Business Plan for
The Original Chicago Bakery , Inc.
Gluten-Free Bakery
Confidential
Jane Smith
154 Main St.
Los Angeles, CA 90035
(310) xxx-xxxx
Business Plan for
The Original Chicago Bakery, Inc.
Gluten-Free Bakery
Executive Summary ........................ 1
Description of the Business .............. 1
Introduction: the need for a GF bakery ... 2
(What’s a co-packer?) .................... 3
The GF problem — short shelf life ........ 3
The solution — frozen food ............... 4
The GF customer ......................... 4
Traditional GF sales venues .............. 5
Retail GF bakeries ....................... 6
Marketing strategy ....................... 7
Layout & operations plan ................. 8
Start-up budget ......................... 12
Projected income ........................ 13
Projected expenses ...................... 13
Operating budgets
Best-case ............................ 14
Realistic ........................... 16
Worst-case ......................... 18
2
Executive summary
Rice Cakes Gourmet, Inc. (RCG) is a newly incorporated
wholesale manufacturer of gluten-free baked goods (breads, desserts,
& snack foods) in downtown Chicago, IL. This document outlines the
plans for start-up and the first year of operation, for a total projected
budget of $200,000.
Description of the Business
State of California Corporation #288xxx, subchapter S, named
Rice Cakes Gourmet, Inc. on July 20, 2011. 500 shares of stock each
issued to the owners.
Employer Identification Number 20-530xxxx
 Owner; Jane Smith
1541 Glenville Drive
Los Angeles, CA 90035
(310) 925-xxxx
 Owner; Sandy Newman
1290 Main St.
(310) 925-xxxx
 Accountant; James (Jim) Karp
CHARLES, BLANK & KARP, LLP
Certified Public Accountants
4419 Van Nuys Blvd., Ste. 310
Sherman Oaks, CA 91403-2910
Phone: (818) 377-3300
Fax: (818) 377-3555
jkarp@cbc-cpa.com
 Lawyer; Mark Baer, Esq.,
3500 W. Olive #300
Burbank, CA 91505
Phone: (818) 827-7125
Fax: (818) 827.7126
www.markbaeresq.com
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Introduction: the need for a GF bakery
At this time, there are no commercial gluten-free bakeries in
Chicago, IL. This is mainly due to the contaminating nature of gluten
and the necessity for dedicated facilities. And of course, until recently,
a gluten-free diet was considered highly unusual. Perhaps one in five
thousand people were diagnosed with celiac disease – a potentially
life-threatening condition triggered by eating gluten, a protein found
in wheat, rye, and barley.
Not anymore. New, improved diagnostic tools have shown that in
fact 1 in 133 people, or approximately 2.25 million Americans, have
celiac disease, making it one of the most common hereditary
disorders — about par with hereditary high cholesterol. 97% of celiacs
don’t even realize they have the disease, but continued exposure to
gluten can lead to other problems, ranging from an inability to
concentrate to infertility to intestinal lymphoma. Celiac disease is
quite the hot topic in the medical world.
A gluten-free/dairy-free diet has also been indicated in the
treatment of other illnesses, most notably autism & related disorders.
Some doctors estimate that for every one person who has celiac
disease, ten others would benefit from a gluten-free diet. “Glutenfree” is the hot commodity of the health-food world.
For example; 2009 retail sales of gluten-free products were $450
million. 2011 retail sales are expected to top $696 million. The market
is anticipated to grow at 25% annually for the next four years, to reach
$1.7 billion in 2014. (Gluten-Free Foods and Beverages, Packaged Facts, 2006.)
Suddenly, everyone wants to make a gluten-free product. And
theoretically, everyone can — it’s not that hard. The tricky part is
ensuring against gluten contamination. In a normal bakery that’s
impossible because the lightweight wheat flour becomes airborne; it
gets everywhere, even into the air ducts. And while the FDA won’t
issue labeling laws for GF foods until 2008, no one wants to sell a
gluten-free product that might make people sick.
On the other hand, it’s not cost-effective for most companies to set
aside dedicated facilities for the few people who, at this moment, eat
gluten-free. [Think about it: If 1% of the population has celiac disease,
but only 3% of celiacs have been diagnosed — our 2.25-millionperson market just shrank to 66,000.)
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So what we have are a few dedicated gluten-free bakeries,
nationwide, most either selling directly to the consumer over the
internet or wholesale via health-food or upscale grocery stores.
What we need is an explosion of gluten-free options to match the
explosion of gluten-free dieters. We need a co-packer who can
provide the facilities for all those companies to make all those GFproducts.
What’s a co-packer?
A co-packer is a food manufacturer which produces a product for
another company to resell under the second company’s brand name.
Usually they provide product development, production (baking), and
packaging. When Trader Joe’s offers TJ’s-brand items, they are
buying from another manufacturer who just puts the TJ’s label on.
That manufacturer is a co-packer. Typically only a percentage of the
gross sales comes from co-packing arrangements, and the
manufacturer also sells under its own brand.
In addition to co-packing activities, Rice Cakes will also sell its
own line of breads and desserts to bakeries, restaurants, caterers, etc.,
throughout Southern California; wholesale to health-food stores &
specialty / upscale grocery stores; we will develop markets for catalog
/ gift items, and secondary processing (i.e., the brownie pieces in Soy
Delicious Fudge Brownie frozen dessert); and directly to the
consumer with our online (Yahoo!) store.
Furthermore, Rice Cakes will provide gluten-free support to food
service businesses in the form of information, help developing glutenfree recipes and menus, and acting as a liaison/marketing
coordinator to the GF community (for example, if Applebee’s should
become our customer, and do a GF-friendly menu with a pecan pie
for dessert, we will alert the GF media).
The GF problem — short shelf life
The biggest problem with most GF baked goods is they get stale so
quickly. Inventory management and efficient distribution are the
keys to success. But the gluten-free market isn’t like the kosher-foods
market, for example, where there is an identifiable enclave, in a
relatively specific location, where you can find your customer. Gluten3
free-dieters come in all geographic, socio-economic, and ethnic
flavors.
The solution — frozen food
In the case of breads, it is possible to par-bake the product and
flash-freeze it, and sell it with the intent that it should finish baking in
the customer’s oven. This is how La Brea Bakery sells their artisan
loaves nationwide. It makes for a consistent, high-quality product. We
would need packaging to protect the loaves against crosscontamination in the final oven. (Perhaps something like the foil bags
used for frozen garlic bread.)
With cakes, it is interesting to note that (a) gluten-free cakes are
just as tasty as the wheat kind - in fact, you don’t want gluten in a
cake. (b) GF cakes keep as long as the conventional variety. Nut
tortes, though expensive, actually last longer than those made from
wheat. (You don’t notice because most GF products don’t contain
preservatives.) Finally, (c) it is standard bakery practice to freeze
cakes, sometimes for weeks, before decorating.
Even though it means higher storage & distribution costs,
concentrating on frozen foods, with longer life of the product, gives us
better control of inventory. We can make frozen products in larger
batches, which means lower costs. And finally, the quality of the
product will be far superior, and that means higher sales.
Distribution of fresh items would be limited by the need to get the
product into the consumers’ mouth as soon as possible.
The GF customer
Let’s look at it from the other perspective. How does the average
gluten-free individual manage his situation?
Sadly for us, most adults tell us they don’t purchase a lot of
specialty gluten-free products. They tend to do without, finding it
easier on their waistlines & their wallets. They eat potatoes and rice if
they want carbs, and nosh on chocolates or sorbet.
But everyone eats a sandwich occasionally. Once a year, everyone
needs a special dessert on his birthday. And people will always crave
pizza. So there is a market for grown-up foods, with a lot of room for
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expansion if we can figure out what people want and where they
might be persuaded to purchase it.
Gluten-free children are a whole other story. An adult may not
spend on GF-items for himself, but he won’t want to see his child do
without. There will be bread almost every day for school lunches,
packaged snack foods like pretzels and shelf-stable cookies, and
special treats like cupcakes at every party that child attends.
Traditional GF sales venues
40% of the retail sales of gluten-free products happen in healthfood stores. (Again, Gluten-Free Foods and Beverages, Packaged Facts, 2009.) The
leader in this field is far and away Whole Foods Market. They have
their own “Gluten-Free Bakehouse” for ‘fresh’ product that is shipped
all around the country out of North Carolina. I’m sure it is delicious
but it’s not kosher so I wouldn’t know. This isn’t an “archtypical”
bakery selling fresh breads and cakes. It’s more like an Entenmanns’.
Whatever the case, we can’t open a gluten-free company without
factoring Whole Foods into the equation. And Whole Foods won’t
work with a supplier that’s not USDA-certified. We just have to accept
the trouble & expense of being certified as a cost of doing business.
(And anyway, it allows us to do meat, and chicken-pot-pies.) As soon
as we’re certified and ready-to-go we must contact them because our
frozen pizza crust blows away what they carry.
I believe Trader Joe’s is ready to claim a bigger share of the GF
market. Their head office is in Monrovia (near Pasadena – a lot closer
than Austin, Texas, where Whole Foods is headquartered) and they
just need a consistent co-packer for basics like frozen bagels & waffles
& cupcakes. Unfortunately, one source tells us that they’re not willing
to pay fair price for a good product. But that was a couple of years ago
and things may have changed.
Another opening is at Erewhon, where we have a lead.
Even better, find a distributor who deals with health-food stores,
and handles frozen foods. Go visit, take samples, and take confidence
in the fact that it’s an excellent product.
Sales to regional health-food (and specialty/upscale) markets
means we’ll need some kind of delivery mechanism. You don’t ship
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UPS to Trader Joe’s. You’ll find payments on a refrigerated van,
insurance & maintenance, in the projected budgets that follow.

The next-most-frequent way gluten-free foods are purchased is
over the phone or over the internet. There’s no way around this one,
either; we must provide for online sales. Yahoo! Stores offers a
simple, cost-effective way of setting up an online store
(www.ricecakesbakery.com) and handling VISA transactions.
We’ve budgeted for design on a five-page website, Yahoo! fees, &
assumed the manager will handle order fulfillment to start, delivering
through UPS.

Other ways gluten-free foods are traditionally purchased are just
more of the same, really. Conventional grocery stores are increasingly
carrying GF products (albeit at a higher price than at the health-food
stores). Some GF-online-superstores carry a number of different
bakeries’ products. I believe there is an untapped market in gift
catalogs (for example, GF-Christmas fruitcakes and gingerbread men,
both of which keep & ship well.)
Retail gluten-free bakeries
Retail bakeries and bakery/cafés are popping up around the
country, and at some point we should consider a retail outlet.
Chicago sprawl is a factor to consider — one mother of a celiac child
told me she would drive a couple of miles to go to a GF bakery, but
beyond that it would be easier for her to order online. It’s better for
our customers for us to bring the product closer to them, by selling to
other stores, bakeries, and restaurants.
In the case of a bakery/café, we have to remember that celiacs are
used to doing without. Rather than always make all his friends and
relatives drive to eat at ‘his’ special GF café, it’s likely Joe Celiac will
sometimes want to go to a GF-friendly establishment and sometimes
he’ll go somewhere else and eat a baked potato. Joe is actually better
served by providing for more GF-friendly restaurants where he can
trust the salad dressing and maybe splurge now and then on a slice of
chocolate cake.
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Marketing strategy
During the week, we market to other businesses. On weekends, we
go to celiac support group meetings and give samples of our products
and talk about where it can be purchased. Meeting the people, finding
out what they want and where they want to buy it, is priceless market
research. And sampling is the best advertising.
In the same vein, we can distribute coupons, both to consumers
and to editors of the GF-magazines and newsletters. Perhaps we can
even barter for advertising space, killing two birds with one stone.
Each business will require its own approach. Not just each type of
business, but each specific business. For example: Whole Foods and
TJ’s actually require totally different approaches. TJ’s will likely need
a package of frozen bagels or petit-fours to offer at competitive prices.
Whole Foods may want to offer finished loaves of artisan breads, or
fresh cakes in the self-serve bakery. We’ll have to see.
The bread and butter of the business will be the 1000’s of frozen
desserts and ready-to-bake breads sold directly to 100’s of food
service establishments. It’s all about just going out and making those
sales calls. The August restaurant trade convention should be a good
place to hand out business cards.
A nice touch would be to send a pretty box with a cupcake and a
card to sales prospects and follow it up with a phone call.
When we meet, part of the visit can be to explain to the business
owner or chef about gluten and brainstorm ways to be more glutenfree-friendly. By offering value first, without expectation, we set up a
relationship with the client. A mutually profitable relationship.
Bakeries can sell frozen baked goods (as Schwartz will do) or
frozen-par-baked loaves baked to order in our gluten-free foil
packaging (as Breadbar might). Bakeries could also special-order
items like cakes & holiday pies, or stock a limited number of small
cakes weekly (or 4-packs of iced cupcakes) or a shrink-wrapped,
decorated holiday cookie.
Other markets are hotels, particularly ones that do conventions;
places like Universal Studios & Disneyland; commissaries & caterers
that do business lunches; hospitals & nursing homes; and basically
anyone who feeds masses of people daily.
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Layout & Operations
Note that all the major improvements (walls,
plumbing, heavy-duty wiring, gas, venting, and
floor drain) can go along one wall, which will save
$$ on build-out.
The other side of the bakery doesn’t really even need walls –
partitions made of sheet metal and/or wire grids would work & save
space & $$. Floors & walls need to be sealed. That side can hold
wiring for telephone, computer networking, burglar alarm and
security cameras.
1. Loading door – to alley – this is main entrance to bakery.
Needs fan above &/or screen. Punchclock next to the door.
Space for staging deliveries in & out.
2. Private office — next to the front door so the manager can
have a clear idea of traffic in & out. Inside a locked door is a
safe, checkbooks, and confidential files. This is where the
telephone hub is, the internet cable in, and the networking
cables out. Also wired into computer are three security
cameras & possibly the alarm system. Office software &
bakery software (must be new, obviously.) (But computers
don’t! Better an old PC with fast internet, than vice-versa.)
3. Shipping/receiving desk – counter height w/ computer,
telephone, space for P.O.’s, receiving scale on floor, hand
truck. Also postage scale, UPS boxes & forms. Needs floor
space for racks.
4. Public office – desk, chair, computer, telephone, all-in-one
printer/scanner/fax/copier. Files/records storage. Space
above for water cooler & coffee machine. Bakers will use this
space for ordering, inventory, and break-time.
5. Employee break area (with 5a, lockers) — couple of couches,
a coffee table, & another telephone.
6. Rest room #1 — standard issue, one toilet, one sink, mirror,
paper towel dispenser / trash receptacle. Floor drain. Vent
to alley side of building.
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7. Maintenance closet— with sink, shelving for cleaning
supplies, hooks for mop & broom, and stacked washer/
dryer to save on linen expenses.
8. Rest room #2 — like rest room #1, only perhaps with shower
head behind a half wall. Vent, floor drain, etc.
9. Walk-in freezer (7.5’ x 12’)
10. Walk-in refrigerator (7.5’ x 12’). Reserve space for rack.
11. Packaging center — cake boxes with tamper-evident seal
(i.e, “safe-t-gard” at www.inlineplastics.com/news.php);
plastic bags with “innosealer” (www.innoseal.com). Not so
high-tech but effective. Shrink-wrap-sealer and film,
boxes. 10’ work counter, with stool, and space for racks.
Access to freezer. Obviously packaging takes place here,
and also inventory management.
12. Decorating center – decorating machine, traditional pastry
bags, assortment of tips. 10’ workbench, with stool,
telephone, space for paerwork. Lots & lots of storage,
shelves, little cubbies & boxes. (One day with own hot-top
burner, microwave, small mixer &/or reach-in fridge? to
take pressure off main work centers.) Access to both
freezer and refrigerator.
13. Dry storage — Seven 5’-long wire shelving units, 27” deep.
Plastic storage bins. Step ladder.
14. Dishwashing area — Bakery-sized 3-drop sink. Garbage &
recycling center. One day a rack dishwashing machine (a
whole rack of pans could be wheeled into it) but
otherwise, a pan-type dishwashing machine.
15. Scaling center —bins, scoops. 8’ workbench. Baker’s scale.
Shelving above with smaller bins. Access to sink across
“hall,” dry storage, & cooler.
16. Mixing center — Hobart, 60 qt., with attachments & extra
bowls. One day – a bowl lifter on wheels (can take bowls
to extruders).
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17. Cooking area — prep sink with drain, 7’ stainless counter,
combination range-type oven & 6-burner cooktop, steam
kettle (double, if possible, to use one for chicken pot pies),
and separate bagel kettle (different animal). Microwave,
knives, cutting boards, food processor, measuring tools,
pots, whisks, colanders. Here’s where pie fillings, custards,
cream frostings, etc., are born. Bowl-lifter should be able
to access steam kettles.
18. Work area #1 — 12’ workbench, wet glop extruder (allpurpose, adjustable output), all work tools, pins, pans, piepress, space for racks.
19. Work area #2 — similarly outfitted to #1, but more for
bread-making, and less for cakes, due to proximity to
ovens.
20. Single (one day a double) revolving rack oven, proof box,
and rotating 24-pan oven – one of the newer, smaller
models. This combination provides the most flexibility for
different products, with excellent space, fuel, and labor
efficiency. Upgrades are available, such as an oven-loader
for the pan oven. Ventilation can go straight through the
ceiling & roof. Mason-block construction is preferred for
insurance reasons, and ovens can be placed closer to wall .
21. Emergency exit to street. Possible mail delivery. Door
should be alarmed, with metal screen door for ventilation
and security. Fan above door for bugs.
22. Window could be frosted for privacy, but should have sign
facing street. Free ad space, baby.
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Start-up budget
Lease (1st & last month’s rent)
$10,000
Get 3 month’s rent abatement , and work out contingency for
waiting for health dept. permits. Sometimes takes as much as 6
months! (Do it right the first time, but allow 6 months, in case.
– try to negotiate deferred rent!)
Construction:
$20,000
Equipment (used, good quality)
60,000
Salaries during build-out
15,000
Legal (Incorporation, state forms, EIN number)
1,500
Accounting, tax prep.
1,500
Graphics & Marketing Materials
3,000
Corporate identity, business card,
website design, some packaging design,
signage outside building, POP signs
Beginning Inventory
2,000
SUB-TOTAL
$113,000
Contingency
$12,000
TOTAL START-UP
$125,000
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Income Projections
Ideally by the time we open we should have solid contracts with a
few mid-sized buyers like Schwartz Bakery and the Breadbar (who
might eventually run as much as $1000/month each), and one big
buyer like Coffee Bean (who, once they sell Rice Cakes across Illinois,
might do $750/day or over $20,000/month). I think larger stores
like Whole Foods or TJ’s are going to want to see us open and
fulfilling orders before buying from us, but that aspect of the business
might eventually bring in $50,000 per month.
Ultimately we could do $125,000 a month in 2000 square feet.
Since we are a new company, it is important not to grow too fast
and take on more contracts than we can handle. The projections
reflect a slow and steady growth without sudden spikes that will
create havoc with our workload.
We think we can reach break-even point before the end of year
one, and begin paying off start-up costs by the end of year two.
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Projected Expenses
 Cost of Good Sold: Industry standard is 33%. This includes packaging. In
general wholesalers operate on smaller margins but make it up in volume,
but ours is a specialty product and commands higher price. Rice & other
gluten-free flours have high cost compared to wheat varieties (average
“volume” price is $1/lb., compared to pennies for wheat flour) and we’ll have
to see what the market will bear.
 Payroll: Industry standard is just under 25%. Gluten-free batters and doughs
have a different consistency than regular products, and require special
handling and different equipment. Once we’re operating at full capacity, we’ll
be able to stick to 25% but only because we are charging more for the product
to begin with (to maintain 33% food cost).
 Misc. Services: This includes ongoing monthly accounting & legal fees,
janitorial, equipment maintenance, exterminator, and graphic design; etc.
 Rent: 2000 square feet at $2 per square foot, plus triple net. Hopefully it will
be less than the $5,000 budgeted for.
 Supplies: Includes cleaning & maintenance supplies, small equipment, office
supplies (including coffee for the staff!) & stationery.
 Debt Service: Assuming interest only, at first, on $120,000 loan. Payments
to principal will begin when we can afford to do so.
 Advertising: Set at $1000/month until $50,000/month sales, then 2% of
income. Marketing plan is in an appendix, but to sum: bulk of this money will
be spent going to gluten-free support groups and sampling products, and to
pay for point-of-purchase marketing (like “Order your gluten-free birthday
cake here!” signs.) As budget increases, it may be worthwhile to share costs of
advertising with our customers (“Rice Cakes, available at these fine
stores.…”) but first we’ll explore options for free publicity.
 Insurance: Includes not only fire & liability but also vehicle insurance and
worker’s compensation. Eventually we’ll have to offer health insurance
options for key employees.
 Utilities, Linen, & Trash Removal: All fairly straightforward. We will
save $$ by doing our own linen.
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