How to Open a Bakery With No Money

How to Open a Bakery With No Money

Opening a restaurant is a dream for so many entrepreneurs. But between sky-high restaurant opening costs and the risks of opening any business, opening a food establishment takes a lot of confidence.

It also helps if you have the money. Unfortunately, that’s not a given for all aspiring restauranteurs. If you’re starting a bakery, you may have fewer expenses than if you were to start a sit-down, full-service restaurant. But when you’re short on cash, you’ll need a great business plan, some guts, and a lot of patience. 

No, you can’t do it for free, but many businesses have opened on shoestring budgets before, and you can do it, too.

TL;DR: Opening any food establishment takes time and money. But even if you’re limited on both, there are ways to go about opening a bakery.

What do you need to open a bakery?

No business simply materializes overnight. Most business owners think about their new business for years before being able to make it a reality. While every process is different, this is a general step-by-step process on how to open a bakery.

A bakery concept: You’ve thought about your bakery for a long time, so what makes it different? What are your bakery ideas that stand out? Why will new customers come to your bakery rather than the other one that’s been doing business around the corner for years?

A bakery business plan: A business plan for a seafood restaurant won’t look the same as a bakery business plan. You might not know how to start a bakery, so building out a strong bakery business plan will guide you through concept to selling your first muffin and beyond.

Bakery capital: Even if you don’t have any money, you still need to find money. Between the space, bakery equipment, staffing, and myriad other expenses, the costs will add up fast. That money has to come from somewhere.

Bakery location: Location is crucial for any food establishment. Think about the customers your bakery will serve. Coffee, breakfast pastries, desserts — whatever your bakery sells, you want your store to have foot traffic from residents or offices, or offer a snack to people running errands in a commercial district. Your store’s location will depend on available real estate, but it’s important to find somewhere that will attract business. Plus, when you find a space, you can start to think about bakery design ideas to make your brick-and-mortar truly unique. (Or, you can use those ideas to inform your real estate search.)

Licenses and permits: These will depend on your location. Different states and municipalities have different requirements for businesses. Enlist a lawyer’s help to figure out all of the licenses and permits you need to file for your specific area.

Menu: When dreaming about your bakery, menu ideas are probably the first thing on your mind. It’s even more fun when you know they’re going to become real soon.

Bakery staff: One of your biggest financial considerations, employees are the lifeblood of any restaurant. Think about what you need for front of house, back of house, managers when you’re not around, and any other staffing requirement specific to your business. These are the people who will make running a bakery a lot easier for you.

Bakery technology: Speaking of making running a bakery easier, technology can smooth operations and work to increase your profit margins. Your point-of-sale (POS) tech can improve how you process orders, and will likely be your most important tech investment. (You can find the right one for you using our POS comparison tool.) Other useful technology includes inventory software, accounting software, and payroll software.

A marketing or promotional plan: Very few restaurants open to a big, excited, stable customer base. As such, you’ll need a bakery marketing strategy to drum up interest before you open and keep spreading the word to attract new customers after you open. It’s important to do market research and understand how your local business will fit into the area’s economy.

An opening date and launch plan: All of the prior steps are guided by your opening date and launch plan. You need to have your menu ideas, renovations, bakery equipment, staff, and capital in place well before your opening date so you can open on time. That way, you can execute a well-researched and planned launch plan that will help you build a loyal customer base from day one.

How much does it cost to open a bakery?

The average cost to open a bakery is between $10,000 - $50,000. That’s far less than the typical cost to open a full-service restaurant, which can range from $95,000 - $2,000,000. Considering a small bakery's average annual revenues of $325,000 - $450,000, bakeries have great profit potential because they can be operated on lower labor and food costs than other food business models.

How to open a bakery with no money

You know the steps to open a bakery, you have a great idea, and your work ethic is unimpeachable. But you still have no money. So, how do you open a bakery with no money?

Use a restaurant incubator

If you’re a brand new business owner, a restaurant incubator can help you learn valuable skills for running a business while helping you concept your bakery. Restaurant incubators are shared spaces filled with the bakery equipment and other kitchen facilities you need.

In addition to space and equipment, incubators may provide resources like:

• Equity-free capital

• Business development training

• Tailored mentorship programs and workshops

• A supportive community of culinary professionals pursuing similar goals

Cities all over the country have incubator programs. Some examples include Relish Works in Chicago, Food-X and the Chobani Incubator in New York, CommonWealth Kitchen in Dorchester, MA, and La Cocina in San Francisco.

While restaurant incubators are a great way to get your restaurant off the ground, they can be extremely competitive. Incubators often have low acceptance rates and many have very specific applicant requirements, which may exclude you and your business from eligibility.

Apply for restaurant loans or explore capital opportunities

There are many restaurant financing options available to aspiring bakery owners. Some options include:

A term loan from a “brick and mortar” bank: Traditional loan terms vary from bank to bank, so you’ll have to shop to find the best option for you. They may require strict qualification requirements and repayment terms. 31% of small business owners use personal assets to secure these loans, while 49% will use business assets.

An alternative loan: Alternative loans may offer less stringent qualification requirements and more flexible repayment options. 

Products like Toast Capital provides eligible Toast customers with access to loans from $1K to $300K that can be used for any restaurant need. Toast Capital Loans have one fixed cost with automated repayment that flexes with sales* – with no compounding interest and no personal guarantees. Once you’ve been approved and signed your Toast Capital Loan agreement, you can expect funds to be sent to your bank account in as soon as one business day**.

Toast Capital Loans are issued by WebBank. Loans are subject to credit approval and may not be available to borrowers in certain jurisdictions. WebBank reserves the right to change or discontinue this program without notice.

*Toast Capital Loans offer different target repayment terms ranging from 90 days to 360 days, depending on eligibility. The maximum repayment term is 60 days following the end of the target repayment term. Any outstanding balance due at the end of the maximum term will be collected automatically via ACH. If you select a 270- or 360-day target term, and you are provided with a Repayment Milestone Schedule with your Credit Agreement, then, every 30 days during the term, your total payments to date must equal the minimum amount disclosed to you. If they fall short, the difference may be collected via ACH.

**Funds are typically disbursed within 1-2 business days after signing your credit agreement.

A small business association loan, also known as an SBA Loan: Loans from the U.S. Small Business Administration support working capital and fixed assets. Learn more about SBA loans here. 

A merchant cash advance: A merchant cash advance is where a provider will pay an up-front lump sum to purchase a percentage of an eligible restaurant’s future sales. 

A business line of credit: Like a credit card, a business line of credit offers an open line of credit from a brick-and-mortar bank or alternative lender to an approved business owner. Like credit cards, there is typically a spending limit, which must be repaid monthly or annually before a merchant can draw down additional credit.

There are pros and cons to each of these options and they all depend on your particular situation.

Find an investor

Of course, it’s easier said than done, but finding a deep-pocketed investor is one way to open a bakery with no money. You can find an investor by leveraging some of the points we’ve already discussed. Restaurant incubators will help you with equity-free capital. Wealthy friends or family members could make ideal business partners.

Otherwise, finding an investor may feel like a full-time job. Speak to colleagues in the restaurant industry, go to local and national networking events like the Hospitality Industry Technology Exposition & Conference (HITEC), and leverage social media like LinkedIn to learn about potential investors and opportunities.

Finding an investor is about more than just networking, though. Make sure you have a great pitch deck and business plan available to show investors exactly how you plan to earn a profit.

Investors will provide more flexibility than working with a bank, but they still have strings. Working with one may require you to make sacrifices to your vision because an investor has certain expectations and ideas.

Get creative with crowdfunding

Crowdfunding has become very trendy in the startup world. This business financing option allows new business owners to collect investments from individuals in exchange for a benefit. Aspiring bakery owners could offer a free pastry, an invite to the soft opening, or free coffee for a designated period of time. With a compelling offer, you’ll not only attract local investment, but you’ll build a customer base as you source funding. As such, crowdfunding could be both a great way to source capital and improve your marketing strategy. 

Some of the most popular crowdfunding sites include GoFundMe, Kickstarter, IndieGoGo, and AngelList. These sites let you get creative with your investor outreach, but you have to reach a certain investment goal to see any of the money. There’s no guarantee you’ll reach that investment threshold — especially with a hyperlocal business like a bakery.

Start small with a pop-up or food truck

Food truck culture in the U.S. has exploded in recent years. A big reason why is that there are so many talented culinary professionals with great ideas but no money to open a brick-and-mortar storefront.

New food trucks typically cost between $50,000 - $175,000 to operate, which is no small sum, but a large chunk of that cost is dedicated to buying and outfitting the truck itself. Opening a pop-up restaurant is also less expensive. Both food trucks and pop-ups allow you to start your baking business more cost-effectively while building a loyal customer base.

With a food truck, you can travel all over the area to find where your truck is most popular, informing where you decide to open up your store. Pop-ups could take over an existing restaurant’s space for an evening, rent a small space for a month, or set up at a brewery a few times a month — there are virtually limitless possibilities.

These concepts let you build a customer base before opening or even market to existing customer bases. For instance, Boston’s Congee & Me is a pop-up restaurant by Arielle Chernin that partners with popular local restaurants like Mei Mei to serve traditional Chinese rice porridge with a twist to diners who love seeing something new from their favorite restaurants.

Reach out to your local restaurant association

Restaurant associations probably won’t help with startup costs, but they can put you in touch with people to help you get your bakery business off the ground. Whether you need help with a business plan, could use some menu or design inspiration, want to find investors, and more, your local state restaurant association may be able to help.

You should also consult resources available from the National Restaurant Association and explore any restaurant or hospitality groups active in your area.

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Entrepreneurs who want to open a bakery need confidence, patience, and money. If you’re short on liquid cash, don’t worry. There are ways to open a bakery with no money. With this step-by-step guide to opening a bakery and resources to find capital, you can fund startup costs, build a customer base, and start selling amazing baked goods in no time.