Bread Bakery
BUSINESS PLAN

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Photo by: Alaettin YILDIRIM

BREADCRAFTER

8900 Green Lake Road
Port Hanover, Michigan, 49333

This business plan is a tightly constructed, succinct consideration of all factors relevant to launching this bakery. From rent charges to competition and seasonal changes to costs per loaf, this plan hasn't left anything out...all without being overly verbose. This exemplary plan is very focused and complete, which will help the business stay on course.

• EXECUTIVE SUMMARY
• THE COMPANY
• PRODUCTS
• PRODUCTION
• MARKET
• MARKETING
• RISKS
• FINANCES

EXECUTIVE SUMMARY

Awareness of high quality baked goods is on the rise. Good bread is a rare combination of nutrition, convenience, and luxury. Today's consumer has less time to create wholesome, handmade bread, but increasingly appreciates the nutritional and sensory benefits it provides. Good bread provides fiber and carbohydrates in a convenient, low fat form that is portable and delicious. Good bread never goes out of style.

Breadcrafter will produce and sell high quality, handmade breads to the residents and tourists of Port Hanover and Freeman County. The Company will focus on European Style; naturally leavened breads and baguettes made with high quality ingredients. Breads will be baked and sold at a storefront facility using a 4 deck, steam injected bread oven. Labor saving devices will allow the proprietor to run the entire operation with the help of two part time, seasonal employees.

Breadcrafter's main competition includes a health food store, three pastry shops and three supermarkets in the Port Hanover area. Its advantage lies in the high quality of its products due to specialization and artisan manufacturing. The main marketing focus will be an eye catching sign, the scent of fresh bread wafting out of the storefront, and periodic printed advertisements. The company will sample its products liberally.

After establishing the operation, the company will explore the possibility of making takeout sandwiches. Delivering wholesale bread and baked goods to area restaurants and specialtyretailers will also be considered.

The company is being founded by Kevin Richards, an artisan baker currently baking breads and pastries for Toothsome Foods Company in Port Hanover, Michigan. Kevin has spent the last two years building the TFC program from the ground up. His wife Renee Richars is also a bread baker, having baked for one year at the Grainery Food Co-op, Breadcrafter's chief competitor. Together they bring a wealth of practical experience and a realistic market sense to the company.

Breadcrafter is currently seeking $70,000 in loans to get the business underway. Major costs include equipment purchases, shop rent, ingredient purchases, site modifications, and marketing, which total $61,000. Projected sales for the first three months, based on market and competition studies, will total $41,087. Total operating expenses and cost of sales will leave an average profit of $4,740 per month.

Opening day is scheduled for July 1st, 1996. While Breadcrafter has the potential for high growth, the first three years will be spent establishing company financial stability and increasing market share.

THE COMPANY

Breadcrafter will be created to serve the Port Hanover community by exploiting the need for a good bread bakery. It will offer a variety of high quality, European and American style artisan breads, baked fresh in its storefront bakery.

The company's immediate goals are to achieve start up by July 1st, 1996, in time to capitalize on the lucrative summer tourist season. It will start with the proprietor, Kevin Richards, as baker and manager with the help of two part time employees. The company should gross over $100,000 in its first year. Long term goals include the addition of a takeout sandwich store to the storefront and wholesale bread sales within one year.

Kevin Richards, the proprietor and baker, is the creator of Breadcrafter. For four years, he has been employed at Toothsome Foods Company, a specialty foods manufacturer in Port Hanover, Michigan. His experience as a Production Supervisor and as a Research & Development Cook bring a sense of production realities and technical savvy to the company. As the driving force behind TFC's current Handmade Bread program, Kevin has two years practical experience with sourdough breads. He holds a BA in English Literature from the University of Michigan.

Renee Richards, Kevin's wife, also has bread baking experience. She baked bread at the Grainery Food Co-op in Port Hanover, Michigan for one year, and she contributes a keen sense of the bread market. She also contributes retail sales experience accrued through several retail jobs around Port Hanover.

The company is in the process of securing $70,000 in start up financing.

PRODUCTS

Breadcrafter's breads will stand out from the competition due to their uniqueness and outstanding quality. Most of the breads are European in style, including Sourdough, Miche (a traditional French whole wheat bread), and Sourdough Rye. These breads are made by the sourdough method which uses no added yeast. This method imparts a rich flavor, which can be tangy or mild, as well as a toothsome inner crumb and a crackly crust. By using this method, a skilled baker can create truly delicious breads without added fats or sugars, making many of Breadcrafter's products 100% fat free. Sourdough breads also have an extended shelf life, remaining fresh for days without the use of preservatives. Breadcrafter will also offer specialty breads, which will be made in the sourdough way with the addition of such luxurious ingredients as Parmagian cheese with fresh ground pepper and dried Michigan cherries with roasted pecans. Spent Grain Bread, made with barley leftover from beer brewing, is another unique product that Breadcrafter will offer. Two varieties of French style baguettes will be offered fresh daily, a high demand product that is available nowhere else in the area. Breadcrafter will also produce White and Wheat Sandwich Breads with soft crust and a tender crumb for traditional American Style sandwiches. As the needs of the customer change, so will the lineup of Breadcrafter's products. The bakery equipment is chosen with versatility in mind.

After establishing the business, Breadcrafter will research the possibility of producing sandwiches to increase revenues. This investment would require approximately $1500.00 for the purchase of equipment and ingredients. The company will also pursue wholesale contracts. Toothsome Foods Company has indicated interest in a contract to produce two Christmas products on a per loaf basis, Cherry Chocolate Fruitcake and Midwest Christmas Stollen. These products can help generate revenues in the slower Autumn months. The proprietor will also consider producing some of Toothsome Foods' current lineup of Handmade Breads on a wholesale basis.

A self serve beverage cooler filled with soft drinks will also help increase revenues, as will the sale of fresh brewed coffee.

PRODUCTION

Production of sellable breads is projected to begin on July 1st 1996. Raw ingredients will be ordered for twice a month delivery from North Farm Co-op and Sysco Inc., at which time a two week production schedule will be drawn up by Kevin Richards, the proprietor/baker. Ingredients will be stored in a dry storage area and in a walk in cooler (already on the proposed premises). Rent of the facility will be $1,050 per month with utility costs running approximately $725/month.

Scheduling will begin with three large bakes per week (MWF) and two small bakes (T,TH). Due to the extended shelf life of sourdough breads, product can be sold for two days before staling. Each bake day the baker will bake breads in a deck oven. The oven provides intense, even heat and a controllable amount of steam injection, allowing tremendous control of crust crispness. Everything from soft white sandwich breads to thick crusted, dense savory breads to sweet baked goods can be perfectly baked in this oven. While breads are baking, the baker will begin mixing the long fermenting doughs to be baked off the next day. Labor saving equipment including a dough divider and a bread moulder makes this possible. Hot breads will begin coming out of theoven by 7:00 AM, and all baking will be finished by 10:00 AM.

The storefront will open at 9:00 AM and close at 6:00 PM Monday through Friday. Saturday hours will be 9:00 AM to 4:00 PM for sales only. Part time employees will work the counter and assist with store maintenance during peak hours while the baker is baking. A beverage cooler and coffee machine will encourage convenience sales at the register.

Breadcrafter will economize on bookkeeping costs by handling its payroll duties in house. Year end bookkeeping will be handled by a professional accountant.

MARKET

The specialty bread market is about to experience enormous growth. Throughout the country small bakeries are appearing at an increasing rate. Chain stores, such as Great Harvest Bread Company, are experiencing tremendous growth by capitalizing on the wholesome appeal of fresh baked loaves. According to the Bread Baker's Guild of America, a trade organization, membership increased 40% between 1994 and 1995. As people become more aware of its healthy nutritional profile, good bread becomes even more attractive.

There is currently only one source for artisan breads in Port Hanover, Toothsome Foods Company, where the proprietor learned to bake. Market tests performed in the summer of 1995 by Toothsome Foods Company showed strong demand for the product, no price resistance and the need for a more frequent and visible presence. As a pilot program with no promotion in the summer of 1995, Toothsome Foods Company was able to sell all available loaves (20 30 per bake, two bakes per week) all summer long. Even without the benefit of window signage or a consistent delivery schedule, Kevin Richards and TFC have developed a loyal following of regular buyers that continues to grow.

The Millwright Bakery in Maple, MI., a similar operation to Breadcrafter, currently bakes 200- 700 loaves a day for wholesale in the Connor City Area. This bakery has been open since November 1995 and has not yet experienced a summer tourist influx. It has stopped taking on new accounts for fear of exceeding its production capacity during that season. Millwright finds the Port Hanover area very attractive, but delivery from Maple is impractical. This summer season will bring Millwright a large influx of cash, and they will almost certainly consider establishing a bakery in Port Hanover if none yet exists.

Breadcrafter will set up its storefront bakery in the Green Lake Shopping Center. The center is conveniently located on one of the busiest arteries to and from Port Hanover. It has plenty of parking and is easily accessible from the road. The shopping center currently contains a successful, higher end grocery store, a successful liquor convenience store, and a donut bakery that also sells country clutter handicrafts. The shopping center is currently a destination for people seeking gourmet foods. These people will appreciate Breadcrafter's products. There is very little market overlap between Breadcrafter and the donut shop, and the two could exist in synergy. Pricing of artisan type breads around Port Hanover currently ranges from $2.50 per loaf (GraineryWhole Wheat) to $5.95 per loaf (Toothsome Foods Pesto Bread). Breadcrafter's products will range in price from $2.25 (Sourdough Baguette) to $4.95 (Pepper Parmesan Loaf).

COMPETITION

Grainery Food Co-op

Breadcrafter's primary competitor. The Grainery currently has a customer base that regularly buys whole grain breads. These customers are interested in healthy foods, and they will appreciate the attractive nutritional profile of our products. Due to undercapitalization, the Grainery will have trouble responding to the quality advantage our equipment and methods provides. Many potential customers are reluctant to patronize the Grainery, perceiving its patrons and employees as "too liberal". True or not, these customers may feel more comfortable at Breadcrafter. Renee Richards, the proprietor's wife, was formerly a Grainery bread baker. She knows their business well.

Helmut's Pastry Shop

An established bakery specializing in pastries and doughnuts. They have a capable facility. Due to heavy investment in pastry equipment and relatively small bread sales, they are unlikely to react strongly to our presence.

Twin's Bakery

Very similar to Helmut's.

The Coffee Mug

Specializing in donuts, pastries, and country clutter handicrafts. They sell some lower quality breads. Major risk is their location, right next door to Breadcrafter's prospective site. This risk could also be an asset, bringing bakery customers in search of better bread to Breadcrafter.

Fred's Markets

Large supermarket with in store bakery. Fred's offers nonscratch, relatively low quality breads and pastries at very low prices. Their largest advantage, other than price, is the convenience of one stop shopping. There is some possibility of future wholesale distribution of our products.

Daley's Supermarkets

Very similar to Fred's

Taylor's

Similar to Fred's and Daley's, but smaller. Higher possibility of future wholesale distribution.

Toothsome Foods Company

Downtown specialty foods retailer. Current employer of Breadcrafter's proprietor. TFC has a small, undercapitalized bread program Due to the absence of the baker, they are unlikely to compete. Proprietor will offer to buy some of the bakery equipment. Future wholesale distribution of contract products is a strong possibility.

Breadcrafter's production capacity will be an advantage over the specialty stores. Product specialization will be an advantage over the pastry shops and supermarkets. Breadcrafter's product quality will be an advantage over all local competitors.

MARKETING

Breadcrafter will sell its products to new and repeat customers from its storefront in the Green Lake Shopping Center, located on the busy stretch of M-17 between Port Hanover and Crescent Heights, Michigan. A large, tasteful, storefront sign will catch the attention of passing motorists. The smell of bread as it comes from the oven will bring customers in from the parking lot. Breadcrafter will offer a sample of fresh baked bread to anyone who comes into the store.

Breadcrafter's products will be truly unique in the marketplace. The look, feel and taste of its breads, when compared with the competition, will underscore their quality and value. Many of the products, such as Pepper Parmesan Bread and Sourdough Baguettes, will not be available anywhere else. Breadcrafter will also actively encourage customer satisfaction. Our product line will react to the needs and desires of the customer, thereby encouraging repeat and word of mouth sales. As a small hands on facility Breadcrafter will have the freedom to react quickly and accurately to changes in the market. Due to its uniqueness and convenient location, Breadcrafter will become a destination for food lovers.

Printed advertisements, which will run opening week, will highlight bread as an everyday product, to be purchased fresh on a weekly or daily basis. More printed advertisements will run Labor Day weekend and during the Christmas season. Costs for these advertisements will be approximately $200 each.

RISKS

The major risk to any Port Hanover area retail operation is the seasonality of the customer base. Breadcrafter will address this problem by opening at the height of the lucrative summer season. This will give the company a good supply of working capital to help with the startup period. The company will market itself primarily to the year round population. Contract products prepared for Toothsome Foods Company will bring in cash during the slow fall season. Unless strong demand shows a need, labor will be eliminated in the slower seasons and advertising will be minimal. Depending on available cash after Christmas, Breadcrafter will contemplate adding a sandwich bar to serve local shoppers and employees.

Breadcrafter will budget $9,800 in cash reserves as a cushion to help weather the startup period.

FINANCES

(Personal Income Statement removed for privacy.)

Start Up Costs

The compnay is in the process of securing financing for startup. The proprietor currently has $20,000 from private sources and is seeking $50,000 in additional bank loans.

OPERATING COSTS

Payroll

Two part time employees will be hired to start working on opening day. They will be retained until Labor Day weekend unless strong sales show a further need for them. In the fall, winter and spring, the proprietor and his wife will be the only staff required. Employees will be paid $5.50 per hour, and will work a combined total of 30 hours per week. Wage expenditures will be $707.00 a month with additional payroll taxes running $71.00, for a total expenditure of$778.00.

Rent

The Green Lake storefront currently under consideration rents for $1050 a month.

Utilities

Heat and Electric bills for Jordan Galleria, a downtown storefront of approximately the same dimensions required by Breadcrafter, pays $225.00 at the height of the winter heat season. Taking into account walk in and reach in cooler use, a figure of $350.00 is a reasonable estimated monthly average.

The bread oven will be run four hours per day on busy bake days. Conversations with other bakery owners have indicated that a 4 deck oven consumes $4 of gas per hour, for a total of $343.00 per month at maximum capacity.

A total figure of $725.00 per month is a reasonable estimated monthly average.

Advertising

Breadcrafter will run an advertisement in the Port Hanover News Review during opening week. Another advertisement will run Labor Day weekend. Total advertisement expenditures will run $200 per month. The News Review is known to do spotlight stories on new Port Hanover businesses and Breadcrafter will take advantage of this publicity.

Advertising expenditures will be kept to a minimum in the fall, winter and spring. The company will rely on community service functions, liberal sampling, and word of mouth to reach new customers.

Repair and Maintenance

The estimated maintenance cost for the first month is $500.00. From there it gradually diminishes to $200 a month for the remainder of the year. After the first of the year maintenance estimates are reduced to $100 a month.

Insurance

A Business Owner's Policy, covering contents, liability, and some loss of income, will cost $400 $500 a year for Breadcrafter, as quoted by Sam Williams of Port Hanover Insurance. Worker's Comp will run $2.25 for every $100 paid. Breadcrafter has budgeted $50 a month in general insurance and $20 a month in Worker's Comp. Health Insurance premiums for the proprietor and his family will run $250 per month.

Taxes and Licenses

The company has budgeted $150 a month on miscellaneous taxes and licenses.

General Supplies

General supplies will consist mainly of bread bags which cost $.05 each for paper and $.03 each for plastic. Bag material, which affects the quality of the crust in storage, will be chosen by the customer. These prices have been included in the cost of sale of each loaf. Cleaning and maintenance supplies will total no more than $50 per month. Breadcrafter has budgeted $125 per month as a conservative figure.

Professional Fees

Professional fees after startup will be kept to a minimum. The proprietor will perform all the necessary filing and bookkeeping chores required except year end tax filing and calculation of depreciation. The company has budgeted $325 in January and

$325 in March to cover these needs.

Miscellaneous

Breadcrafter has budgeted $120 per month to cover miscellaneous expenses.

Proposed Baking Materials Requirements

Proposed Equipment Requirements

Proposed Equipment Requirements

Miscellaneous Requirements

Bread Cost/Profit Analysis

Beverage Cost/Profit Analysis