Bakery Shop Business Plan Example

Part 1

Business Description

The Delicacy Bakery Shop will be incorporated in the Southside of Chicago, state of Illinois. It will be managed and owned by XXx and partners. The proprietor has comprehensive experience and knowledge in bakery, sales, and event marketing. The owner has worked with reputable food companies and had attended a distinguished culinary school part-time. The shop intends to recruit full-time pastry bakers and three part-time baristas to handle customer service and daily activities. The front shop aims to be a great innovator in the snack food market and engage in eco-friendly and social responsibility by actively participating in some community-based initiatives. The shop will offer a variety of products in its many. They include biscuits, cakes, cookies, cupcakes, muffins, pecan pie, pumpkin pie, sweet potato pie, and tea scones. The business will have a set of values that will help guide its daily efforts and maintain integrity at the core of its operations. The products will be sold directly to the clients, and home delivery is also done on a client’s quest.

Start-up Summary

The Storefront Bakery Shop is a start-up business. Financing will be generated from the proprietor and willing partners’ capital or a soft community loan.

START-UP REQUIREMENTS
Start-up Expenses
Legal fee	$1,000
Business registration fees	$ 2, 000
Rent deposit	$ 500
Renovation of the Premise	$2,000
Starting inventory	$ 1, 000
Utility setup fees	$ 500
Other	$500

 

TOTAL START-UP EXPENSES	$40,000
Start-up Assets
Cash Needed	$10,000
Current Assets	$2,000
Long-term Assets	$5,000

 

TOTAL ASSETS	$7,000
Total Requirements	$20,000

 

Marketing Plan

Description of Products

The shop has developed various recipes for its unique menu, which institute the following products: biscuits, cakes, cookies, cupcakes, muffins, pecan pie, pumpkin pie, sweet potato pie, and tea scones. These products have applied the stings of the existing restaurants within the neighbourhood, some of which have existed for over 30 years. However, the front shop has initiated a unique way of delivering its items to the customers since it covers only a smaller range.

The approximated shelf-life of both the product and ingredients is 14 days at the refrigerators’ temperatures and upon 21 days when frozen. The shop intends to offer a wide variety of products, all from high-quality ingredients. It aims to cater to all its clients by providing every esteemed customer bakery product to suit their varied demands and meet their satisfaction. The baker shop would offer freshly made bakery products at all time during the operations. Approximately five moderate batches of bakery items are to be made daily to ensure that the sold products stay fresh and always available.

Market Description

The products that the Storefront Bakery Shop will market will be distinguished in two classes: the bakery product. This specific business plan will analyze markets. 

Bakery products: the overall market has experienced a slight increment in the past years (Census of Agricultural Products, 1998, USDA). It is estimated that the North American bakery products market will steadily grow at a CAGR of 4.6%. The market is driven by accessibility, convenience, and nutrition that is linked to bakery products. Additionally, due to an increase in demand on instant and nutritious bakery items and the growth of out-of-home consumption in the neighbourhood, this trend has dramatically facilitated the consumption and demand for bakery products. 

The local area has experienced dramatic growth in the consumption of various bakery products. This particular trend is projected to stay the same for some period. Moreover, they are increased demand for health-promoting bakery products that are minimally processed with lesser preservatives, lesser trans fats, rich in protein, and have other critical micro-nutrients. Such knowledge will help to inform our strategy to produce products that satisfy the customers’ expectations. The baker retail stores tend to contribute almost 70% of the bakery industry profits in the area, even though they are fragmented. 

Nonetheless, the point of purchase and packaging are marketing efforts and critical in these markets. The retail bakery industry in the US currently encounters dramatic growth. The chilly climate in the Southside of Chicago, Illinois, seems to enhance the significant consumption of hot baker products in most times of the year. The Storefront Bakery Shop needs to establish a broader regular customer base and focus on its business and marketing on residents, which will be the dominant target market. This will enhance a healthy, stable revenue base, therefore ensuring the stability of the business. Highly competitive products and services are essential to capture this segment of the market. 

The whole grain bakery products are drastically becoming popular with local consumers due to the health and nutritious lifestyle concept. The heath-orientation is catered to by introducing products containing high fibre, wholegrain, or other health-promoting ingredients. Thus, new product innovation regarding packaging modifications is critical to retain competitiveness in the bakery market.

 

The business’s emphasis is on attaining the demand of regular residents of the Southside of Chicago, Illinois, customer base. 

Market Segmentation

The business will focus on the local market since it is still a small business and cannot serve a broad range of needs. The locals tend to consume lots of bakery products regularly as snacks. 

Local Residents

The shop business needs to establish a large, frequent customer base since this would enhance a healthy and consistent sales base in ensuring that the company becomes stable.

Target Market Segment Strategy

The dominant target market for this business will be a regular stream of residents and the community. Customised and convenient customer service at relatively competitive pricing is critical to sustaining such a local market share of this specific business’s target market.

Market Needs

Since it is typical with cold winters, hot and fresh bakery products are relatively in high demand. Most of the day’s activities occur in the morning hours before eleven a.m. and in the evening after five o’clock.

Service Business Analysis

The retail bakery industry in Illinois State has recently encountered drastic growth. The cold winter tends to enhance the high consumption of hot bakery products most of the year. The local consumers are sensitive to the nutritious and healthy concept of their product, thus informing our menu. The business aims at offering fresh products in a conducive environment where the customers can comfortably enjoy their snacks. It has to indicate modern designs and consider some of the local cultural practices in the design to fit in the environment.

Competition

There are many varieties of menus of bakery products available in several retails shops within the Southwest, Illinois. For instance, there are all ready to eat a variety of snacks produced in the grocery stores. Some shops offer a substitute for baking to make their product admirable and seem healthier, and some bake goods with nuts, yoghurt, and fruit bars. Hewn Bread’s Inc. has had a more substantial base. The strengths of its products are due to their wider market share and various complex channels of distribution. Some bakery shops tend to have their products in virtually every retails outlet locally and have attained a significant market share and acceptance from their loyal customers. 

Additionally, some other well-established bakery firms such as Oak Park Bakery, Chiu Quon Bakery & Dim Sum, Goodness and The Baker have had their market base for a decade and have customer locality and established channels. The established bakery shops tend to price their product relatively lower, thus attracting more clients than start-up businesses. However, such products’ weakness lacks a range of variety, and therefore some clients tend to get bored with the same old product and wish to taste new products. Few such companies produce flavoured bakery products, and they are unwilling to change the packaging as well.

Competition and Buying Patterns

The level of competition in the local area is relatively low, and therefore the business is focused on providing effective customer service and product quality. We are aware that the residents need a customised and high-quality product in a conducive atmosphere and desire a classy local shop. In addition to effective sales via firm-operated retails shops, leading competitors to sell their established products through other channels as well as special operations. 

Moreover, smaller business and shops sell their products in a more limited selection of items and a few accessories such as logo carrier bags. During the financial year 2018, industry retail sales mix by product type was estimated at 73% bakery items and five per cent dough-making equipment and accessories. Technologically existing competitors make fresh products and bakery-related products conveniently available via mail order and online. Moreover, mail order catalogues certain food items, and select dough-making equipment and accessories, have been made available by a few larger competitors. 

Marketing Strategies

The distribution of Delicacy Baker’s products will commence in the local Southeast of Illinois area. The owners will have to build their integrity and brand within the locality; thus, the products’ introduction would experience less resistance. The local leaderships and groups have at least indicated that they are ready to carry the products. In the letter of intent, the Delicacy Bakery emphasised the healthy and nutritious concept of its bakery products based on the federal standards and Food and Beverages Act. 

The demonstration project will be initiated in the streets and give free samples to the residents and ask for their opinions to get more insight into their demand and desire. This specific project will enable Delicacy Bakery to introduce its brand into Southside of Chicago, Illinois, under a relatively fair market share. The shop will depend entirely on the front outlook displays to be in a position to stand out and demonstrate some degree of uniqueness.

A particular focus has been towards designing attractive, classy, and modern labels that will help to stress the uniqueness of the product and its ingredients. An expert will help with the design of the packaging label and front outlook of the shop.

Manufacturing Plans

Delicacy Bakery has a 10-gallon moderate speed mixer and a pressurised mini-tank. The process is established on a residential consumption scale. The menu is currently shown to the potential employees and how to prepare the different items stipulated on the menu. The practice is critical to ensure that it is a standardised and unique ware in which the Delicacy Bakery stands out and maintains consistency in its production.

Execution: Strategy and Implementation Summary

The business will be successful by providing clients with high-quality bakery products listed on the menu with personal service at a competitive price.

Competitive Edge

Storefront Bakery’s competitive edge is significantly minimal in the local area in this specific niche. The business strategy will be formulated based on the following SWOT analysis.

Sales Strategy

Based on the table below, the business projects a sale of about $9,000 in the first six months, $50,000 in a year, and $ 110,000 in the second year of the plan.

 

SALES FORECAST
	Six months	YEAR 1	YEAR 2
Sales of Unit
biscuits, cakes, cookies, cupcakes, muffins	5,000	40,000	50,000
pecan pie, pumpkin pie, sweet potato pie	4,000	10,000	60,000
tea scones and Other	0	0	0

 

Financial Plan

Financial Considerations

The Storefront Bakery Shop is estimating to raise & 50,000 of its capital to provide the needed financing. Moreover, the business will borrow $ 10, 000 from a bank to provide additional funding for the start-up requirements. The business projects sales of about $120, 000 in the first six months, $ 200,000 in the first year and about $230,000 in the second year of the plan. The business will have to break even by the sixth month of its operation as it steadily optimises its sales. Profits for this duration are projected to be $3,000 in 6 months, $6,000 in the first year, and $ 10,000 in the second year. The business does not estimate any cash flow issues shortly after its initiation. For future growth and expansion plans, the company will borrow a long-term loan worth $100, 000, which matures in the next five years.

Mission

The Storefront Bakery Shop aims to provide high quality, nutritious, and healthy bakery products to the residents as the primary market target.

Keys to Success

Keys to success will include:

• Offering the highest quality bakery items with adequate quality customer service and customising the products. 
• They are introducing competitive pricing.
• The bakery is strategically located, where the rate of influx of customers is high

Finance Proposal

Delicacy Bakery IL

Pro Forma Balance Sheet

	Opening balance sheet	Projected balance sheet
As of date	(By the end of year 1) $	(By the end of year 2) $
Assets
Current assets
Cash in bank	10, 000	100, 000
Accounts receivable from sales	50, 000	110, 000
Inventory	2, 000	3, 000
Total current assets	62, 000	213, 000
Fixed assets
Furniture and fixtures	1, 000	2, 000
Machinery and equipment	1, 000	2, 000
Leasehold agreement and improvements	3, 000	3, 000
Less accumulated depreciation on all fixed assets		1, 000
Total fixed assets	5, 000	6, 000
TOTAL ASSETS
Liability and capital
Current liabilities
Payment to employees	39, 000	132, 000
Interest payable	1, 000	1, 000
Taxes payable	2, 000	2, 000
Short term bank loan	50, 000
Total current liabilities	92. 000	135, 000
Long term liabilities
5-year bank loan		100, 000
Total long-term liabilities		100, 000
TOTAL LIABILITIES
Capital
Owner’s equity	50, 000	230, 000
Retained earnings	40, 000	100, 000
Less (drawings)		20, 000
Total capital	50, 000	310, 000
TOTAL LIABILITIES AND CAPITAL	142, 000	545, 000

 

Assumptions:

• Currently, the bakery has raised $50, 000 for the start-up, but requires an additional $ 10, 000 obtained through a bank loan.
• The purchase of machinery and equipment valued at $ 1, 000, furniture and fixtures worth $ 1, 000.
• The bakery’s fixed assets are expected to depreciate; the lost value is estimated at $ 1, 000.
• The taxes imposed on the bakery’s revenues are valued at $ 2, 000, and the interest payable on the short-term loan estimated at $ 1, 000.
• To finance the plan for growth and expansion in the next five years, the bakery plans to acquire a bank loan worth $ 100, 000.
• After all, expenses are deducted, the projected net profits are expected to be $ 40, 000 by the first year and $ 100, 000 by the second year. The owner is allowed to make drawings by the end of the second year, and the minimum amount is $ 20, 000

 Delicacy Bakery IL

Pro Forma Income Statement

June 2020 – February 2021

 

Net Sales                                                                                $10,000.00

Less: Cost of Goods Sold                                                      $8,000.00

Gross Income           

                                                                                                                        $18,000.00

Operating Expenses

Labor                                                                                     $1,000.00

Utilities                                                                                   $500.00

Insurance                                                                               $400.00

Sales Promotion                                                                    $2,000.00

Delivery                                                                                   $400.00

Miscellaneous                                                                        $500.00

Total Expenses         

                                                                                                                         $2,900.00

Gross Income                                                                         $20,080.00

Net Income                                                                                         $15,800.00

 

Assumptions:

• Net sales-based pricing at an average of $1.32 per unit
  • 3,800 units sold in Southside of Chicago, Illinois local area 2000 units per month
  • 8,000 units sold in Armour Square every month
  • 20,000 companies in Bridgeport, 4000 units per months
• Sales approximated based on 5% sales increment in the first year
• Cost of products sold encompasses packaging materials, ingredients, and labels.
• The owners will draw no salary in the first six months. However, all profits will be reinvested in the business and expand production and distribution channels.

Management Plan

Business and Management Review: Management Summary

The potential business owner has comprehensive skills, knowledge, and experience in marketing, sales, and management. Additionally, the possible owner has worked in some reputable bakery companies, such as Oak Park Bakery. The owner is likely to bring useful bakery experience and quality customer service to the locals.

The bakery’s management structure is such that the owner has 100% ownership. A business partner will be sought after three years of operations when the bakery is ready for growth and expansion. The business will employ three lower-level managers in charge of finances, processes, and employees. The financial manager will be a professional accountant who will handle the financial aspect of the business. Additionally, the company will hire a law firm to oversee issues of legal compliance. 

To cater to customers’ projected size, the business will hire six qualified and experienced, bakers. The business owner will be the top baker, providing the desired ingredients, designs, and giving direction where required. All employees will be included in the day-to-day decision-making process as a human resource strategy. This will significantly boost their loyalty and commitment towards the business, and subsequently, their productivity.

 Personnel Plan

The personnel plan is indicated in the table below, the business projects to achieve significant investments in sales, sales support, and staff members.

PERSONNEL PLAN
	Six months	YEAR 1	YEAR 2
Managers	$10,000	$15,000	$25,000
Bakers	$5,800	$8,000	$75,000
Legal compilations(lawyer)	$10,000	$16,000	$32,000
Other	$0	$0	$0
TOTAL PEOPLE	6	6	8
Total Payroll	$25,800	$39,000	$132,000

 

Contingency Plans

Even though an effective business plan is drawn for this shop based on its strategic goals, such a goal may face various challenges, and some may not be met. An acceptable zone for financial and sales objectives is set to cover for any form of uncertainty; this involved a 5% negative deviation from projected returns and overall sales. Nonetheless, if the expected returns on the business venture are less than 95%, more strategic action will be employed. Some of the activities include the following:

• For the intolerable sales rates during the first six months: Delicacy Bakery will have to encounter the issue by way of doubling in-store promotion and marketing. The owners will organize the marketing activities to the residents on the weekend evening when a relatively larger number of people are accessible. In case the effects are not detected, then the marketing will be done weekly for two months, and will involve door to door promotion.
• For intolerable sales rates in Southside of Chicago, Illinois: after a month of marketing in this local area, the owner predicts that the levels of sales will be enhanced. However, suppose the deals are still far way below target. In that case, Delicacy Bakery will finally decide to contact the local marketing specialist to assist with their expertise and help push the products’ sales. The contract will entirely rely on the commission on sales made. It will be terminated by the Delicacy Bakery upon meeting the expected target and mission, thus offering incentives for the specialists to generate sales of the shop.
• For the case of intolerable liquidity of the business: Delicacy Bakery will carefully evaluate its accounts receivable processes to make sure that the payment time valid and payment are timely scheduled and completed. Additionally, the cash flow estimations will be carefully updated to identify any unpredictable risk or expenses that may be compromising the finances of the business.
• For intolerable equity returns: If the returns on the available assets are below the projected rates, the Delicacy Bakery will evaluate and compare the cost of production per unit of every item on the menu and marketing with the prices of sales. Nonetheless, the shop will also assess other available opportunities for reducing the cost of production and evaluate various marketing and distribution options.

Appendix

A Copy of the Label

A SWOT Analysis of the Business

Strengths	Enhanced cost-effectiveness of service provision encompassing the demand of the locals· Prioritization of investment in stable and supportive locality to strengthen the self-efficiency for the business· Making a product that meets current demands thus minimizing the waste
Weaknesses	Frequent involvement and long-term commitment of various legalities and any other fee· Funding for the business and maintaining the current capacity·                   Hiring and coordinating employees due to insufficient operational funds.
Opportunities	Offers access to quality bakery products as well as social support· Facilitation of a long-term community self-help support by actively engaging in some of the local initiatives
Threats	The environment constrains as more openings of premises and may lead to congestion of the town· Inadequate funding toward the business and may not be easy to expand it shortly· Some people are naturally resistant to new business and thus may take much effort to win the trust and loyalty of the residents

 Letter of Intent

To Mr Xxx

Hi sir,

I would wish to present this letter of intent, showing our business’s interests in engaging in a front shop bakery production in Southside of Chicago, Illinois, in a commercial space in your premise.

Our expectation of the space is further detailed in the attached email. The area has to be spacious, well-ventilated, near supplies and within Southside of Chicago’s locality and affordable, among other requirements.

We want to request you for a meeting to be in a position to express our proposal even in further detail and signing any agreements and legal requirements if need be to have a liable contract. Our business would like to commence as soon as possible, and we are much ready to sign the agreement in time and move in. We are prepared to agree with your terms and conditions as long as they are within the legality and favourable.

Sir, you can contact us via the email address or personal number to provide at the end of this letter. Please, you can inform us if you require any more details about our intent, and we will be much ready to cooperate promptly. Thank you for your humble time; I appreciate it. 

Regards,

B.tn

Proprietor

xxxx@gmail.com;+167xxxxx

PART 2

Memorandum

DATE: June 2020

TO: (Prospective financier/resource)

FROM: (Proprietor’s name)

SUBJECT: Opening of the Storefront Bakery Shop IL

I have been engaging in the food industry for many years. However, I currently want to open my first Bakery shop in Southside of Chicago, Illinois, on June 1, 2020. Motivated for the quality of the several bakery items that call for demand, thus informing my proposed menu for the potential clients, extraordinary notoriety for the desserts needs to be achieved to meet their satisfaction. After many years for the demand for the flavoured biscuits, cakes, cookies, cupcakes, muffins, pecan pie, pumpkin pie, sweet potato pie, and tea scones, I have decided to start a front shop. I ultimately initiate marketing for such products in the neighbourhood. I have developed various recipes for the items to make them stand out and compete effectively. 

The business plan presented to you contains the start-up details, including the description of the products and the intended market, the marketing plan, the management plan, and the financial plan. The purpose of this business plan is to help articulate the strategy for starting the business and provide insight into the resources required to achieve the business goals at the anticipated timeline. The items’ approximated shelf life is 14 days at the refrigeration temperatures and up to 21 when frozen, always aiming to provide fresh products. The first bakery shop seeks to market the items in 8-plastic tubs. More emphasis has been towards initiating a luring label that will focus on the uniqueness of the things. The distribution of the product will start at the local Southside of Chicago, Illinois, area. There is a desire to establish a brand name and reputation in this region, and the product initiation needs to encounter minimal resistance. Nonetheless, financial analyses indicate that the shop will have positive cash flow and profit in the first six months. The expected return on equity in the first quarter is 8.78%.

The bakery has been my passion, and I have been involved with the food industry for many years and worked with one of the JJB bakery companies that were initially opened in 2012. The quality of various items on the menu was due to the unique notoriety for the company’s desserts. After years of demands for a new list for the flavoured biscuits, cakes, cookies, cupcakes, muffins, pecan pie, pumpkin pie, sweet potato pie, and tea scones, the Delicacy Bakery shop has decided to initiate marketing for these items. I believe that the business strategy is feasible, and will bring in significant profits as it takes off. Your feedback will be highly appreciated.

 

Thank you.