Renting a Commercial Kitchen

We rented a commercial kitchen for our bakery in California since 2008. It's not as convenient as baking from home but in some areas it is the only way to legally run a food business (aside from building a second kitchen on your property or opening a storefront). Once you get a decent amount of volume the additional space for prep, baking, and cooling can help significantly improve your efficiency.

I'm also thinking about this, it's the only way I can sell legally without getting my own commercial kitchen and I'm not ready to commit to that kind of investment yet.

I'm pretty sure I'll be losing money in the beginning, I mean 4 hours at $25 an hour to make one cake, it's not going to leave me with anything. But maybe it will help me build my client base and portfolio until I can reach the volume needed to get into profit.

If you're spending 4 hours on a single cake the rental cost should be built in to the price. For example: rental of $100 + your own wage of $60 + $30 ingredients + $20 overhead = $210 + ~20% markup = $250.

If your volume is still low there will be slack time (so 4 hours of work time might turn out to be, say, 6 hours including waiting time) but eventually you will be able to fill in that slack time with work for other orders.

Sorry to hijack the thread, but I have more questions! 

 

How do you handle things like freezing, for instance I'd mix and bake my cake there, but then it needs a few hours to cool. So can I take it home with me at that point? And then I usually chill the cake after it's crumb coated, so again does it come home with me? And then if I don't need to deliver it until the next day? Renting a shelf in their fridge and freezer is an additional $25 each a month, so leaving my cakes there, while being at risk of being taken, will also add more expenses. But if the whole point of paying to rent a kitchen is to keep the cake out of my house then how can I make it work?

I don't see how you would be able to efficiently produce products in a commercial kitchen without fridge and freezer space. If you look at the increased productivity enabled by on-site cooling it should pay for itself with the first order. Just as with the rent, the additional $50/month would be allocated across the cost of all orders for that month.

Usually when a commercial kitchen is required to legally sell cakes you are not allowed to bring the cakes home with you anyway.

Unfortunately the law (at least in CA) states you can not store or bring any product home. You would have to leave it there.  Too bad you have to pay for freezer space, the kitchen I rent doesn't charge freezer space. I don't know if your kitchen has different pricing. My kitchen has the fee for baking.. and a lower fee for using space for decorating or packaging (that doesn't use oven,mixer or their equipment). 

 

It isn't cost effective for me when I do my custom cookies, but it definitely is when I do my 30 lb batches of gingerbread. Like Jason said it can work with volume.

 

ps If it's a well managed kitchen there should be no issue with theft from fridge or freezer or storage.

 

Good Luck!

So commercial kitchens aren't a viable option for someone who wants to do cakes without opening their own legal kitchen then I guess. Back to the drawing board...

Rented commercial kitchens can certainly be viable, what gave you the impression that they couldn't?

It's just the fear of the unknown I guess. I know I have to consider the loss as an R&D cost, but I don't know how long I could sustain that. I won't be getting many $250 orders, the requests I've had were for single tiered 8" party cakes, and I have no idea how many of those I would even get while I'm stil building the business. I'm sure it works for people who already have the volume to make it work, but I'm starting at the bottom. 

If you are renting by the hour the loss with lower volume shouldn't be too bad. This is the reason why a business plan and market research is critical, so you can know beforehand that your target market exists and is willing to pay your prices, not to mention working out how much your profit or loss will be at different sales volumes.

When starting a new business you can generally expect to break even or take a loss in the first year or two.

And to clarify, this would be an operational loss, not R&D. R&D costs can be recovered by allocating to sales, while an operational loss is (hopefully) a temporary situation that can be resolved by lowering operating costs (e.g. improving efficiency with higher volumes).

Given that most of my friends aren't interested in paying full price for my cakes, I think it might be cheaper to keep making them for free until I am ready to make the investment of going legal! 

 

Thanks for all your help anyway Jason, very good info here. 

Look around for other options....I just found a community center that is licesed....they are going to work with me with the pricing. They rent the kitchen for $100 a day....12 hours....but if I clean up and etc, I can get it cheaper....Not sure about the area you are in...I live in PA....I have knocked on so many doors with no luck...then one day it hit me...the local community center that holds monthly pancake sells and etc.

 

Best of luck....I was using a commercial kitchen that charged like yours did...and I just had to turn down people that wanted a small order. Because on top of the $25 a hour I had to drive 3 hours roundtrip.

 

Keep looking and don't give up!

Thanks for the advice, I'll try that. 

 

As we're also looking for a new house we're factoring in the possibility of building our own space to our search criteria.