Friday, January 11, 2013

Start a bakery business - Location : Step 3

Besides shopping malls, you should also consider renting a shop space in eg. HDB shophouse/ground level or in less well-known shopping centres. The advantages are as follows.

Lower rent:
This is the most obvious advantage. The rent is likely to be lower.

You set your own opening hours:
In popular shopping malls, the tenants are bound by contract to stick to the opening hours of the mall. Say the opening hours of the mall is 10am to 10pm. So tenants must keep their shops open during those hours. And tenants must open for business every day. So you must be prepared to work every day, or you employ bakers and rotate their work shifts such that your bakery is open every day. On the other hand, for HDB shops owned by landlords, you are not bound to any opening hours. As long as you pay your rent to your landlord on time every month, I don’t think he/she is going to bother with what time you open or close your bakery. In some shopping centres, eg Grandlink Square, some of the shop units are owned by landlords. My father is one example. Many years ago, he bought a shop unit in Grandlink Square and has been renting it out ever since. It is presently tenanted to a bakery which does online fondant cake orders. The bakery owners choose to close one day a week, to give themselves a rest day.

Less renovation rules :
In popular shopping malls, if you decide to rent a shop unit, you must present your renovation plans to the management. And if they do not approve of the plans, you must make changes to it until they are satisfied. Sometimes, this ‘ding-donging’ back and forth, approve, not approve, kind of situation delays your renovation plans. Usually you are given about two to three weeks to do your renovation, after which the mall will start charging you rent. So before you sign the rental contract with the mall, do up a rough design of the shop on paper and show it to the management first. See what they say. At the very least, you have an idea of what kind of shop renovation is acceptable to them. The management has to make sure that the look of your shop is in line with the look of their mall. So say if the mall is a high-class type, then your shop must look high-class too. For a small bakery, the renovation alone usually costs a five-figure sum.

Just to tell you a bit about what happens when your lease is over. If you do not wish to continue renting the shop unit, you must do reinstatement. This means you hire a contractor to restore the shop to its original condition. Eg. hack away floor tiles, wall tiles, lighting, built in cabinets, etc. All these must be removed if these were not originally there when you first rented the shop. Do not underestimate the cost of reinstatement. It can possibly come up to a high four-figure sum.

Cost of renovation:
If you do have the money, it is worthwhile doing up the shop nicely because it will create a favourable impression on your customers. If your shop looks bright, clean, new and trendy, with good interior designing, it really helps draw in the customers.

If overall the shop looks relatively OK, you may save some money on renovation. Eg. if the flooring looks well-maintained, you can leave them as they are. Remember, if you do minimal renovation, then when your lease is up, and if you do not wish to continue there, you don't have to spend much on reinstatement.

In order to make his shop more attractive, my father actually renovated the Grandlink shop after the previous tenant moved out. Bakery equipment was moved into the shop so that this will attract bakers who are thinking of opening a bakery. Using my previous experience in running a bakery, we did up the shop and advertised it as a bakery studio for rental. We had several offers after the ad went up. It is amazing how many people want to start their own bakery business! And my father’s shop made perfect sense because the bakery owners do not have to come up with a lot of money to start up their business. Everything was in place already. In the end, we rented the shop to a pair of very enterprising young graduates of a prestigious baking academy. If you wish to take a look at some of the pictures of what was in the shop before it was rented out, go to

Possibly low human traffic:
Some HDB shops have low human traffic and so walk in customers are very few. Of course this means bad business for your bakery. My father's shop at Grandlink is such a case and I was frank with potential tenants that they cannot depend on walk -in customers to sustain their business. They have to have a good website and take phone or online orders in order to do well. Another option is to use the shop to set up a bakery school and conduct demo or hands-on baking classes.

By now you may be thinking I'm a little biased against setting up shop in popular shopping malls, after reading this post. But I am not. Because popular shopping malls really do have higher human traffic due to their good location and this will be a boost to your bakery. If you have a lot of money to start the bakery, and especially if you have experience working/managing a bakery before, then you can consider setting up shop in a shopping mall. However, if you are on a tight budget, it is not wise to borrow money to start your bakery, pay a lot for renovation and pay very high rent every month. If for some reason, the bakery fails, you could end up in great debt. So for those who have a limited budget, it is better to start small, pay less on rent and renovation. It is more important that your cakes, cookies, etc taste excellent and you provide good customer service. And don't forget a good website, facebook account, and other forms of social media can help bring in a lot of business for you.

Classified Ads:

Make sure to check the classified ads every day for potential shops to rent. Call or SMS those you are interested in. Ask for the following information:
Where is the shop located?
How big is the shop i.e. how many square feet?
What is the asking rental? Is it negotiable?
Does the shop have a water point?
How many amps does the shop have?

Be organized:
Keep records of all the replies you get from agents or landlords. This helps you to get an idea of what the ‘market’ is like out there. If the shop does not even have a water point, you don’t even have to consider it because a bakery definitely needs water!

Familiarise yourself with the surroundings:
After you’ve narrowed down your choices, go to the shops in the morning, afternoons and evenings. On weekdays and on weekends. Is the shop very far from where you stay? Will you be taking public transport or you’re going to drive to your bakery every day? Where will you park? Below are more points you must observe.

Does the shop have high human traffic?  
What kinds of people frequent the place? Do you think they will be interested to buy your baked products?
Any other bakeries (competition) nearby?
Do you like the place?

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