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Cupcake Pricing - Wholesale , Cost of Goods

post #1 of 16
Thread Starter 
Hi-
I've got a food related/ retail store. I'm looking at diversifying (times are tight, everywhere) and think we've got a great market for a fresh baked cupcake line. I've been researching for about 6 months- even developed a basic and delicious line of cupcakes. But, I don't really want to get into the cupcake baking business. I've tried to identify someone who would be interested in leasing space and having dedicated space in the store to sell cupcakes. No takers at this point, but a lot of folks interested in kitchen space for rent. I consider hiring someone to do the baking but don't have the money, time or knowledge to oversee their work.

My last resort is to find someone interested in providing them essentially wholesale / for resale.

My research seems to show cost of goods (food costs only) of about .25-.35 per cake. This doesn't change much regardless of whether you use mix or bake from scratch.

Does that "cost per cupcake" (food / ingredient costs) seem right to folks?

In my store we'd typically mark up our food items x 3 - x 4 to keep it inline with the rest of our operating costs (rent, utilities, labor, etc). The consumer market here will obviously support paying more than $1 /cupcake.

My thinking is that I should be looking for someone who can provide cupcakes around (or under, really) that price point ($1). Given that I still have to package (which can be as expensive as the cupcake itself), and staff the sales of the cupcakes, it isn't exactly a land mine of profit. Again, I'm looking for an alternative that complements what we already offer and serves an unmet need in our area.

Is that an unrealistic price point for a well made / decorate cupcake?

Do most bakeries aim for 30% food costs? More or less?

I've read hundreds of posts here in the last few days and can't seem to get my head around this clearly.

Any thoughts or ideas folks have would be appreciated. Please be gentle.

Thanks
post #2 of 16
I am wondering where you are located at? What exactly are you looking for with leasing your space for cupcakes. What kind of skill or requirements are you looking for? Curious about the prospect.
post #3 of 16
My first thought also where are you located? Do you have ovens? If you have an oven are you able to bake them off? If you are there are many alternatives.

Mike
post #4 of 16
Thread Starter 
Thanks for the replies. I'm in Northern Virginia- sorry Mike maybe a little too far from you in MI! I do have a full service kitchen (am health dept inspected) that includes commercial mixer and single deck convection oven. Essentially everything (except smallwares, which are easy to come by) that would be necessary to set up a cupcaker shop in house. My struggle right now is capital and sweat. I'm pouring all I have in to make my current business go.

IDEALLY, I'd find someone interested in actually sub leasing part of the space. I'm sitting in 3000SF right now. I'm in heavily trafficked (sp) retail space @ about $30/sf. I'd carve out some display space up front (not much is needed as I can see from visiting other cupcake-type locations), they'd bake in the morning, out of the kitchen by the time we arrived to do our prep work and we'd sell throughout the day. I'd entertain sharing sales staff during our regular hours if we could make a reasonable and equitable arrangement and we'd process sales out of a single register with different deparment codes. Transparency. Streamlined from the customer perspective. I'm looking to bring in more foot traffic and help offset rent with a product line that is a complement to our current services, look, etc.

That said, ideal hasn't worked its way to my door just yet. So, now I'm in search of either someone looking to start small and prepared and ready if/when growth occurs (because it's such a darn fine product). Or, perhaps find someone already in business that has a great product and is looking to bring in additional revenue by "wholesaling".

Product?
High End-ish. They can get cheap sprinkly preservative laden cupcakes across the parking lot at Safeway for a fraction of what I'd charge.
6-8 variations/day, a dozen or so each to get started (start small and grow)
4 Basics and 2-3 specialties
All natural ingredients (not organic-just no preservatives)
A line of ccs on par or better than the scant offerings currently in this metro area (not a lot, but it is certainly picking up steam) and in other major metro areas

Hope that helps...now, any thoughts on some of my original questions re: product costs?
Thanks!
post #5 of 16
Have you thought about posting an ad on Craigslist? It sounds like you have a great set-up for someone who loves to decorate but doesn't have quite the capital required for a free standing shop, all the equipment, and the health inspection. Let us know what happens.
post #6 of 16
Thread Starter 
Thanks for the suggestion, KF. I just put together a posting for CL.

We'll see what, if any response I get. I've tried listing other random stuff on their before and the response ranges from nothing to odd, to lots of calls and no follow throughs to scammers offering to purchase/pay/participate from a distance. We'll see how this one turns out. I'm listed in For Rent/Sale under commercial business "housing" right now. I tried to cross post in items wanted but it wouldn't let me. If nothing happens in the current area I'll try one of the others and see if I get any traction.

If you have suggestions on how the posting could be improved or what questions you would have that I should anticipate and answer in the ad, I'd love the feedback. Here is a link to the posting:

http://washingtondc.craigslist.org/nva/off/843612351.html

Or, any other locations that are free to "advertise" the opportunity.

Thanks!
post #7 of 16
Thread Starter 
Thanks for the suggestion, KF. I just put together a posting for CL.

We'll see what, if any response I get. I've tried listing other random stuff on their before and the response ranges from nothing to odd, to lots of calls and no follow throughs to scammers offering to purchase/pay/participate from a distance. We'll see how this one turns out. I'm listed in For Rent/Sale under commercial business "housing" right now. I tried to cross post in items wanted but it wouldn't let me. If nothing happens in the current area I'll try one of the others and see if I get any traction.

If you have suggestions on how the posting could be improved or what questions you would have that I should anticipate and answer in the ad, I'd love the feedback. Here is a link to the posting:

http://washingtondc.craigslist.org/nva/off/843612351.html

Or, any other locations that are free to "advertise" the opportunity.

Thanks!
post #8 of 16
Thread Starter 
Thanks for the suggestion, KF. I just put together a posting for CL.

We'll see what, if any response I get. I've tried listing other random stuff on the site before and the response ranges from nothing to odd, to lots of calls and no follow throughs to scammers offering to purchase/pay/participate from a distance. We'll see how this one turns out. I'm listed in For Rent/Sale under commercial business "housing" right now. I tried to cross post in items wanted but it wouldn't let me. If nothing happens in the current area I'll try one of the others and see if I get any traction.

If you have suggestions on how the posting could be improved or what questions you would have that I should anticipate and answer in the ad, I'd love the feedback. Here is a link to the posting:

http://washingtondc.craigslist.org/nva/off/843612351.html

Or, any other locations that are free to "advertise" the opportunity.

Thanks!
post #9 of 16
Hi WJJO!

I just noticed your response. I tried to find your CL posting but it was expired. Can you copy it here? Did you have any luck?
post #10 of 16
Thread Starter 
Hi-
It should still be up and running:
http://washingtondc.craigslist.org/nva/off/857702228.html

If you go to the DC craigslist, then look under For Rent >>office and commercial and then search for cupckes.

I actually had a pretty good response. A lot of folks who were considering starting up a business...which didn't seem quite ready for prime time, but a handful or two of other strong contenders. It's becoming a really tough decision for a variety of reasons. But, a good position to be in. Still have a few more inquiries to follow up on in the next week or so.

I'm looking to make a decision ASAP as I'd like to have this in place before the holidays.

Thanks!
post #11 of 16
I looked at your ad on Craigslist. Very well done! Good luck with your decision. Keep us posted.
post #12 of 16

i would find a small cupcake store that bakes good cupcakes and create a standing order at a discounted price.  you are correct in the product cost to be .25-.38 per cupcake.  if you can find a good small place they would be more apt to get their name out for around 1.25.  per cupcake.  depending on your area selling for 2.50-3.50 per cupcake. both of you are still making money.   keep the flavors simple to start with.   i would love to do something like this but you are to far. 

post #13 of 16

There's a lot of people out there that would love to do this so you just need to find them. Are there any rental kitchens in your area? If so, look at who's baking there/renting time solicit those bakers in private. You can check out their websites and probably purchase from them under cover to check their quality before getting into any details with them. Someone who already has a small business and is producing a cupcake line is your best bet. You might also find the right people at a local farmers market or even a google search in your area of cake decorators.

 

It's tricky finding someone who isn't flaky and who can produce a consistent product for you (off craigslist). You don't need someone who's a problem in any way.

 

I would set up a straight sales system and not have them using my kitchen. You don't really want them knowing your mark-up and raising their prices on you (people get stupid about this). What you could do is add decorations to the cupcakes you purchase, package them nicely (Upscale) and get a good price $3.75 to $4.50 each. That would make things profitable for you. You can buy decorations online from a ton of sources and create seasonal looks or holiday looks as "gift" food purchases. Then if that cupcake baker opens their own shop ever, you won't have identical products and you created your own product line. If worse came to worse and things didn't work out with the small time baker, buy the cupcakes wholesale through a major supplier. There are good frozen products out there.

post #14 of 16
FYI, this thread is almost five years old.
post #15 of 16
Quote:
Originally Posted by jason_kraft View Post

FYI, this thread is almost five years old.

NICE.............urg!

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