Why a Bakery is a Retail Type of Business

As you research your potential bakery or are just curious about the bakery industry, it’s easy to get bogged down in terminology about what kind of business a bakery really is. What makes a bakery a retail business?

A bakery is a retail business because it sells goods in the form of baked goods directly to the consumer, or its customers. Most retail bakeries function in this way, although wholesaler bakeries, who make their items in bulk and sell to other retailers, do exist. 

What other types of bakeries are there? What’s the definition of a retail bakery? What’s the difference between a bakery and a café, or a bakery and a restaurant? Find out more about the bakery industry as you read on. 

What type of business is a bakery?

Why a Bakery is a Retail Type of Business.

Your typical, run-of-the-mill hometown bakery is considered a retail business. A retail business sells goods or services directly to consumers—or, specifically in a bakery’s case, they are selling baked goods directly to their customers. 

According to LawInsider.com, there is a legal definition for “retail bakery”—” Retail bakery means any food-service establishment in which food and food products are mixed and baked to final form and offered to the ultimate consumer and intended for off-premises consumption.”

While the definition can get a little complicated, they also include this clause that allows your customers to eat on the premises—”A retail bakery may provide for on-site consumption for up to twelve (12) persons if toilet facilities are provided for the patrons.”

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What other types of businesses can a bakery be?

While being a retail business is the most popular, most profitable, and most common, there are other ways a bakery can sell their items, and not all of them are considered retail. 

  • Wholesalers. There is such a thing as being a wholesale bakery. Wholesaling is when goods are sold to retailers, who then sell their items to the consumers. It is when companies buy products in bulk to sell in their stores—think when big box stores such as Walmart, Costco, or Safeway bring in loaves of bread or baked goods to their stores to sell. The original brands, like Hostess or Sara Lee, are considered bakeries, but they are selling wholesale. 
  • Restaurant or food service. If you’re offering your baked goods made to order, you could be considered a restaurant. This can add additional cost to your business licenses, though, so be cautious as you move towards this type of business. That being said, it can be extremely profitable as an option for you, as you can add on a coffee shop with meeting spaces and even an event space. 

What’s the difference between a bakery and a café?

While the difference is very small and can even go down to a confusing legal level, there is a slight difference between the two. A bakery is an establishment that focuses on baking their items on-site and selling them fresh, while a café typically has other small food items such as sandwiches and also sells coffee and tea. They also are a location that does not typically offer table service—your customers come to a counter and they serve themselves. 

That being said, a café can also be a bakery and a bakery can be a café—you are not limited to just one business model. 

What’s the difference between a restaurant and a bakery?

While both can provide seating for their customers and sell food items, there is a slight difference between the two. A restaurant has a menu and it is made custom to the customer’s order. A bakery, on the other hand, produces a set amount and set type of food products to allow for the customer to make a choice of already existing items. Bakeries also allow for immediate consumption of the product. 

Startup Cost for a Bakery. (Is it Expensive to Start a Bakery)

What’s the difference between a retail bakery and a commercial bakery?
Why a Bakery is a Retail Type of Business.

It’s very easy to compare the commercial bakery and the wholesale bakery, but there is a slight difference. A wholesale bakery sells to businesses for them to sell, while a commercial bakery creates items on a much larger scale to sell to larger consumers. 

When it comes to comparing a retail bakery and a commercial bakery, they are the exact same—except for scale. A retail bakery makes a small batch of muffins to sell to their customers, while a commercial bakery makes ten dozen muffins for a business having an event. 

Which is better: a wholesaler bakery or a retail bakery?

Both can be profitable and both have their disadvantages, as owning your own wholesaler bakery or retailer bakery are similar yet very different. 

A retail bakery is the most common type of bakery, and you will be able to work face-to-face with your customers. You have the ability to completely create your bakery from the ground up, including marketing and the design of your building, and it’s typically less expensive than creating a wholesale bakery. That being said, you will not be taking large orders in your retail bakery at first, and you’ll need to hire employees to run your business. 

A wholesaler bakery also has its pros and cons. You can have a steadier source of income through large orders placed with your business, and you don’t need to have employees to run the front counter. You also don’t need to have a storefront, and can run your business from anywhere. But the costs to start such a business venture is much higher than it would be to start a retail bakery, and because you intend on making a high volume of quality baked goods, you will need employees to do so. 

Types of Bakery Service

With all these different types of bakeries, you also have different types of service within your bakeries—a café, counter service, food truck, specialty, and home bakery. These can all be considered retail bakeries, but are subcategories of the type. 

Why a Bakery is a Retail Type of Business.
  • Café. As mentioned before, you can also allow for a restaurant style seating and coffee window. While you need space for this to happen, you can broaden your menu based on what people are looking for when they visit. 
  • Counter service. Most bakeries will function as a counter service bakery. These do not have a dining area and customers come to the counter to order their items. Walk-in customers will be your main focus, but customers can also call ahead for larger orders. 
  • Food truck. Ever popular and continuing to grow, you can save money on large scale operations by creating a food truck bakery. While you won’t be able to do large orders, you can also travel to wear the customers are. 
  • Specialty. If you find that you’re doing your best work on cakes or cookies, or you have a particular design you focus on, or are focused on providing baked goods that are vegan or gluten-free, you can also make a profit. Make sure you market your options broadly when you choose this subtype.
  • Home. It’s possible to create a home bakery with success. While you need space, equipment, and permits, along with the ability to market your business without a large-scale business space, you can start your own home bakery. 

Just because a bakery is a retail business does not mean you are limited to only setting up a counter and selling cookies and cakes to those people who come to visit. Broaden your horizons and consider adding a coffee counter, or specialize in something amazing like hyper-decorated cookies. Whether you find your success in a retail bakery or even decide to go big or go home with a commercial bakery, no matter what you’re making your profit and you’re making your baked goods to share with the rest of the world. 

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Frequently Asked Questions

What type of business entity is a bakery?

While it can be any type of business entity that you want, most bakeries are either sole proprietorship or limited liability companies. Sole proprietorship is when you own your business completely, and your business assets and personal assets are not separate. A limited liability company, on the other hand, allows your business and personal assets to be separate in the eyes of the law, protecting your personal assets from any issues in your business. 

What are the most popular bakery items?

In most cases, the small retailer bakery will sell mostly bread and rolls. Cakes and other bakery products make up the next tier, while pies bring up the back of most popular bakery items. When deciding on your bakery’s menu, consider the most popular items in your area, not just the entire country; certain baked goods can sell better depending on your region. 

How much money does it take to start a bakery?

Because you will need equipment, a building space, permits, insurance, furniture, marketing, a point-of-sale system, and inventory, along with enough staff to start your business, you will typically need between $10,000 and $50,000 to initially start your bakery. There are ways to raise that money through grants and loans, which you can find out more about at the Small Business Administration website

To learn more on how to start your own bakery business check out my startup documents here

This blog post is provided for informational purposes only. The information contained is not intended to constitute legal advice or to substitute for obtaining legal advice from a qualified attorney.