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Working on getting a shop open. Advice please!!!

post #1 of 36
Thread Starter 
I cant have an in home bakery where i live without having a separate kitchen. There's a loophole in the rule that says i can sell at the local farmers market and that has been going VERY well! I dont have the space to build a separate kitchen in my house, so i decided to shoot big and look for a space to open a shop. I found a FANTASTIC spot in the mall for a fair price that we're seriously looking into leasing. It used to be a SUbway so it's got all the plumbing and electrical in all the right places and it would be super easy to set it up as a cupcake/coffee shop!

Now that we're looking into an actual shop instead of a home bakery, i'm sort of lost on what this business is actually going to entail. It will be mainly a cupcake shop but i'll do custom cake orders too. With the repeat business i've been getting at the farmers market, the HUGE interest in it, the super well-placed shop space i'm looking at, the BOOMING economy we have here, and the fact that there are NO other business like mine in town (other than grocery store bakeries) i think i can do pretty well.

What i'm worried about is the unforeseen issues, problems and other stuff that i just wont know til i try it. That's where i'm hoping you ladies helpful insight will come in! icon_biggrin.gif I'm hoping to avoid some costly trial-and-error mistakes!

And what pieces of equipment and appliances are commonly looked over? I mean, ovens and fridges are obvious, but what are things i might need to purchase that i wouldn't otherwise need in a home bakery?
post #2 of 36
You need to do an in-depth, no shortcuts business plan. This is a serious undertaking with huge financial risks, even if you start out debt free. Hopefully you have business ownership experience. You need to start with your health dept, contractors, utilities... first. From there you need to know down to the cupcake, what you will need to produce. Cost out all ingredients and packaging.

When you put the words, "lost" and, "commercial retail space", in the same post, I'm sorry, but this doesn't sound good at all. People who are ready to open this size business don't have questions. They already have the answers.

Remember, when money gets tight, businesses will "borrow" from the IRS to keep the electricity on. Coupled with the lease you will be responsible for and the IRS, you could jeopardize your home, your credit rating, and years of your furure income. There is a reason why 85% of small businesses fail in the first year. Be very careful. Sorry to be negative, but realistic.
post #3 of 36
Thread Starter 
Quote:
Originally Posted by scp1127

You need to do an in-depth, no shortcuts business plan. This is a serious undertaking with huge financial risks, even if you start out debt free. Hopefully you have business ownership experience. You need to start with your health dept, contractors, utilities... first. From there you need to know down to the cupcake, what you will need to produce. Cost out all ingredients and packaging.

When you put the words, "lost" and, "commercial retail space", in the same post, I'm sorry, but this doesn't sound good at all. People who are ready to open this size business don't have questions. They already have the answers.

Remember, when money gets tight, businesses will "borrow" from the IRS to keep the electricity on. Coupled with the lease you will be responsible for and the IRS, you could jeopardize your home, your credit rating, and years of your furure income. There is a reason why 85% of small businesses fail in the first year. Be very careful. Sorry to be negative, but realistic.



Really? EVERY single successful business owner already have it all figured out down to the last detail? There's no learning curve to opening a new business?

Our business plan is in the works. I've already talked to the health department, i've been emailing with the owner and the mall manager about utilities and other costs with the unit along with the lease details, i'm researching the equipment and supplies, calculating costs for ingredients, deciding how to furnish and decorate the seating area, figuring out how taxes work with this type of business, if i can afford to hire a part time employee and all that entails, and today i plan on calling around to price insurance.

My husband and i have ran more than one successful business. With his business and marketing sense and my background in business law, i think we'll do alright even though we haven't ran this particular type of business yet. (Aside from the custom cakes i used to do when we lived in ID that i did very well with)

And no, we will NOT be borrowing money from the IRS, or any other entity for that matter. We are doing this completely on a cash basis with some of our personal money to get started. We're going to form an LLC so if the business tanks, we can pull out, claim bankruptcy if we have to and have no personal repercussions. I couldn't care less if it effects our credit anyways, as we dont NEED our credit because everything to do with our finances is on a CASH basis. We've, unfortunately, learned the hard way that borrowing money is the dumbest thing we can do and are still paying on those decisions. We will protect our personal finances and if this business fails, we'll regroup and start over. Ask Donald Trump how that works icon_wink.gif.

I should just give up though, because apparently someone ready to open a store already has all this information by osmosis or something, right? icon_confused.gif

So my actual question is, what were some things that you figured out AFTER you got your business up and running? Because i DONT know it all, and i realize that it's going to take a bit of trial-and-error to get it perfected.
post #4 of 36
Glad to hear you will have some help on the business side, a lack of business expertise is probably the main reason businesses fail. It sounds like you have a pretty good handle on the costs involved. But the profit margin on cupcakes is relatively low compared to custom cakes (unless you will be subsidizing with beverages with a much higher markup) so you need to make sure you can be profitable long-term even with less-than-optimal estimates.

One thing to look at is if you will be better off with a by-appointment-only commercial kitchen with no retail storefront. While you would be giving up walk-in traffic, you would gain more flexibility with lower overhead costs (and significantly lower startup costs if the kitchen space already exists), and you would be able to focus on high-margin products like custom cakes.

How much is the rent at the mall, and how does that compare with renting a commercial kitchen?

And to be fair, based on your initial post it did seem like you were a little lost, your followup post helped to clarify the situation.
post #5 of 36
Thanks Jason, she was vague. I was giving basic information because your post had been overlooked for so long and nobody had replied as they usually do. Probably because of how you worded it. I'm sorry that I tried to show some interest in your query. But, since I've given this information countless times and have the pm's to show how many people are interested in this answer, I will disregard your attack and remind you that thousands of people read these posts, so it isn't always about you.


And yes, people who open in malls don't come on CC and ask the basic questions. A few miscalculations will cause you to lay out some serious cash.

Here's your unforseen... not enough business to support the outlay and you are sitting on a five year lease. Why did Subway close in this location?
post #6 of 36
I think I will elaborate on this one.

How many independent businesses do you see in a mall? Over the course of 20 years, how many have you seen open and remain open for 10 years or more. I have never seen it. The payroll alone will be about $3600.00 for one person. You will need more on weekends. Add to that rent and utilities, taxes, probably B & O too, and buildout.

Now take into consideration that your inventory will go stale during the week because there is little traffic except for browsers with no jobs. On weekends, you will have to bake like crazy, unless you will do like the chains and sell so-so dry, box mix recipes that are nothing special, because that is what must be done in these situations.

Mall stores make all of their money in three months out of the year. Can you stock and employ enough people to support this business model, because that is how a mall works.

And don't think I don't know from experience. My husband and I had a kiosk in the mall, not a cart, but a $25,000 buildout. It was about 15' x 15'. He used it for free health screenings. We weren't trying to make money because we didn't sell anything. It was essentually a billboard. The weekdays dragged by with little traffic. On the weekends, we were innundated. It took as many as five employees to man it during peak hours. This was 15 years ago. We paid about $2500.00 in rent. This kiosk was the biggest hassle. October, November, and December were great. January was bad because people were just exchanging and using gift certificates in the mall, not spending more. The rest of the year, the rent and payroll stayed, but the traffic dwindled. Eventually, we decided that the 12 months were not worth the three months, so we negotiated to be in the mall only for those months. We could dismantle the cabinetry, store it, and put it back up. Not a cheap project, but necessary to avoid nine bad months.

My cousins owned a candy store in the mall. There were four of them waiting on customers and making candy. It was so much work they ended up hating it. After about five years, they shut it down. It wasn't losing money, but nobody got rich. It just wore the four of them out. They had no life.

It doesn't matter how busy you are, malls are not condusive to small businesses. Chain stores buy in quantity, have experience in the retail cycle, have proven marketing plans, have carefully considered their branding, are capitalized, can make almost all of their revenue in three months and can lose money for nine months, and they still fail.

Cupcake Girls, that show, gives a true picture of a retail cupcake location in a mall or high traffic area. Their franchise price is $345,000.00. They have money, make a lot of money, and go through serious financial issues.

Good Luck
post #7 of 36
The "attack" was kind of justified though. Your post, here and in other threads, came off as you saying that there is no point in even thinking about starting a business if you've never ran one before. Plus it comes off as you thinking your superior then everyone else. Not saying you mean to sound like that, but you do a little.
post #8 of 36
My point is that people don't go in malls, one of the highest rent districts with no experience.

Do you know how many times in two years I have seen these threads?

My posts are accurate. 85% of businesses fail because somehow, someone got a little money... home equity, inheritance, etc., and decide to go in business with little experience. I owned a marketing company that specialized in small business for 15 years. After the initial interview, I could tell how long the business would last... 3 months, 6 months, a year. I was rarely wrong. I bring this experience here, hoping that people who are planning a business in the future will be diligent in their persuit of all of the knowledge and experience they can gather, so that their quest and their future retail operation will be a success.

If you all were talking commercial kitchens, home kitchens, or even a stand-alone bakery, the cost is less.

Some people just have their head in the clouds about how simple this is. And I'm sorry, for this type of undertaking, people shouldn't have toa sk the most basic questions. It gives away the level of experience. I certainly didn't come on CC and ask these questions. I went to the source of the the information. The health dept, dept of ag, state tax dept, plumbers, electricians, engineering dept, and planning commission. I am looking at commercial retail space now. And with all of my experience and capital, the last place I would go is to a mall. For retail space, you go to the experts. Commercial real estate agents, leasing agents, banks, Chamber of Commerce for stats, shopping center corporate offices, the electric company, retailers in the vicinity, and restaurant equipment stores. Then an analysis of all competitors and a mock-up of their approximate structure based on gathered information. A visit to a similar city, interviewing similar businesses would be a help.

This is what people do if they expect to be successful in a high rent area. Sorry the reality does not sound as much fun as the fantasy.

As an exercise in the viability of any business venture, go to your personal bank and try to get a loan based on the knowledge you have at present. You may not need one, but it will be an eye-opener. They will be happy to tell you exactly what amount of risk you will be taking. After that meeting, see how far off my post is from the truth.

This is the business forum. Do you want reality, or do you want the pretty fairy tale version. Business in the best of times is difficult. And now, more than ever, being profitable will be a challenge. I am not sorry that you find this offensive. I just hope it helps other who have a more realistic view.
post #9 of 36
I "get it" scp1127. I would much rather have the real true life version than a fairytale, RAH-RAH! session when I ask a qustion. I agree it seems a bit naive to ask that, and did not "tell" of any experience.

Maybe you should have just said, "Your cakes are gorgeous and your flavors sound delish!! You should totally take out a second mortgage and go fo it!!! icon_biggrin.gif "

If someone truely wants to start a business, and comes here asking a question, they need to learn how to take advice with out the hand-holding and molly-coddling. If you can't take it, then you are going to have bigger problems before you even get your doors open!
Beginners, be sure to parrot advice and get your post count up as fast as you can. After all, it's not what you know, it's what people THINK you know.
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Beginners, be sure to parrot advice and get your post count up as fast as you can. After all, it's not what you know, it's what people THINK you know.
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post #10 of 36
Anna, you ought to know. You have just done this. How accurate is my post?
post #11 of 36
scp1127: I really do not know how or why people are not getting what you say. They are not "listening"(reading) to what you have said about your experence nor do they seem to be getting that you are speaking from your level of expertise in and experience concerning this subject. you are trying to help the lady that asked a question and I would just say go ahead and share your expertise and advice and not even bother with replying to the attacks. I have learned a great deal from you myself or what you have shared has confirmed what I was told before. I have wanted many times to go into my own business and be my own boss, but my parents and true friends have set me down and said think on these things before you think this would work. Most of what you have said has already been shared with me and I am not in business yet because I listened to them. Yes it was discouraging, very much so, but I am also not floundering around and hurting financially either. Because I listened to what I was told and heeded the advice.

If we would all just share advice or opinions and not attack each other on these forums it would be more fun. Even when we disagree we can be agreeable. If I have ever attacked someone, it certainly was without intention and I am sorry for it if I have not already said so....I am not perfect either, far from it, but I try to learn and apologize when I realize I am wrong or I 'm confronted on an issue.
I can do everything through Christ which strengtheneth me Phillipians 4:13
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I can do everything through Christ which strengtheneth me Phillipians 4:13
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post #12 of 36
jules, you are on her gathering like crazy. And I am sure that this is not your only source. I always read your posts. Obviously you have some future plans and your approach is methodical and shows a real knowledge of the process. If nobody gives real information, is that fair to the ones who are planning a business.

As I have posted before, you will not find me telling someone how to roll fondant or how to deal with unruly brides. But you will find my posts in the business forum and any threads about scratch baking. In both areas I have knowledge through experience and education.

That story I told about the new businesses... it started with my first job out of college as a salesperson for the local newspaper. I remember we all had a Rolodex on our desks. We would visit a new business and then on their page, we would write down an estimate of how long they would be in business. About 5 salespeople were in on the "game". We were eerily accurate on our data. It brought home how accurate that failure rate actually is. People lost so much. Their lives and demeaner were so changed after a public failure. And they all had such high hopes and enthousiasm when the venture began. And these people weren't even at the mall. I would be very worried about a location that was formerly a Subway. Maybe it just moved two stores down. But if it is gone... why? I will bet that she hasn't even walked the mall, gone into every store, and gathered useful information from each manager. They would be happy to share what they could, especially about traffic flow, income levels, and overall viability. There is a cupcake store in our mall. It is owned by a well-capitalized lady with a successful cake business and years of retail experience. But even she chose a location that happened to be on the outside of the mall, no inside entrance to the mall. It is basically a stand-alone store within the walls of the mall. I'm sure she knows what she is doing, but those kind of numbers are daunting. I don't have the experience to go into a mall. Wait, yes I do... way too much work with only a slim chance for profitability and multi thousands to lose. And the IRS issue... do you shut down when you are running out of money, or do you "borrow" to keep the lights on... or more importantly... to make payroll? I doubt you will ever find a businessperson who has an IRS issue say that it was planned. No, it was a last ditch effort to keep from drowning. If that tax money sitting in your account will provide the answer to a serious financial problem and all other sources are depleted, it usually gets used with the intention of putting it back next month. But for most, "next month" never comes. Isn't business fun?
post #13 of 36
And everyone keeps telling me "like OMG, you should totally open your own business"... Really?! Realllllyyyy?!! This post has made it so obvious how much hard work is involved in doing that.
post #14 of 36
Lisa, the risk is so much lower and profits are potentially higher in a smaller bakery. The chains have the buying power, experience, and capital to make high rent districts viable. But we, as individuals, really don't. When the poster stated that not everyone has had business experience when they opened and later became successful, it's like stating how many people win millions in the lottery vs. how many play. There will always be a rogue success story, but they are seldom based on how many try.

My posts in this thread are strictly about high rent districts. I will stand corrected if this person knows how many cupcakes to make a gross personal income of $70,000, because that is probably what could be made after this much effort at another job. If she knows how much electricity it takes to run her ovens and calculates that for how many hours the oven needs to run to make this work, based on the rate at her local electric company, I'll stand corrected. If she knows how many man hours it will take to produce enough to be profitable and the resulting workers comp bill, I'll stand corrected. Does she even know the rate of a workers comp bakery policy? I don't, but many on CC do. What is the B & O rate? Is there one? And is there one of these questions that is not critically pertinent to signing a mall lease?

If you look at the trend... look at Cupcake Wars where most of these people are in commercial kitchens and are building very nice businesses. You can tell the ones who have family money like the 20 year old last week. Any with storefronts are small. The nicer buildings usually belong to those who have been in business for years. Look at Georgetown Cupcake. Two highly educated corporate women who started in a tiny building. Another example is Gesine Bullock-Prado, a great autobiography for anyone thinking of opening any baking business. She had plenty of money and it was still difficult.

I am currently planning a retail location. I already have a 1500 sf commercial kitchen that is debt free with room to grow. It is on the ground floor of my home. All baking will come from there with no overhead except the electric bill. The retail space I would love to find will be in an older home. Probably one that is not selling and the owners will consider renting. I will only need about 600 sf, so I plan to find a place that will allow me to rent just that much. I have a plan for sharing the rent with another business owner in a great related field that I won't disclose. This person can man my counter for reduced rent. No employees, just two business owners. Fill in employees will be from my daughter's prep school... not your average kids. I already own every fixture, decoration, and all display stands and platters. All antiques for an upscale shop. My husband pays for my SUV with the cupcake wrap, my commercial auto insurance, all other insurances, pest control, my electric, and most of the time he pays my grocery bill just to be nice. And I am still looking into how much I will have to produce to make this work. You would think I had a sure bet. But once I have all of the information, I then must consider what I will need to make as income for myself in order to make this worth the effort. I have years of experience and it has taught me to move forward cautiously and slowly. And that experience tells me that I have much more work to do before I start looking at space. That is the last step once all issues are known. My rent will be relatively cheap compared to most bakeries. I can't imagine a higher COGS. And if someone considering a lease doesn't know what that is... oh well.
post #15 of 36
scp11277, you are right, this is not my only source of help. As much as it always frustrated the dickens out of me when my parents always "rained on my parade", it was because they loved me and did not want me to go into something with out all the angles and perspecitves I could get. My parents are both very wise and intelligent people and it doesn't hurt that they both have a college education. I don't have so I know that to listen to their advice no matter how discouraging it was at times was wisdom too. I know that there are a lot of things that I would like to do someday, but whether they happen or not is up to God. He is the one that will have to provide the financing of it to start it off and the financing of kitchen appliances and all. I have had a lot of friends tell me that I ought to go into business for myself, but after listening to mom and dad all these years I know that I am still a long way away from it and even if by the time I have the finances to do it, I may not want to do it? But I love being on Cake Central and learning. Well I had better be going.
I can do everything through Christ which strengtheneth me Phillipians 4:13
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I can do everything through Christ which strengtheneth me Phillipians 4:13
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