How to start a bakery business and run it successfully
Bakeries are big business in hospitality. In fact, The Federation of Bakers states the UK bakery market is currently worth £5.74 billion, from craft bakeries to large, industrial states. And since we have a growing UK coffee shop culture, the demand for high-quality, artisanal bakery goods is on the rise.
For many avid bakers and pastry chefs, starting a bakery is the ultimate dream, but like most startups, making it happen can feel daunting.
If your end goal is to start a bakery business, Bionic can help provide information and tools to help you set up and manage your business efficiently.
From the key start-up costs and creating a business plan to being compliant and ensuring your business attracts customers and makes money. We can help you with the process of starting a bakery business from scratch.
Guide breakdown:
- The cost of opening a bakery
- Start up costs to consider
- Licenses and regulations for running a bakery
- How to attract customers and make money
- How to start a bakery business from home
What is the cost of opening a bakery?
One of the first things on your mind at the beginning of your business venture is likely - how much money do you need to open a bakery? On average in the UK, opening a bakery is estimated to cost anywhere between £8,000 and £40,000, depending on factors such as location, size, and menu, but it can cost much more if you’re going for a larger, sit-down establishment.
That’s why it might be best to start small first. Consider running a home baking business to build up demand and, when you’re ready, acquire a premises.
What are the key start-up costs?
When setting up a bakery business, you’ll need to consider both the upfront investment and the ongoing monthly running costs.
Startup costs include leasing or purchasing a space, renovating the premises to make it ready for opening to the public, and essential equipment like ovens, mixers, proofers and other kitchen equipment. Other upfront costs include business registration, legal and licensing fees, branding, website development, marketing, and setting up software systems for taking payments.
Once the bakery is up and running, ongoing costs can include rent or mortgage payments, energy bills, staff wages, software, equipment maintenance, and marketing, among other financial commitments. You’ll also need to budget for unexpected expenses such as equipment repair or rising food costs - there is a lot to consider!
Premises and renovations
As with any business, one of the biggest upfront costs for a bakery is securing a suitable location. The cost varies widely depending on the type of bakery you are operating, the space’s condition and your preferences. Location can also play a part. If you want to open along a busy high-street, this will likely cost more than a pop-up van.
The most common types of baking businesses include retail bakeries, such as bakery cafes and over-the-counter bakeries, commercial bakeries, home bakeries and catering van bakeries. Rent deposits, lease agreements and property size can all affect the price too.
Equipment
Bakery equipment is also a major investment, ranging from specialised kitchen equipment like large multi-tier ovens and mixers to state-of-the-art coffee machines and payment systems. The exact type of equipment you need will depend on the type of bakery you run, but here is a list of what you might need:
| Equipment | Costs | Second-hand options |
| Front of House POS system | From £0 - £69 - Square - Good for bars From £59 - Lightspeed - Customisable From £29 - Zettle – Good value | You may be able to find used systems on eBay |
| Commercial kitchen equipment | A basic setup can cost between £3,000 - £20,000 for commercial fridges, sinks and grills. For a fully kitted out kitchen you could expect to pay between £35,000 - £100,000. | Caterquip offers tested second-hand commercial kitchen gear, often at a large discount. |
| Commercial coffee machine | BeanMachines offer a wide range of commercial coffee machines available for lease and purchase from £3,395.00 or £23.24 p/week. | United Baristas is a dedicated marketplace where you can buy and sell coffee equipment directly with other baristas. |
| Mugs, glassware and service ware | Buzz Catering Supplies for catering crockery, glassware and cutlery at low prices. | You may be able to find used systems on eBay or try Facebook Marketplace. |
| Lighting and decor | Fritz Fryer offers stylish hanging lighting for cafés from £108. | You may be able to find used lighting and decor on eBay |
| Tables and chairs | Andy Thornton offers new, stylish café furniture from £100. | City Furniture Clearance has a good collection or try Facebook Marketplace. |
Business rates
Business rates are charged on most non-domestic properties, like shops, offices, pubs, warehouses, factories, holiday rental homes or guest houses. You’ll probably have to pay business rates if you use a building or part of a building for non-domestic purposes. Your local council will send you a business rates bill around February or March each year it's based on your property’s ‘rateable value’ and can vary by location and property size.
Insurance costs
If you are an employer, you are legally required to have employers’ liability insurance to help cover the cost of compensating employees who are injured or become ill due to carrying out their work. If you have a vehicle for business purposes you also need business vehicle insurance by law. Other covers to consider include product liability, public liability, stock and equipment cover. If you are unsure what type of insurance your business needs, Bionic can help talk through your options. We are unable to offer business vehicle insurance, but we should be able to cover your business operations.
Tailored bakery insurance through Bionic can cost from £1.83 a day*
*The price is based on the average of the bottom 10% of E-Trade policy invoices, on a rolling year basis between 01/07/24 & 30/06/2025, provided by Bionic. The per-day figure is based on an average of 30 days. Your actual price may vary.
Energy costs
Energy expenses are a large consideration when starting a bakery. Owners must budget for consistent power usage of commercial equipment, including ovens, mixers, refrigerators and other specialised gear.
You’ll also want to make sure that you’re set up to run as energy-efficiently as possible. Think about energy-efficient lighting, consider start-up and switch-off times and arrange a great deal on a fixed contract.
At Bionic, we work with a panel of trusted suppliers to help you compare business energy quotes and find great energy deals that suit your business needs.
Professional services
When you start your business, you may have to handle a lot of paperwork and contracts. Professional services include accountants to manage finances and tax obligations and solicitors for lease agreements, drafting contracts and compliance. Hiring professionals may seem costly at first, but their expertise can be beneficial in the long run. Reliable support from experts can give bakery owners confidence and time to focus on baking good quality goods and customer experience.
Marketing and branding
Marketing and branding are key for attracting and retaining customers in a crowded market. In the beginning, costs may include designing a memorable logo, developing packaging and creating visual identity across signage, menus and uniforms. Setting up your website and establishing your social media presence can also help spread the word online and give potential customers a platform to check out your products before they come to buy.
Are there any regulations and licenses I need to be aware of?
Food business registration
The first step in establishing a bakery in the UK is choosing the appropriate business structure and registering it with HMRC. The most common types of business structure are a sole trader, a partnership, a limited liability partnership and a limited company.
If you’re just starting out as a home-baker, registering as a sole trader might be best. But if you are setting up a shop, you may want to consider a limited company. Once you decide on the right business structure for you, registration should be completed at least 28 days before trading begins.
Health and safety
Bakeries must comply with Health and Safety Executive (HSE) regulations to protect both staff and customers. The key requirements include:
- Conducting and documenting risk assessments
- Maintaining safe equipment and working practices
- Providing appropriate staff training
- Displaying a Health and Safety Law poster
- Reporting accidents and incidents
- Having employers’ liability insurance (if you have any employees)
For bakeries with five or more employees, written health and safety policies and risk assessments are mandatory. Even for smaller operations, maintaining documentation is good idea.
Pavement licence (for outdoor seating)
If you plan to have outside seating for customers to enjoy their coffee and baked goods, you may need to apply for a pavement license. You can apply to your local council for a fee, and they may want to see evidence of your public liability insurance as well.
Music license
If your bakery plays recorded music, whether via radio, streaming services, TV or audio devices, you’re legally required to obtain a music license. Without it, playing copyrighted music in public could lead to costly legal consequences. You can apply at TheMusicLicence. And learn more about this and others you might need in our guide on getting the right business licenses.
How can I make sure my bakery attracts customers and makes money?
Running a bakery isn’t just about creating delicious treats - it’s also about ensuring that the business is profitable. The following strategies can help you attract customers and keep them coming back.
Create a business plan and concept
A strong business plan and unique concept are essential for building a bakery that stands out and thrives. Start by defining your niche and ensuring it aligns with your target market’s preferences. Use creative ideas like a “flavour of the month” and seasonal bakes that reflect holidays or events, and trend-inspired products to stay ahead of the competition.
Marketing strategies
Like in all sectors of the food and drink industry, social media is playing an ever-more influential role in shaping customer preferences and demands. Platforms like Instagram and TikTok are ideal for showing visually appealing content, such as behind-the-scenes baking videos, product launches and customer testimonials. Consistent posting and strong branding can help to build a community around your business and drive customers to your bakery. You might also decide to test running some paid advertising campaigns to target nearby audiences.
Customer retention
Whether you specialise in artisan sourdough, mouthwatering pastries or homemade cakes, building customer loyalty is the key to long-term success. But how do you ensure your shop stands out? Retention strategies for bakeries include offering loyalty programs, like a stamp card, to boost customer retention and build stronger connections. Other ways to keep customers coming back include providing excellent customer service and gathering and acting on any negative feedback.
How to start a bakery business from home
Starting a bakery business from home is quite different from running a traditional bakery with its own premises. Home bakers often work on a smaller scale, using domestic kitchens that need to meet professional food safety standards.
Because your business is based in your home, there are extra steps to ensure you’re operating legally and safely. It’s also important to think about bakery insurance to protect your business, equipment and customers.
Register with your local authority
When it comes to how to start a bakery business from home, you need to register with your local authority. You should register at GOV.UK to verify your account at least 28 days before you start your food business.
Check you have the appropriate permissions
To run a business from your home, you may need permission from your mortgage provider or landlord, local planning authority or local authority.
Register as self-employed
You need to inform HMRC that you are self-employed when starting a food business, even if you are part-time or have another job.
Consider food safety training
Food safety is crucial when preparing food for the public. Contact your local authority’s Food Safety or Environmental Health team for advice on relevant food safety and resources.
Prepare your premises to run a food business
Your food business premises should be clean, well-maintained and designed for efficient food preparation. Separate storage areas for ingredients, allergen management and ensure regular cleaning.
Get your bakery on its feet with help from Bionic
Need a helping hand getting started with your bakery business? From business insurance and energy savings to broadband and finance, Bionic gives you the tools you need to help make manage costs and grow your business.
Our tech-led experts work with a panel of trusted suppliers and providers to get you a competitive deal for your small business. Get in touch by starting a quote online today.
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