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How do Additional Costs Affect Bakeries Profit Margin?

Food and Beverages | Tuesday, May 03, 2022

There are numerous options here, and there are hundreds more that can help a bakery increase its profit.

FREMONT, CA: If you own or intend to own a bakery, profit will significantly influence your decision-making. If you haven't read my guide to pricing bread, it details the costs associated with manufacturing and selling bread. However, what about the charges not included in the manufacturing cost? How do they affect your profit margins, and what else can be done to increase a bakery's profit margins? Consider the following.

These are additional costs not included in the usual cost of production. They will whittle away at your profit margins (or buffer). It is possible to implement controls to prevent these occurrences. However, they are more than likely to occur on occasion.

Accurate production planning, simple operating systems, and a thorough onboarding procedure (training) help minimize the likelihood of these issues occurring.

Here are a few examples:

Inefficient production quantities: With accurate production targets, you can control your waste if you bake bread to order for local businesses or residents. Producing the exact amount of dough required for production might save you a lot of money. A precise recipe calculation and a good set of scales are essential here.

This costing method works when the oven is full for each batch produced. However, what if a client requests only a few pieces of their regular bread and no one else does? You're going to have to manufacture it for them, but it will be inefficient.

Mistakes: You're going to forget the yeast, burn the buns, or run out of inexpensive flour, forcing you to buy the more expensive variety. It is inevitable, so be prepared.

Unexpected difficulties: Equipment may fail, power outages occur, or your employee may call in sick. All of these factors contribute to decreased productivity and increased expenditures.

Waste: If you sell your products from your shop or stall, you get control over your manufacturing. This is beneficial for controlling your workload and maximizing your efficiency. Where it becomes problematic is when your sales are unpredictable.

One day, you may find yourself underproducing and upsetting your clients. On other days, it may rain, forcing you to discard your stale loaves—there is only so much bread pudding one can cook.

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