The Fresh Loaf

A Community of Amateur Bakers and Artisan Bread Enthusiasts.

Amateur baker looking for advice on buying a bakery

ohkeepossum's picture
ohkeepossum

Amateur baker looking for advice on buying a bakery

Hello! This is my first post here... just found the site while looking for information about baking and bakeries. I thought I would just put this out there and see if any one has any advice! So, I have a very unique situation. I am part of a small food hub in semi-rural New Hampshire that sources locally produced foods and sells them in our retail store and through wholesale networks. We are currently renovating an old in (1900) that is our retail space and the site of a "future" shared use commercial kitchen. We are not the owners of the property, however we are partners in the development, which allows us to operate rent free until we start showing real profits. Recently we found an old bakery in the the town next to us that is going out of business, and is looking to sell the whole place. I have a knack for the kitchen, but baking is still something I am just getting into. I can make some nice simple loaves, but never have worked in a commercial bakery. They have lots of equipment; Ovens, Mixers, bowls, whisks, tables, sheet pans, etc... Everything. They are also offering recipes and hands on training to learn exactly how they do it. I am just looking for some advice on taking on a bakery like this...Like I said, I have loads of kitchen experience and feel good about the process, but this would be uncharted territory for me! Thank You! OKP

gerhard's picture
gerhard

You might want to take a job in a bakery and see if you like the work, it will be a completely different experience from baking a few loaves for friends and family.

There might be more to moving the existing bakery than you think.  How old is their setup?  They might be allowed to operate the equipment because they have been grandfathered in as new regulations where passed.  You move this bakery to a new location you will be held to todays standards for safety and sanitation, sometimes old equipment can be upgraded other times it can't.  Old ovens often contain asbestos which makes moving them a dangerous operation.

Not wanting to scare you but do a bit of research before jumping at buying an old bakery that you want to move.

Gerhard

Lazy Loafer's picture
Lazy Loafer

Community food hubs are one of my areas of interest (here in Victoria, BC Canada). What a treasure you have found and a great opportunity! I wish you the very best of luck in your endeavors.

As for the bakery, you might first want to find out why they are going out of business. Is there not enough local market for their goods? Or some other reason? If you want to have bakers in your community kitchen, you might want to find out how many bakers are interested. Perhaps the demand isn't so great that you need an entire bakery, but you might be able to use a commercial mixer or two and possibly a deck oven, if only a few people want to bake a small amount of bread. Also some of the small wares (bowls, sheet pans, etc.). And if you do have several people lined up who want to be bakers in your community food hub, perhaps they could take the owners up on the offer to train them. Or you could find someone else who wants to run an entire bakery and contract out to them for a portion of their production. Lots of options!

 

Arjon's picture
Arjon

As a possible starting point, would the bakery operate as a business that needs to be profitable? If so, right away or would you have the ability be able to afford to lose money for a while? If the latter, how much and how long? 

In a related vein, you should see the bakery's books if possible - and preferably should have them looked at by an accountant who is familiar with small acquisitions - to find out how well or poorly the business was doing financially so you can assess this alongside your financial needs and goals. 

ohkeepossum's picture
ohkeepossum

Thank you all for the great information regarding my situation. I will try and answer some questions and clarify the details. 

Gerhard: Thanks for the information! Some stuff I really would not have considered. They have been in operation for about 25 years, a great local bakery that people from all over New England come for their "classic" German breads. Most of the equipment is from the 80's and 90's. Do you know of a good resource for figuring out if there would be asbestos in these ovens? That would be really useful, the internet doesn't have too much specific info. 

Loafer: Yes! we are all very excited to be working with farms in our community. The bakery is going out of business because "I don't want to be dragged out of here by my ankles"(per the owners). It is a married couple who run the bakery and they are just toasted. Like I said before they have been in business for a long time and have dedicated customers who travel hours for their bread. There is demand and we have retail and wholesale clients that are already interested. 

Arjon: I would like to see profits ASAP. I need to keep the lights and oven on and start paying back the loan for equipment (0% interest) and get some savings in. But like I said, I can run rent free for a certain amount of time (to be agreed upon). Also, I am purchasing the bakery equipment and have the option to buy recipes and training. I am not buying the name or the bakery itself, really I am just getting the equipment. 

Thank you all and I hope this clarification helps! 

 

Arjon's picture
Arjon

is a critical distinction. Everyone wants to be profitable right away. In reality, a lot of businesses take time (and planning and effort) to reach break-even. This isn't necessarily because the idea is poor. Quite often, there are other reasons and combinations thereof; it takes time to build a sufficient clientele, to work around unexpected issues, to adjust to the specific preferences of a market, etc., etc. 

That's why a startups should have a business plan that factors in - among many other things - a break-even calculation, as well as sufficient money / financial backing to survive for long enough to become profitable in a fairly negative scenario, one that includes considerably lower sales than you expect as well as unanticipated costs and problems.

gerhard's picture
gerhard

They have been in operation for about 25 years, a great local bakery that people from all over New England come for their "classic" German breads. Most of the equipment is from the 80's and 90's.

The oven probably doesn't contain asbestos insulation if they are newer than the early 1970s, although they still used asbestos in a sheet form for insulation for a while after that but I don't think it was that common.  A check with the oven manufacturer should be able to confirm that they don't contain asbestos.  They closed the bakery in our small town about 20 years ago but the oven did not sell at the auction.  I had a conversation with the retired owner a few months later and he told me that getting rid of the oven cost more than the auction of the other equipment produced because of the asbestos insulation.

The other machinery would usually just be a matter of retrofitting safety guards and power cutoff switches and ensuring that it's not dripping lubricant on food contact surfaces.  Old tinned mixer bowls are sometimes frowned on but they can be retinned or you could buy a stainless bowl.

Gerhard

barryvabeach's picture
barryvabeach

I have not run a bakery, but am pretty familiar with purchases and sales of existing businesses. If you want to be profitable right away, you need to look closely at the books.  You need to see what their sales were, and determine how they will be impacted by the sale of the business.  If you took over their location and the name, and ran the business just as they did, a decent guess is that your sales at first would be about 80 % of their sales  ( There are some customers who developed a personal relationship with the current owners, and would be likely to go elsewhere once there was a change in ownership   ( It is like going to a barber for years, then moving, but still going back to the barbershop which is not all that near you because you developed a relationship with that barber, once a new barber comes in, you would likely find someone closer to you )  Since you are  moving to a different location,  the 80% is pretty unlikely, at best you would be in the 30 to 60% range.  Of course,  if you did something different in terms of advertising, or more demand in your town, you may generate additional sales.  On the expenses side, again look closely at their books to see what their expenses were, and how you can cut expenses, and what expenses will be higher for you.  You said rent will be free at first, so that is a savings, but it was a married couple, so if both of them were working full time, you will likely have to hire someone to replace one of them, and you will have to be a full time worker at the bakery.  Finally, take a detailed inventory of the equipment, and determine what you will need to make what you sell, then determine what a fair price is for the stuff ( check ebay or craigslist, the local auction house, and the local restaurant equipment service company).  It is okay to buy the place, lock stock and barrel, if the vast majority of the price is for the mixers and oven that you will need.  On the other hand, you don't want to spend a lot of money on assets that you would not need - so for example they have a machine to make a particular product, and you don't intend to make that, you don't want to spend tens of thousands on that item.  Another thing to price is the cost to move and install and set up the machinery.  For a house, you can buy and oven and install it yourself.  Most commercial equipment needs special wiring, and an electrician to hook it up, and maybe a specialized technician to get everything up and running.  Sounds like a great adventure.  

Agree with Gerhard, it would be a great idea to work in their bakery for a week, not just to see if you like the work, but to get a feel for how the operation works, what equipment is working well, what may need to be fixed.  If they are afraid you would just take their recipes, go to a lawyer and have him draft something that says that you will pay them a certain amount if you don't buy their equipment, and open a bakery in 60 days from when you worked their, you will pay them a certain amount.  That way both sides are protected. 

crumbsinthebutter30's picture
crumbsinthebutter30

Hey there, I just moved to New Hampshire and was wondering how the bakery thing is going.  Did you take over the business?  If so, I would love to stop by.  Where are you located?