A friend wants to wholesale baked goods

[K8memphis]

But for those of you who do any wholesaling, what information can you give me for her? The plan is to start out small, try to get agreements with coffee shops, resturants, gas stations, market sports food all packaged up like freshly made energy bars. She hasn't done any market studies yet which would be helpful. The overhead is very low where's she considering locating so...any words of advice besides 'just say no'.

Edited December 6, 2006 by K8memphis (log)

[JeanneCake]

Ok, NO. Don't do it.

Now that we have that out of the way, I'm first nervous that she hasn't done any type of market analysis or study. I'm not talking about something you pay high-priced consultants for. Why would people buy her product? What's so special about it? What makes this area the right area for this product? Is the places listed the right places to be?

I wonder whether she's approached a health club or yoga studio to ask their input as to what their clients want (whether there's a snack bar there to sell this product) and whether they'd be interested in being part of the "market analysis." No risk on their part, we want to test market the products and see the response. Then if there is a good response, move to the next step (this would be part of the business plan that she really should be doing. To go to retail locations, she must be fully approved/licensed/insured. Otherwise, it's like jumping into a river head first from a rocky ledge....

[Darcie B]

But for those of you who do any wholesaling, what information can you give me for her? The plan is to start out small, try to get agreements with coffee shops, resturants, gas stations, market sports food all packaged up like freshly made energy bars. She hasn't done any market studies yet which would be helpful. The overhead is very low where's she considering locating so...any words of advice besides 'just say no'. 

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Be careful with those agreements to spell out the details. Are they going to purchase xxx per week even if they don't sell? How can the amounts in the agreements be modified to reflect trends? Is she expected to deliver the items? What are the payment terms? I worked out an informal agreement with a local coffee shop and thought we had most of the details but some stuff I thought was obvious and didn't spell out really needed to be spelled out. One particular item where I was supposed to deliver the stuff. I delivered it to their kitchen, which is in a separate building (but right next door) from the retail location. I did that so they could easily arrange on platters and refrigerate what they weren't going to display (seemed obvious to me). They called me wanting to know why I was late delivering the goods when the goods had been in the kitchen for nearly 3 hours. They never even thought of looking there.

I agree with you, though, it's a lot of work for very little return.

Edit to kill run on sentence.

Edited December 6, 2006 by Darcie B (log)

[JeanneCake]

Be careful with those agreements to spell out the details. Are they going to purchase xxx per week even if they don't sell? How can the amounts in the agreements be modified to reflect trends? Is she expected to deliver the items? What are the payment terms?

You also want to specify how problems should be reported (if an order is short some number of items, if something is not ok how is it refused - at delivery only, or within 24/48/72 hours?) And on the subject of payment terms, you want to also specify what happens if they are behind on payments - when do you shut off their orders so you don't lose any more money.... how often will your pricing change and do you give them 30 days notice for price increases or just reserve the right to change prices more immediately. Is there a charge for delivery or is delivery free with a minimum order amount.

Be specific about the ordering process, too. Detail how long it takes between placing the order and delivery, whether there are any additional charges for rush orders.

[Teri Everitt]

I used to work in wholesale. Some of the problems included lack of control in how restaurants were keeping/serving the desserts. I got a call from an angry client demanding a refund for a "furry" cheesecake. I checked back through my salesbook and the restaurant had purchased it 3 weeks ago! I refused his request and chewed him out for damaging MY reputation by trying to serve spoiled food. I don't think his customers were getting the best indication of our product by eating in his restaurant.

We also had to turn down a client who wanted us to change portion sizes, use newer and more expensive packaging, and had outlets all over town and in the burbs. Almost all of our restaurant clients were in the downtown core, but this was a franchise (Great Canadian Bagel) and their locations are scattered everywhere. Factor in gas, labour costs and general hassle, and this client would have been more work than was profitable to accomodate for a small bakery with 3 employees and 1 delivery van. A lot of new businesses hesitate to turn down clients, especially in the beginning, but be careful who you accept as clients. You could have to plan the workings of your business (labour, scheduling, delivery time, product and product sizes) around this one client that may not make you enough money to be worthwhile.

Another factor is lack of recognition. When I was doing wholesale, I supplied some of the better restaurants in town. Restaurants will not claim that they made your product in-house usually, but they are happy to let their guests assume so.

Advantages are that wholesale has a lot less waste than retail. Mistakes do get made, but in general you are filling orders so you don't make things that clients don't ask for. The biggest change for me switching gears from wholesale to retail was getting used to all the waste when business is slow.

Hope that helps.

[K8memphis]

Jeanne--Ok, first of all she's my partner in my current venture. However, nothing has been signed yet. It's two baking businesses in one slim skinny building. Yes, umm, it's a pay as you go mentality. Build out. I mean how right are the experts? I mean I know all I ever hear is do your homework get your market studies, write a business plan. Fred Smith got a "C" on his business plan for FedEx. Yeah, I ain't Fred Smith but...I'm used to pay as you go. I'd use a Quicken or whatever for day to day accounting, taxes etc.

And more great detail stuff. Thanks

Darcie

Thanks, good information about the devil in the details But our overhead is so incredibly low I mean this is Baltic Avenue (like in Monopoly) We're gonna have to improve a bit but overhead will be so low it's a miracle location Myself, I never met a run-on sentence I didn't love.

Teri

Great stuff about the down & dirty side. Planning around a client is something that we will need to be careful about since we're sharing space. And that two edged sword of needing the exposure but no control. That's why I prefer celebration cake. I can usually retain a lot of control.

Yeah, the waste in retail really turns your stomach huh.

THANKS Y'ALL!!! THIS IS GREAT STUFF WOULD LOVE TO HEAR MORE!!!!

[paulraphael]

This is an interesting subject ... I've always wondered how people managed with this kind of thing.

As a purely amateur cook and baker, I'm baffled by how anyone can make money unless they're working in a real production environment, cranking things out in multiples. Even then, it would seem like affter ingredients get paid for, the hourly wage would be ridiculous. I'm not even considering overhead.

Just the other day I made a couple of tarts. They turned out pretty well ... better than most of the professionally baked tarts I've had. but when I factor in the cost of ingredients, and pay myself a reasonable wage, I'd have to charge around $40 each, wholesale! This ignores overhead, and also ignores that no one is going to pay that much for a tart.

What kind of hourly wage do good bakers expect to earn?

Edited December 7, 2006 by paulraphael (log)

[K8memphis]

What kind of hourly wage do good bakers expect to earn?

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OK, wait, my thing is celebration cakes, sculptures tier cakes etc. My partner's thing is gourmet wholesaling.

Well to be honest, I'm cheating. My husband will keep me fed and housed, not fashionably clothed though--I mean I didn't think those boots cost too much but he did!!! But I digress, umm, so I don't need a wage per se. I get paid by the job. I (hope to) have the luxury of doing artsty fartsy stuff. I can operate on this low overhead and have plenty of time time time to create create create without wasting precious energy on business business business.

So, what can I say, "Will work for boots"???

But seriously, umm, let's put it this way, the cake in my website that I copied from Kerry Vincent's creation would could sell for eight hundred to a thousand dollars, the white & gold one in the third 'book' down. The materials cost a nano fraction the expertise cost thirty years. So what price art?

So twelve cakes like that a year will pay for the cost of that cake and my overhead and take me out to eat once. Or four lesser cakes a month. Miracle. Miracle. Miracle, et cetera...

But again, nothing's in writing yet.

I can make handsome on my work if I can get past the legalities and can spread my wings and fly fly fly.

Now my business partner is a different story. I gotta work with her on her thing.

All discussion and advice warmly welcomed.

Edited December 7, 2006 by K8memphis (log)

[devlin]

Here's a question: Is your friend planning that this business will be her primary income right off the bat?

For me, going into my very fledgling business, all of the issues noted so far were significant, but since I'm fortunate enough to be able to not have to rely on the business to support me, I have the luxury (knock on wood) to get it together and not starve at the same time.

While I didn't do a formal sort of market study, I did bide my time looking around at the situation in my area in earnest and asking a lot of questions. And since I didn't want the overhead and total risk of renting or buying or building a space, I decided to work with the space I had at home, and my husband and I spent a couple of years looking for a house to buy (we were in the market anyway because we'd relocated and were renting) that could accommodate the right space for a bakery and an Alan Scott oven. One of the reasons we bought this house (apart from the fact we love it) is that it had an attached garage that was separated from the house by a bathroom, laundry room and mud/sun room, and so it was a perfect setup in that regard.

It's taken about 5-6 years to even really get up and running, from conception to now. During those years I read everything about artisan breads and the business of artisan baking I could get my hands on, practiced til I got what I was looking for and had a bank of products I have complete faith in, attended an Alan Scott bread oven conference, talked to people in the business, and slowly put together a bakery. One of the things that kept me going were the stories of those who were in the business. They almost all of them started as I have. Very small. Like baking breads in their kitchens and taking them around to friends and wherever they found people to try them.

I started by giving breads and cakes and tarts to friends, then to other interested folks, with the caveat that I was practicing on them and once I opened for business, I'd be selling the stuff, should they want it. My husband works for an international company out of Italy, and the Italians here who all pass chain bread stores every day won't buy from those places anymore. They have a standing order with me, and they frequently drop by my husband's office asking when the next bake is. They're some of my best pr. My doctor begs me for bread when I see her. One of my neighbors orders 15 loaves at a time.

I've been going along like that for awhile now, and just a couple of weeks ago, I got my first big client, one of the top-rated restaurants in the region. It's as much as I can handle on my own right now and it's a learning curve for me. I'm streamlining process and prep more and more which helps, and thinking about how to hire somebody on a very part-time basis and then only occasionally to help with that. Right now, I don't need it. But I hope I will within a year.

Each step has been nerve-wracking and scary and has seemed just barely doable, sometimes impossible, til I've managed to actually do it.

My husband thought I was out of my mind when I started talking about this 5 and 6 years ago. Now he's one of my biggest advocates and he's absolutely certain of the eventual, bigger success. Which is something from him. He's a business man to the core.

The Village Bakery

[K8memphis]

Way too cool, Devlin!!! Yes, she has a husband to keep her from starvation too. So we are poised fairly well here...if ... if ... and if....

But I love your story. Unfortunatley when I found the perfect place to buy with interestingly enough a finished garage apartment to transform in to a bakery it all got shot down by the authorities. It's impossible in my county without a commercial location. So...we'll see how this venture goes.

So do you have your Alan Scott oven??? Weren't you looking for an oven a while back??? Or was that for a mixer??

Edited to say: I just clicked on your webpage--Oh that oven is to die for!!!!

Edited December 7, 2006 by K8memphis (log)

[shaloop]

I really enjoyed reading your story Devlin. I wish you much continued success. I also hope to hear more from you, K8. I didn't know you had something else in the works!!

[stscam]

Wholesale, eh?

When my wife and I bought our bakery in May 2004 it was strictly wholesale, having given up on retail a couple of years earlier (after offering it for nearly 25 years). Our plans focused on using the wholesale business as a platform upon which to build a retail baking/specialty food/deli operation. Wholesale made up more than half our sales, and on a busy day in summer we were turning out 1200-1500 hand rolled Kaisers and hamburger buns, as well as loaves, dinner rolls and lots of other stuff.

About 15 months ago we dropped wholesale because it had become a financial drain on the business and an emotional drain on us. It meant slicing revenues in half, but boy did we feel liberated. Now we're doing really well, focusing all our energy on the aspects of the business we like best.

Why did we drop it? Two reasons - staff and customers.

When we took over Martha, by default, became the delivery person (a two-hour route starting at 5:00am, six days a week). We tried hiring a replacement for her, but most lasted only 1 or 2 days! My main responsbilities were getting the retail up and running, so I was dayside. The actual baking was done by hired staff. And therein lies the rub. The average tenure of our baking staff was 3-6 months, which meant we were always looking for new people and spending an inordinate amount of time training them in the ways of our bakery. What really forced our hand was a feud that broke out between our two main bakers. They came to hate each other's guts, driving down the morale of the rest of the staff. One day one of them quit in a snit, saying that we obviously preferred the other baker over him. A couple of days later the other baker, not knowing the first had quit (they were by then on different shifts) also quit, and also telling us that we obviously preferred him to her. Rather than facing more hirings and training sessions we pulled the plug on wholesale. Lesson #1 - the baking in a small scale wholesale bakery must be done by the owners.

The problems we had with customers were legion. According to them our rolls were either too small or too large; too light or too heavy; too brown or not brown enough. Some people paid same day. Others took 45-60 days to pay. When we tried raising prices everybody balked noisily, and some even refused the raise outright.

Lesson #2 - food service folks can be huge pains in the neck; much more so than retail customers.

So now we are concentrating upon a few speciality breads, higher-quality pastries and confections, amazing sandwiches, and the best selection of gourmet foods in the state. It's fun. It's rewarding. And it's all retail.

Cheers,

[K8memphis]

Thank you Shaloop. And actually I've already shot this business venture down. The wholesale girl was very new to any kind of quantity baking and newer still to launching a business. So there was no way for her to succeed.

I mean all I needed was for her to crunch some numbers so I could determine how much floor space for everything, and she couldn't manage that, so...oh well, on to bigger and better.

And Steve, thanks for the information. She would have never ever made it. How completely and utterly wild that a personality conflict turned Hatfield and McCoy's (feud) could twist your business to that extent huh? Totally morphed it.

Y'know the never ending irony is that it's just in my county here that I cannot be legal in my home. I have to have commercially zoned property end of the world. I mean I could apply for a zoning variance for but they've never granted one. <sigh> Thirty miles in any direction from here and it's a different story.

Oh well, we'll see what the new year brings.

Edited December 24, 2006 by K8memphis (log)

[shaloop]

Y'know the never ending irony is that it's just in my county here that I cannot be legal in my home. I have to have commercially zoned property end of the world. I mean I could apply for a zoning variance for but they've never granted one. <sigh> Thirty miles in any direction from here and it's a different story.

Oh well, we'll see what the new year brings.

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Y'know, I'm facing the same thing. I'd like to put a seperate structure on my property from which I'd do only wholesale baking. I'm specifically looking for small scale. I don't want a store-front. I'd have to have delivery only. The zoning guy said it's a stretch but if I can get my ideas past the health dept, he'd help me give it a shot. The health dept actually sounded promising. I'm now working on the plans to submit to the health dept. My goal is to have them finished and mailed off by next Friday. My ultimate goal is to be up and running by next September 1st. (when my youngest starts school.) I have no idea how I'll fund this venture but I figured that if I can't even get a zoning variance, there's no point in continuing any plans. So, I figured that if I don't at least give it a shot, I'll never know what could have been. So, I'll see how far I can go with this. If I were you I'd work out the details on paper and talk to someone in the zoning dept and let them know what to expect (no pick-ups, deliveries only, no posted signs, no increased traffic, etc. ) and at least apply. The worst that could happen is that they say no. But imagine "IF" they said yes.

[K8memphis]

It's several thousand dollars just to apply to the zoning board. They've never granted a zoning variance. It's truly annoying.

I hope all goes very well for you!

Edited December 25, 2006 by K8memphis (log)

[shaloop]

OK. Well I guess the worst that could happen is they could say no and you'd be out of a few thousand dollars just to hear them say it. Ouch. That would be painful.