Choosing Between Types of Bakeries for Your New Bakery Start-Up

The types of bakeries in the world are varied as the types of baked goods the bakeries sell. In fact, an available oven, a few good recipes, and a way to deliver your products can be the start of a flourishing bakery business.

It is very possible that you could start-up your bakery business sooner than you thought! You might just need to put your thinking cap on and look at all of the possibilities.

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Let’s Talk About the Different Types of Bakeries…

Think about a bakery….

Do you have one in your mind yet? I seriously want you to THINK about a bakery!

Hopefully, there is an image that came to your mind. It was an image of your ideal bakery. Perhaps it was filled with tiny pastries or cakes under glass. Could it have been a cookie shop or a cake shop?

That image of your “ideal bakery” may be holding you back from starting a baking business now. In fact, you may think that you need thousands or even hundreds of thousands of dollars to fund your dream.

When really you have all that you need to start walking towards it today.

So put your thinking cap on and let’s look at some of the types of bakeries that could get you selling your goods sooner rather than “someday.”

Home Bakery AKA Cottage Food Operation.

This is where you work from your home, serving customers according to your State’s cottage food laws. You are responsible for all parts of your business.

There is a long tradition of this type of bakery and it’s a great way to work from home and be a valued member of your community. It’s a really good small income or side gig, but a lot of States limit the income you can make.

My State of Oklahoma currently has a maximum sales limit of $25,000 for all home bakeries.

This type of bakery also isn’t legal in every state, so you have to check the cottage food laws where you live.

Pros of a Home Bakery:

  • Flexible scheduling
  • Stay at home with your other family obligations
  • You have complete control over your products and time
  • Extremely low start-up costs
  • Increase your equipment and capacity as you increase your income.

Cons of a Home Bakery:

  • Limited earning potential (this can be either from the laws or because of your home’s lack of production capacity)
  • Your home becomes a place of business which can change the dynamic of your home
  • It’s hard to quit working when your work is at home
  • You will have to work harder to prove your standards are on par with retail bakeries

Shared Co-op Kitchen:

There are co-op kitchens and places where you can rent space in a commercially licensed kitchen.

Typically, you pay for a contracted amount of hours per month or week and you pay extra for storage space and refrigerator space. You also have to pay for any State, county, and city licensing required by your municipality to open a food service establishment.

Pros of a Shared Kitchen:

  • The Co-op maintains and handles all of the equipment
  • You can have all of the sales opportunities of owning your own commercial kitchen without the steep investment in buying your own brick and mortar shop
  • It’s an opportunity to test out your business before you commit to a large investment
  • Better still, you will get to network with other food entrepreneurs who are working in your community (that can give you invaluable friendships and connections)

Cons of a Shared Kitchen:

  • There are usually a lot of people sharing the space and not all of them will be as clean or as considerate as you
  • Unfortunately, I have heard tales of people running over their time allotments and having a lack of consideration for storage space
  • A lot of time the kitchen is available 24/7 and new guys get the time slots no one else wants (AKA strange hours)

Small Business Incubator:

These types of bakeries are typically similar to the shared kitchens. However, they will also supply business mentorship and possibly a connection to sales opportunities.

Many business incubators are considered community resources and are only available to certain demographic groups or require an application and acceptance into a business program.

If you can get into one of these as a beginning entrepreneur I STRONGLY advise it.

Pros of a Small Business Incubator:

  • Usually, the education you get truly prepares you to own your own business
  • Real mentors will be assigned to assist you with your business plan and loan package in case you need funding
  • You will also be promoted by your incubator because your success is their success
  • It will be easier to grow your community network exponentially, which is essential for any business

Cons of a Small Business Incubator:

  • You may not be able to move as quickly as you would like because you will have to complete their requirements
  • You may not have all the time required for the mandatory coursework and meetings
  • Since you will also be sharing the space with other start-up food businesses, you may have some of the same problems as with a co-op kitchen.

Existing Restaurants, Churches, Daycares, Nursing Homes, Hotels, Etc:

Sometimes restaurants and other business rent out their commercially licensed kitchen space to trusted businesses and associates during off hours.

This could potentially work well if you already had a friendly relationship with a place. They have trust you enough to use their stuff, their very expensive stuff.

Maybe the church you attend or daycare your kids go to can be an option?

If you can find a place that wants to sell what you are making, then that could be a great partnership. For instance, a cafe that needs desserts.

It will need to be beneficial for all parties to work. You can get really creative here to make yourself more attractive to the business. Maybe you can make the tapioca pudding for all of the nursing home patients for use of their kitchen every Friday?

Pros of Using an Operating Business’s Kitchen:

  • Avoid a steep investment in your own equipment
  • You can build your clientele while working in a well-equipped environment
  • Own your own business and have all of the benefits with very little risk if it doesn’t work out

Cons of Using an Operating Business’s Kitchen:

  • You will be subject to the schedules and whims of the owner or management
  • Your storage space will always be around the real business and your business will never be a priority
  • If your host changes their mind, it could disrupt your business severely
  • You could have the same type of storage and space issues as in a co-op kitchen

Catering Kitchen/ Non-retail style bakery:

In this scenario, you own or rent the space, but it is set up as a production bakery with very little customer service area.

This is a space for working and most or all of your sales will be made to other local businesses, deliveries, and maybe your kiosks or sales venues.

Pros of a Catering Style/ Non-retail Bakery:

  • You will have your own commercially licensed kitchen and complete creative control over the business
  • The rent is usually cheaper on these types of spaces than regular storefronts
  • You don’t have to put a lot into fixtures and decorations for customer comfort and appeal.

Cons of a Catering Style/ Non-retail Bakery:

  • You will need to focus on sales and marketing since you will not be visible or have high amounts of walk-in customers
  • Sometimes these locations are in warehouse districts or rough neighborhoods
  • You may not have any scenery or windows… think about working in a dungeon
  • Sometimes the heating, air, and plumbing aren’t the best in these types of situations
  • You may have considerable build-outs (remodeling) to make the space pass inspection.
  • Cheap rent isn’t all it’s cracked up to be when it comes to food establishments.

Retail Bakery:

These types of bakeries are the ones that have a cute window or counter space, a sign on the building, and pretty desserts all in a row.

You are the owner of the business. Usually, there are fresh baked goods for sale made regularly as well as the option to place special orders.

Any type of dessert can be sold in this way. Some have customer seating available and some have counter service only where you eat your treats somewhere else.

Pros of a Retail Bakery:

  • Usually, these types of spots are highly visible or part of a center with a lot of drive-by traffic and walk-in clients
  • Location and signage create opportunities for sales along with your regular marketing strategies
  • Communities gather to support great local businesses, and everyone loves a delicious bakery!
  • If you have a great business plan, landlords may help you with the remodeling and rent as you get started.

Cons of a Retail Bakery:

  • Your overhead will be higher than all of the other options
  • You could run into trouble obtaining licenses and permits and be unable to open on time according to your lease
  • Problems opening could have you responsible for rent even if you aren’t open for business. (You can negotiate for this scenario in your lease)
  • Also, as a new business, you will probably have a longer lease than in any of the other types of bakeries
  • If you go out of business, you still have to pay the lease or find another tenant

Wholesale Bakery:

These types of bakeries exist to sell baked goods to restaurants and shops. Usually, large quantities and regular orders are placed. You would own this business and need a licensed kitchen location and production equipment.

Pros of a Wholesale Bakery:

  • Typically, you will know how much of each item you will need to produce per week which can create a nice, reliable work schedule with regular hours
  • There is no need for a fancy serving space or costly displays
  • Much like a catering kitchen, functional commercial kitchen equipment is all you’ll need
  • You won’t have to hire counter staff or servers and can focus on baking
  • With all of the advances in bakery equipment, you can automate mundane processes like portioning dough and increase your ability to produce more product, at a faster pace quite easily.

Cons of a Wholesale Bakery:

  • You may remain an unknown baker. If you aspire to become known for your baking you will have to work with your clients to have your name associated with the products as a wholesale baker
  • Many businesses only want to sell your baked good to bolster their own business.
  • These types of bakeries rely on long-term clients with large repeat orders, losing one could hurt
  • Lastly, you will charge your clients less for your items because they are buying in bulk
  • Some business owners will care far more about the bottom line than the quality of your baked goods

Which Types of Bakeries Might Work for You?

Considering all of the options, I hope you see there is more than one way to approach a baking business. Many types of bakeries are even combinations of the different types, such as a caterer and wholesale bakery, or a retail bakery with wholesale accounts!

You also can start with one bakery business model and plan to expand as you reach business milestones. The possibilities to start-up your bakery business are endless!

Questions or Comments:

Did I leave any type of bakery out? Do you have experience with one of these types that you would like to share? Please, share in the comments! If you have any further questions, send me an email and I will get back with you ASAP!

You can also join our free newsletter subscribers and sign up for Delicious News delivered right to your inbox!  I look forward to hearing from you.

More about Bakery Business from Sweet Bytes:

Should I Start A Bakery? 

How to Make a Professional Bakery Customer Service Policy

Food Safety in Your Home Bakery

How to Charge for Desserts

How to Find the Target Market for a Bakery 

Do I Need My Own Recipes to Start a Bakery? 

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