It’s a pretty exciting time for bakeries in the UK. Studies show that bakeries are experiencing serious growth, despite the challenging climate in the industry right now. This is really epic news for all the bakers across the country — the demand is there!
So what’s the best way to capitalise on this growing demand?
Controlling prime costs is a good place to start. Effective cost management means you spend less on things you don’t need, and increase your margins in the process — and this is exactly what we’re covering in this article.
By the end, you’ll have some key tactics up your sleeve to reduce your bakery operational costs to boost your margins.
What are the biggest operational costs for bakeries?
Here are some of the biggest operational costs bakeries face:
- Costs for ingredients and raw materials required for daily production. Inflation has been causing prices to rise for the last few years, meaning that bakeries are spending more on ingredients than ever before.
- Food waste. Bakeries often have products with a short shelf-life, meaning that they’re susceptible to food waste. The more food they throw away, the smaller their profit margins are. And of course, it’s bad for the environment.
- Utility costs to cover rent, leases, gas, water, and electricity. These costs have been rising with inflation over the last few years, cutting into gross profit margins and making it hard for hospitality businesses to grow.
- Labour costs to pay wages and staff benefits. This also covers training costs to build a skilled workforce, as well as the cost of attracting, hiring, and retaining staff (which is proving tricky at the moment). Not to mention, the minimum wage has increased in 2024, leading to at least a 10% increase in labour costs.
- Equipment costs to buy, lease, and maintain baking equipment.
The exact costs of these expenses vary based on different factors, including the type of bakery you operate, how many locations you have, where your venues are located, and so on.
The good news is that there are ways to mitigate the financial impact of these factors — and technology is top of the list.
How to reduce bakery operational costs with technology
Let’s walk through some of the ways you can manage bakery operational costs with technology.
Align production at your central bakery with demand at your stores
Accurate forecasting means you can predict demand and align production at your central bakery with item-level demand at your individual stores. for your bakery, at both an onsite and a central kitchen (or CPU) level.
Think about it. If you can accurately predict demand, you can stock your central bakery with enough ingredients to meet demand across different locations.
With Nory, for example, we analyse your previous sales and performance alongside external factors (like the weather and local events) to predict how many customers will come through the door during any given shift.
As a result, you can:
- Improve your labour scheduling. Create schedules to ensure you have enough staff to meet customer demand, but avoid overscheduling and spending unnecessary money on staff wages.
- Optimise inventory costs. Order ingredients to make sure you have enough food to meet customer demand but prevent overspending on ingredients you won’t use. This also minimises food waste, so you’re hitting two birds with one stone.
Nory success story 🥳 See how Masa accurately forecasts sales within a 3% margin using Nory, controlling labour costs to within 1% of what they’d planned.
“Constantly being able to see what your sales are, what your cost of labour is — and trusting that is really valuable.” – Shane Gleeson, owner and founder at Masa.
Production planning at the central bakery
When operating a central bakery, technology can help you improve the entire production planning process.
For one thing, it provides your central bakery team with easy access to crucial production information. They can instantly access menus, standard operating procedures (SOPs), and technical sheets. This quick access is critical for aligning production plans at the central kitchen with orders from multiple outlets.
It also helps teams make quick and informed decisions about production planning. In doing so, they can ensure that central bakeries meet demand, maintain product availability, and deliver consistent food quality.
And most importantly? Technology allows bakeries to track prices in real-time. You can stay on top of supply chains and monitor prices at the central bakery level, meaning you can be reactive to price changes. As a result, you can make sure that your supply chain is as profitable as possible.
Not to mention, it also arms you with more buying power to negotiate on prices. You can accurately track what you’re spending, so you have the clarity to negotiate for costs that suit your budget.
Stephen Burns, the Group Operations Manager at Rocksalt, talks about how using Nory helps the business react to price changes:
“Because all the ordering and invoices are updated daily, we can catch a price increase from a supplier pretty much instantly. As soon as we spot it, we can react to it immediately.” – Stephen Burns, Group Operations Manager at Rocksalt.
The sooner you can track price changes, the quicker you can react to it. And the quicker you react, the better chance you have of reducing costs and increasing your margins.
Use Nory to handle bakery operations and drive profitability
Nory has all the functions you need to manage your bakery operation, reduce costs, increase your EBITDA, and increase your profit margins:
- Control labour costs in real-time, using our AI-driven forecasts to optimise labour deployment.
- Track inventory costs and processes to pinpoint ways to minimise spending and optimise supply chains.
- Identify where and why locations are underperforming in real-time so you can address them and make the necessary changes.
- Recognise where food waste is occurring in each of your locations and make improvements to minimise it.
Curious to find out more? Take a tour of the system to see it in action!
FAQs about bakery operations costs
What are 3 fixed costs for a bakery?
Here are some of the fixed costs bakeries pay each month:
- Bakery space. Whether it’s a mortgage or rental payment, every bakery pays for the space it uses. These costs generally remain the same, unless interest rates change or the final payment is made.
- Insurance. One of the most popular insurance policies for bakeries is liability insurance, which protects the business if someone is injured on your premises. Employee liability insurance does the same thing, but specifically if an employee is injured.
- Labour costs and wages. Salaries for full-time staff and management, providing consistent labour regardless of production volume.
How much does inventory cost for a bakery?
How long’s a piece of string?! Okay, jokes aside — inventory costs for a bakery can vary significantly. The cost of raw materials (like flour, sugar, eggs, and butter), as well as packaging and other consumables for production, means that bakeries spend different amounts on inventory. Add seasonal demands and product variety into the picture? And the costs vary even more.
