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Comission VS Rental Fee

post #1 of 16
Thread Starter 

I have been approached by a bakery to do some decorating for them.  I've been doing cakes for a couple of years in my home but never for a business.  The owner wants to discuss either a commission or a rental fee for me to use her space.  Is anyone experienced with this?  What should I be asking for a commission or what would a fair rental fee be?  I will be bringing some clientele with me but mostly decorating for her clients.

post #2 of 16
???
They want you to decorate for them and they want to charge you? I must be reading this wrong...
post #3 of 16
It doesn't sound like you two are on the same page, from your description it sounds like the owner wants to purchase your products wholesale and then resell them in her bakery. This can work, but you need to make sure you are legally set up to sell wholesale (which will probably involve a health inspection).

If you will just be decorating cakes the bakery has made, you would want to either be hired as an employee or work as an independent contractor (paid hourly).
post #4 of 16

Subcontractors generally use their own tools, are required to claim and pay their own taxes, set their own hours, and can turn down work or accept the jobs they want to do.

 

Subcontractors don't typically work by the hour, it's by the job... so if you work by the hour you will most likely be considered an employee.  They may want to hire you as an employee to have more control over your scheduled hours, but it shouldn't be a concern as long as they know you'll be available when they need you the most.
 

HOW TO:
Make tip #127D (giant rose tip) Ruffle cake,
Write with icing,
Make buttercream roses on a stick:
http://s984.photobucket.com/albums/ae322/Unlimited1cakes/
Reply
HOW TO:
Make tip #127D (giant rose tip) Ruffle cake,
Write with icing,
Make buttercream roses on a stick:
http://s984.photobucket.com/albums/ae322/Unlimited1cakes/
Reply
post #5 of 16
Thread Starter 
Quote:
Originally Posted by manddi View Post

???
They want you to decorate for them and they want to charge you? I must be reading this wrong...

 

Quote:
Originally Posted by jason_kraft View Post

It doesn't sound like you two are on the same page, from your description it sounds like the owner wants to purchase your products wholesale and then resell them in her bakery. This can work, but you need to make sure you are legally set up to sell wholesale (which will probably involve a health inspection).

If you will just be decorating cakes the bakery has made, you would want to either be hired as an employee or work as an independent contractor (paid hourly).

Yes I am confused too, I was thinking someone may have heard of what she is asking before since I've never worked in a bakery but I agree it seems strange for me to pay her to do cakes for her unless what she is meaning is that I pay a rental fee and I make the profits from the cakes.  Or work on commission on how many cakes I complete.  Hopefully it will make more sense after our meeting.  I was just hoping to walk in with some understanding of what she was asking.  Thank you everyone for your help!

post #6 of 16
If she is wanting you to pay "commission or rent" than that would mean you would have the freedom to set your own prices as well as choose your projects. This being said if they are an established food service outfit they should have a Heath inspection if so you would have to use there facility. Which is not a bad thing. So you need to decide how much time you want to spend there if you think you will do alot of projects and actually take over part of her space then rent would be the way to go. But if just a case by case from time to time them commission would be the smart thing .
post #7 of 16
Let us know how the meeting goes icon_smile.gif
post #8 of 16

I thought maybe she was offering to rent you her space, and when you did cakes for her she would give you a commission from those cakes, or maybe she would get a commission when you do cakes for her clients. 

elsewhere.
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elsewhere.
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post #9 of 16
Thread Starter 

I had my meeting yesterday, we've partnered up and what she was talking about is me paying her a commission for the referrals that she's giving me.  She has many clients asking for cakes and she can't fill the requests so she's sending them all to me and taking a small commission from what I charge.  She's allowing me to set my own prices and schedule.  I'm very pleased.  Thank you all for your help!!

post #10 of 16

Glad you are happy.

How do you know she referred them to you/how does she know they accepted her referal/does it just rely on the customer telling you and you keeping an honest track of who has mentioned it? Hopefully there is a more reliable method!

post #11 of 16
Thread Starter 

All of the quote requests come through her email or via customers in the bakery.  Any orders I get on my own via my current contacts are 100% mine.  I'm  so excited to have the backing of a bakery!!

post #12 of 16
How much of a commission are you paying, and how does that compare with your profit margin?
post #13 of 16
Thread Starter 

Only 20% so my profit margin is still quite good.

post #14 of 16
20% is a pretty big percentage for a commission, considering markup (after ingredients, labor, and overhead) is typically in the 15-45% range.

If the commission is off the gross amount it's even worse...if your cost for a product is $77 and you have a 30% markup, your price would be $100. The commission on that sale is $20, leaving the final price as $80, which is a 4% markup.
post #15 of 16
I think 20% is fair if you can use her facility to do your own customers cakes as well when you consider the cost it would be to open your own facility. And mark up should be very high at least 75 to 100 % I wouldn't bother doing a cake for a 30% mark up. I looked into opening my own bakery and it was going to cost thousands ...... If she only works on commission then if she isn't making cakes it's not costing her anything. I say hey try it for six months and see how your profit margin looks then figure out if its worth 20 % . That's just my opinion.
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