How do I lower Cost of Goods Sold for my bakery/cafe?

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Bakeries can be low-margin businesses, especially if you bake everything from scratch. Here are some ideas to lower your costs.

Analyze Your Profitability

You should also do a profitability analysis of your best-selling products. For example, custom cakes are often unprofitable if the sales volume is low. Specialty drinks like smoothies bring higher margins to boost overall profitability. Product profitability (including production labor) should always be top-of-mind.

Switch Suppliers

You may be able to reduce your costs by 15-25% by switching from a supplier like Sysco to a combination of Webstaurant, Walmart and Sam’s Club. If Walmart and Sam’s Club offer delivery in your area, it may be just as convenient. Just take advantage of the memberships and credit card discounts offered by each (subject to change, of course).

Buy in Bulk from the Best Supplier

Assuming you have storage space, stock up on ingredients when they’re on sale. Regularly compare prices for key ingredients (assuming comparable quality) as prices change over time — sometimes significantly.

Reduce Product Selection

Reducing your product offerings can also reduce costs, as it’s more efficient to make large batches of fewer products than small batches of many products. Too many choices can actually hurt sales, so offer your core best-sellers and some seasonal favorites for variety. Too many options (or too few) can hurt sales, so try to find the right balance.

Use Analytics to Find More Opportunities

And finally, take a look at Sprk™ if you use Square or Clover for your point-of-sale system. It will help you do a profitability analysis, optimize store hours, forecast product-level demand, and other techniques for lowering COGS for your bakery/cafe.

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