Business ideas
8 min read

How to Start a Profitable Bagel Shop Business [11 Steps]

Learn how to start a profitable bagel shop business with our step-by-step guide. Discover key strategies and tips to succeed in the bagel industry.
Nick

By Nick Cotter
Updated Feb 05, 2024

image of a bagel shop business
This page may feature products from our affiliate partners, which could influence the products we discuss due to potential compensation. Despite this, our evaluations are impartial, based solely on our independent analysis. The content here is intended for informational purposes and should not be seen as legal advice. For professional guidance, consulting with a legal expert is recommended.
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1. Perform market analysis.

Starting a bagel shop begins with understanding the market to ensure your business can meet customer needs and stand out from the competition. A thorough market analysis will guide your business plan, helping you make informed decisions about your product offerings, pricing, and marketing strategies. Here's how you can perform a market analysis:

  • Analyze the local demographic: Identify the age, income levels, and preferences of the population in your target area.
  • Study competitors: Visit nearby bagel shops and cafes to assess their menu, pricing, customer service, and any unique selling propositions.
  • Identify trends: Research current trends in the food industry, especially those pertaining to bagels, breakfast items, and health-conscious options.
  • Understand customer needs: Conduct surveys or focus groups to learn what potential customers are looking for in a bagel shop experience.
  • Assess supply chain options: Look into local suppliers for ingredients to ensure quality and cost-effectiveness.
  • Regulatory considerations: Familiarize yourself with local health codes, business regulations, and necessary permits.
image of a bagel shop business

Are bagel shop businesses profitable?

Yes, if the business is managed and marketed effectively. Many bagel shop businesses are profitable when their menu is diverse, they offer a good selection of products and services, and they create a welcoming environment for customers. Properly managing inventory, costs, and staff can also help ensure a bagel shop's profitability.

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2. Draft a bagel shop business plan.

Creating a comprehensive business plan is a crucial step in launching a successful bagel shop. This plan serves as a roadmap for your business, outlining your vision, market analysis, operational strategy, and financial projections. Here's how to draft an effective business plan:

  • Begin with an executive summary that encapsulates your vision for the bagel shop, intended market, and unique selling propositions.
  • Conduct a market analysis to identify your target demographic, competition, and market trends that may impact your business.
  • Detail your product offerings, including the types of bagels, spreads, and additional menu items you plan to serve.
  • Outline your operational plan, covering location, suppliers, staffing, hours of operation, and any equipment needed.
  • Develop a marketing strategy that includes branding, promotional tactics, and customer engagement initiatives.
  • Prepare financial projections, including startup costs, projected income, expenses, and breakeven analysis to ensure financial viability.
  • Include an appendix with any additional information or documents that support your business plan, such as resumes of key staff or detailed market research.

How does a bagel shop business make money?

Bagel shop businesses make money by selling freshly made bagels, cream cheese, and other breakfast items to customers. They may also offer catering services or specialize in unique flavors like asiago or French toast. Additionally, they may offer coffee and a variety of lunch options. A target audience for this type of business could be early morning commuters looking for a quick breakfast on their way to work.

3. Develop a bagel shop brand.

Creating a distinctive brand for your bagel shop is essential to carve out a unique identity in the market and attract customers. Your brand is the personality of your business, and it should reflect the values, ethos, and uniqueness of your offerings. Below are some key steps to help you develop a successful bagel shop brand:

  • Define Your Unique Selling Proposition (USP): Identify what makes your bagel shop stand out. Is it your secret recipe, organic ingredients, or a fusion of exotic flavors?
  • Choose a Memorable Name and Logo: Select a name that captures the essence of your shop and a logo that is visually appealing and easy to recognize.
  • Develop a Color Scheme and Visual Aesthetic: Pick colors and a design theme that will be consistent across your store design, packaging, and marketing materials.
  • Create a Compelling Brand Story: Share the story behind your shop, the passion for bagels, and the journey that led you to start your business to build a connection with your customers.
  • Establish Your Online Presence: Design a professional website and engage on social media platforms in a style and tone that align with your brand's personality.

How to come up with a name for your bagel shop business?

When it comes to choosing a name for your bagel shop business, the best place to start is by thinking about what sets your shop apart from others. Maybe you have a unique topping that you specialize in, or maybe you have a unique twist on traditional bagel recipes. Try brainstorming words and ideas that relate to what makes your business special. Think outside the box and consider how the name could be used in marketing materials and advertising. Additionally, make sure to research if the name you want is available as a domain name so customers can easily find your business online. Once you’ve settled on a name that captures the essence of your business, it’s time to file the proper paperwork to secure it.

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4. Formalize your business registration.

Once you've crafted a solid business plan for your bagel shop and secured the necessary funding, the next crucial step is formalizing your business registration. This process will vary depending on your location, but the following points outline the general steps you'll need to take to ensure your business is legally recognized and ready to operate.

  • Choose a business structure that best suits your needs, such as a sole proprietorship, partnership, LLC, or corporation, considering factors like liability, taxes, and administrative requirements.
  • Register your business name with the appropriate local or state government agency, ensuring it's unique and not already in use by another entity.
  • Obtain an Employer Identification Number (EIN) from the IRS for tax purposes, especially if you plan to hire employees.
  • Apply for all necessary permits and licenses, which may include a food service license, health department permits, and a general business license.
  • Check local zoning laws to confirm that your chosen location is zoned for a food service business and obtain a Certificate of Occupancy if required.
  • Register for state and local taxes, including sales tax and unemployment insurance tax if you'll have employees.

Resources to help get you started:

Explore vital resources designed for bagel shop entrepreneurs to gain insights on market trends, operational strategies, and tips for business expansion:

  • Baker's Journal: Offers industry news, trends, and innovations relevant to bakery operations, including specialized content for bagel shop owners. Visit site.
  • Modern Bakery Magazine: Provides insights into the latest equipment, ingredients, and business strategies for the modern baking professional. Visit site.
  • The Bagel Industry Report: An annual report detailing consumer trends, growth opportunities, and competitive analysis specific to the bagel sector. Available for purchase from major market research providers.
  • Quick Service Restaurant (QSR) Magazine: Focuses on operational advice and growth strategies for fast-casual and quick-service restaurant entrepreneurs, with articles beneficial for bagel shop owners. Visit site.
  • Restaurant Owner: Offers a variety of resources including business plan templates, financial management advice, and marketing strategies tailored for food service businesses. Visit site.

5. Acquire necessary licenses and permits for bagel shop.

Before you can start baking and selling bagels, it's crucial to ensure you have all the necessary licenses and permits. This step is vital for operating legally and avoiding any potential fines or business interruptions. Below is a list of common licenses and permits you may need for your bagel shop:

  • Business License: Obtain a general business license from your city or county government to legally operate your bagel shop.
  • Food Service License: Required by the health department, this license ensures that your establishment meets all food safety regulations.
  • Sales Tax Permit: If your state has sales tax, you'll need this permit to collect and report sales taxes.
  • Employer Identification Number (EIN): Issued by the IRS, an EIN is necessary for tax reporting purposes if you have employees.
  • Health Department Permit: This is often a separate document from the food service license and may involve regular inspections.
  • Sign Permit: If you plan to have signage outside your shop, some local governments require a permit for this.
  • Building Permit: If you're constructing a new space or renovating an existing location, you'll likely need a building permit.
  • Alcohol License: If you intend to serve alcohol at your bagel shop, this license is a must.

Remember to check with your local and state authorities for specific requirements, as these can vary by location.

What licenses and permits are needed to run a bagel shop business?

If you are running a bagel shop business, you will need to obtain a variety of licenses and permits from both the local and state level in order to legally operate. These can include a business license, food service license, health department permit, zoning permit, and a sales tax permit. You may also need to obtain a liquor license if you plan on selling alcoholic beverages.

6. Open a business bank account and secure funding as needed.

Opening a business bank account and securing funding are critical steps when starting a bagel shop. These steps will help you manage your finances effectively and ensure that you have the necessary capital to cover startup costs and maintain operations until the business becomes profitable. Follow these guidelines to set up your financial foundation:

  • Research banks and credit unions to find one that offers business accounts with low fees and good customer service. Consider banks that provide additional support to small businesses.
  • Prepare the necessary documentation, which typically includes your business registration, EIN, ownership agreements, and personal identification, to open a business bank account.
  • Develop a thorough business plan outlining your bagel shop's concept, market analysis, and financial projections to present to potential investors or lenders.
  • Explore various funding options such as small business loans, lines of credit, investor funding, or crowdfunding platforms to secure the startup capital you need.
  • Consider applying for grants or small business programs that may be available to food industry entrepreneurs or local businesses in your community.
  • Keep personal and business finances separate to simplify accounting, tax preparation, and to establish a clear financial history for your business.

7. Set pricing for bagel shop services.

Setting the right prices for your bagel shop is crucial to attract customers while ensuring profitability. Consider the cost of ingredients, labor, overheads, and competitor pricing to find the sweet spot. Below are some pointers to help you determine the best pricing strategy for your bagel shop:

  • Analyze your costs: Tally up the cost of ingredients, labor, rent, utilities, and other expenses to ensure your prices cover these costs and yield a profit.
  • Know your customers: Understand the spending habits and preferences of your target market. Price competitively without compromising on quality.
  • Check the competition: Research prices at other local bagel shops and cafes. Be mindful not to undercut them so much that you devalue your product.
  • Value-based pricing: Price your bagels based on perceived value rather than just cost-plus. This could mean premium prices for unique flavors or organic ingredients.
  • Consider portion sizes: Larger portions can command higher prices, but ensure they align with customer expectations and appetite.
  • Dynamic pricing: Consider offering specials, discounts for bulk orders, or loyalty programs to keep customers returning.
  • Regularly review prices: Ensure your pricing strategy stays relevant by reviewing and adjusting prices in response to fluctuations in costs, demand, and the competitive landscape.

What does it cost to start a bagel shop business?

Initiating a bagel shop business can involve substantial financial commitment, the scale of which is significantly influenced by factors such as geographical location, market dynamics, and operational expenses, among others. Nonetheless, our extensive research and hands-on experience have revealed an estimated starting cost of approximately $101000 for launching such an business. Please note, not all of these costs may be necessary to start up your bagel shop business.

8. Acquire bagel shop equipment and supplies.

Starting a bagel shop involves careful selection of the right equipment and supplies to ensure you can produce and serve delicious bagels efficiently. It's crucial to invest in high-quality tools and ingredients that will help you maintain consistency and keep customers coming back. Here's a guide to the essential items you'll need:

  • Commercial Mixer: A heavy-duty mixer for making large batches of bagel dough.
  • Proofing Cabinets: To allow the dough to rise in a temperature-controlled environment.
  • Boiling Kettle: A specialized kettle for boiling bagels before baking, which gives them their characteristic texture.
  • Bagel Boards and Peels: For handling bagels while boiling and transferring them to the oven.
  • Commercial Oven: A reliable oven that can accommodate multiple trays of bagels.
  • Slicers: Bagel slicers for quick and uniform cutting.
  • Display Cases: To showcase your freshly baked bagels and attract customers.
  • Refrigeration: For storing perishable ingredients like cream cheese and smoked salmon.
  • Smallwares: Including baking trays, scales, measuring tools, and mixing bowls.
  • Point of Sale System: For efficient order taking and sales tracking.
  • Packaging Supplies: Bags, boxes, and containers for takeout orders.
  • Ingredient Inventory: High-quality flour, yeast, seasonings, and toppings to start your production.

List of software, tools and supplies needed to start a bagel shop business:

  • Commercial Dough Mixer - $2,700
  • Industrial-grade Oven - $7,200
  • Refrigeration Unit - $3,400
  • Chopping Boards - $100
  • Mixing Bowls - $50
  • Knives and Utensils - $150
  • Bagel Slicer - $500
  • Packaging Materials & Baskets - $200
  • Serving Display Trays & Platters -$60
  • Point of Sale Software & Hardware- $2,000

9. Obtain business insurance for bagel shop, if required.

Protecting your bagel shop with the right insurance is critical for safeguarding against unforeseen events and liabilities. It's important to understand the types of insurance that are available and necessary for your business. Below are key steps to guide you in obtaining business insurance for your bagel shop:

  • Research different types of business insurance policies such as general liability insurance, property insurance, workers' compensation, and product liability insurance.
  • Contact multiple insurance agents or brokers to compare quotes and coverage options tailored to the specific needs of a bagel shop.
  • Consider the location, size, and scope of your business to determine the level of coverage needed, as well as any additional riders or policies for comprehensive protection.
  • Review local regulations and landlord requirements to ensure your insurance meets legal and lease obligations.
  • Choose a reputable insurance company with experience in the food service industry and a track record of handling claims efficiently.
  • Regularly review and update your insurance policy to keep up with the growth and changes in your business.

10. Begin marketing your bagel shop services.

Marketing your bagel shop is essential to attract customers and build a loyal base. A strategic approach to promotion will help you stand out in the competitive food service industry. Here are some effective marketing strategies to consider:

  • Develop a Brand Identity: Create a strong brand logo, color scheme, and theme that reflects the unique qualities of your bagel shop, making your business instantly recognizable.
  • Utilize Social Media: Leverage platforms like Instagram, Facebook, and Twitter to showcase your products, share customer testimonials, and engage with your community.
  • Offer Promotions: Attract new customers with opening specials, loyalty programs, or discounts on certain days of the week.
  • Collaborate Locally: Partner with nearby businesses, schools, and organizations to cater events or sponsor activities, increasing your visibility within the community.
  • Optimize Your Website: Ensure your website is user-friendly, mobile-optimized, and includes essential information like your menu, location, and hours.
  • Engage in Local SEO: Use local search engine optimization techniques to appear in local search results, making it easier for customers to find you online.
  • Use Email Marketing: Keep customers informed about new menu items, events, and promotions through regular newsletters and email campaigns.
>> MORE:

What licenses and permits are needed to run a bagel shop business?

  • Commercial Dough Mixer - $2,700
  • Industrial-grade Oven - $7,200
  • Refrigeration Unit - $3,400
  • Chopping Boards - $100
  • Mixing Bowls - $50
  • Knives and Utensils - $150
  • Bagel Slicer - $500
  • Packaging Materials & Baskets - $200
  • Serving Display Trays & Platters -$60
  • Point of Sale Software & Hardware- $2,000

11. Expand your bagel shop business.

Once your bagel shop has established a loyal customer base and a solid reputation, it's time to think about growth. Expanding your business can take several forms, from opening new locations to diversifying your product offerings. Here are some strategies to consider:

  • Research new markets where a demand for bagels exists, and consider opening additional locations in those areas.
  • Explore franchising opportunities to allow others to invest in and grow your brand more rapidly.
  • Enhance your menu with new flavors, seasonal specials, or complementary products such as gourmet coffee or sandwiches.
  • Invest in a food truck to serve bagels at events, festivals, and in areas without a physical store presence.
  • Implement a catering service for business meetings, events, and parties to increase revenue streams.
  • Consider e-commerce by selling your bagels online, either fresh or as a "bake at home" option.
  • Collaborate with local businesses or supermarkets to offer your bagels at their locations.
  • Regularly review and optimize your business operations for efficiency to support a larger scale.