, but not so high that they've outpriced themselves in our local market. And they're comparable to many online shops.

It's very hard to explain why small business fail, but food industry has the HIGHEST attrition rates, it is the industry with the most at RISK for failure.

I run my own shop and I do everything, aside from being exhausted and have no time for a personal life...I am jack of all trades and master of none.

I'm so busy doing EVERYTHING, I'm doing NOTHING.

If I'm on the phone talking to customers, I'm not baking a cake, if I'm baking a cake...I'm not doing the books, if I'm doing the books..I need to take care of the walk in customer.....Get the idea?

I thank GOD everyday that I have someone that delivers my cakes, because that would be another thing that I'd be doing at the sacrifice of something ELSE I should be doing!!

I have raised my prices 15% in 4 months and am SILL lower than my competitors, but the clientel is used to my competitors...their speciality is RUM cake and they constantly ask me for flavor and when I give them my stock answer...( NO RUM CAKE IS EVER MENTTIONED) they come back with...Do you make rum cake? ( I'm seriously thinking of just saying NO!)

The other local bakeries sell people a "combo"...when people would ask me for a "combo" ...well you can imagine WHAT I thought...considering the TYPE of cake I make..lol

It's a cake with assorted party pastries...!!!

Hullo, I'm a custom cake shop...not a pastry shop...where the heck would I put them in my teeney weenie shop? (It's like Barbie's Dream Cake shop there..lol)

I'm already 3 months behind on my paper work...I have some outstanding bills that I need to write checks out for and I need a couple of tables to work my fondant and cookies on, and a few storage boxes to put my chocolate molds in and a bookcase/ Espresso station for my new espresso machine!

Just THINGS that I haven't gotten around to doing....and then there is my addiction to cake central..lol

neglez?

If you were asking me how I started business, my husband was there all day with pastries and taking orders while I held down a job a a fast paced Sam's Club bakery. I did this for a year til I couldn't take it any more, It was scary to step out, but we did it on faith. We have been cruisin' and never looked back. Also we bought very little equipment and what we did get it was used, except for the oven we took a loan on a Convection oven. And paid for it our first year. We are very well equipped 11 years later, but we only added equipment as the funds allowed.
Now my whole family is living off this shop.

We don't bake anything unless we are going to make money. In the beginning we took all orders just to get some cash flow. We worked very hard for little pay. But things change as you are more experienced.

My husband is a self taught pastry chef (My Pastry Chef>get it?) I am a self taught cake decorator, now I am a designer! sounds better. When our oldest daughter graduated she came to work for us. My husband doesn't like to work this business, so it's mainly my 23 yr old her 1 yr old and 2 yr old daughters. I love having the grand babies here but I am soooo stressed on busy days. My daughter bakes and decorates. We only take orders till we don't want anymore then we are booked. We don't retail, we keep our door locked with a doorbell and we ask for appointments. I am realizing as I type how blessed we really are.

We have a 1700sf condo in strip mall/building we bought2 years ago and will pay off in 3 years. We are just a couple blocks away from the I-20 and near downtown Shreveport, Louisiana. I would not want to bake out of my home and I hope I never have to work for someone else.

Sorry For the Bio
Lora

Though I am not in business yet, my biggest asset is my husband. He is an accountant and is getting his MBA. He will handle ALL that end, I will just decorate the pretty cakes and handle the customers.

I have heard people say that your first 3 years in the food industry business are sleepless and thankless and it is only after you last that long that you begin to see something for your work.

Rachel

So what kind of courses would you recommend be taken before opening a business?

Business courses, check with your state's small business department, they have a list of classes that will help you!

Rachel

thanks for the info keep it coming. I am making some changes in the new year and with GODs help it will work. All my equipment will be in my rented kitchen and no more trucking things back and forth. Might seem crazy but Im looking forward to being busy.

Wow, what a great thread. My hair stylist and I were just talking about this today. I'm one of those who failed. I got "legal", did it by the book, and threw myself in debt that I couldn't pay. I for lack of a better word "quit" and didnt do cakes for a while after that. Now I'm just starting to do cakes again for friends and family only.

listen to redpanda she knows what she is talking about! I read over and over that it is imperative to take some kind of classes in re: to business and how to run. No matter how much talent you have if you don't take care of the business side you will not prosper.

Momlittr how funny, people tell me the same thing. I just got a lecture from brother on starting my own business!! I also sew,crochet, and bake. I would probably starve though cause I only do these things when the creative urge hits. I find things come out better when I want to make them as opposed to when I have to.

Love this discussion!

I remember vividly one "cake business" here that went down. She set up shop in a pricey, upbeat little center in the West part of town. I'm thinking that what drove her out was the cost of overhead. When I say "pricey" "upbeat" and "West" in reference to Knoxville, you can figure her LEASE was around $3000-$3500 monthly--like 4 years ago.

ANYWAY, she had a really pretty shop. Cheesecakes were her "thing" (are y'all seeing my attachment here?), and she had an amazing looking dummy set up in there. It was a stack of presents wedding cake, but it was all topsy turvy designed. Knowing what I know now, that cake would not have been possible to stack like that---but it looked AMAZING as a display!l She even sold petit fours. Back then she was charging like $2.00 a piece for the plain-jane ones.

A simple 8 or 9 inch cheesecake from her was like $40. I remember going in there once and thinking, "If only I..." It was dreamy. Really.

I don't understand why she didn't do well---in that part of town! That's where all the "trophy wives" live. You know--the ones who spend the better part of the day at the country club, or shopping, or planning a marvelous soiree'. You'd think they'd be beating the door down after a few months to have someone bake their cheesecakes and petit fours. I know they ring my phone off the hook for 'em. Hmmmm....I still think about her sometimes.

So this thread is a real boon to me. I'm interested to know WHY people don't frequent such a place like you'd think they would? I mean, I noticed she really didn't have the customer base she'd need to stay afloat.

--Knox--

I think a big thing that goes against smaller businesses is the fact that people don't plan! People want to be able to walk into Wegmans pick out a cake and have a name put on it. People don't think two weeks out about ordering a cake.

And smaller businesses just don't have the capability to keep three or four cakes around just in case people walk in.

mypastrychef, that was very interesting! Thanks for sharing!

Knox, Maybe those trophy wives didnt' want anyone seeing them getting their "CHEESECAKE ON"...lol