How Much Does It Cost to Open a Bagel Shop? (Sales Forecast and Breakeven Analysis Included)

You need approximately $242,000 to start a medium-scale bagel shop in the United States of America. Note that your ongoing expenses will include rent, licensing fees, employees’ salaries, costs for bagel-making supplies and other foods, costs for beverages, and costs for serving supplies.

Bagels are a classic breakfast food that became popular in New York City but is now eaten almost everywhere in the United States.

Bagel shops are known as places that sell bagels, which are convenient, tasty, and filling meals, to patrons for breakfast and lunch.

Coupled with bagels, most bagel shops also sell beverages and sides, so customers can get a complete meal quickly. The ideal customer for a bagel shop business is an individual who wants breakfast but doesn’t have much time. This is because bagels are a quick, satisfying food.

These shops often appeal to both people with lots of discretionary income and those on tighter budgets, because bagels are relatively cheap.

Estimated Cost Breakdown to Open a Bagel Shop

The cost of starting a bagel shop usually runs into tens of thousands of dollars. Some of your biggest expenses include rent, equipment costs, and employee salaries (if hiring employees). Other expenses include bagel-making supplies, expenses for other foods and beverages, supplies to put bagels in, and cups.

However, if you want to keep your start-up costs low, you can find a small retail location so the fund allocated to rent can be lower.

A small location will also make it easier to grab items for customers, so you can be able to do all the work yourself and might not need to hire an employee. You can also buy used equipment, which costs well lesser than new ones and can also provide significant savings. Nonetheless, below is an estimated cost of starting a bagel shop in the united states.

1. Cost of registering the shop in the United States of America – $750.
2. Legal expenses for obtaining licenses and sellers permit as well as the accounting services (software, P.O.S machines, and other software) – $2,800
3. Marketing promotion expenses for the grand opening of the bagel shop and the printing of promotional flyers – $4,200
4. Cost of employing a business consultant and writing of a well-detailed business plan – $2,000.
5. Cost of purchasing the needed insurance and liability protection for bagel shops (general liability, workers’ compensation, and property-casualty) coverage at a total premium – $3,000.
6. Cost of Leasing or purchasing a suitable shop facility in a good location – $80,000
7. Cost of shop remodeling (construction of cages, kernels, racks, and shelves) – $30,000.
8. Other start-up expenses including stationery ($500) and phone and utility deposits – $2,500
9. Operational cost for the first 3 months (salaries of employees, payments of bills et al) – $40,000
10. Bagel shop start-up inventory (costs for bagel-making supplies and other foods, costs for beverages, and costs for serving supplies et al) – $60,000
11. Cost of acquiring shop equipment (cash register, security, ventilation, signage) – $4,200
12. The cost of purchase and installation of CCTVs: $2,000
13. The cost for purchasing shop furniture and gadgets (Computers, Printers, Telephone, TVs, Sound systems, tables and chairs et al): $4,000.
14. Cost of launching a website and order processing software: $1,200
15. Shop marketing and promotion cost: $5,000

Total: $242,000

How Do Bagel Shops Make Money?

A bagel shop business generates revenue by selling bagels, other food items, and beverages to customers. Some of them may also cater for events and contractual agreements.

According to reports, a plain bagel is priced from $1.80 to $3.00 and a bagel with cream cheese from $1.65 to $4.50, although prices elsewhere might be slightly lower, as New York City is known both for its bagels and high prices.

The other foods and beverages sold by bagel shops, which include fresh fruit, yogurt, coffee, and tea usually cost about the same as a bagel or a bagel with cream cheese.

The profit a bagel shop can make rests on how many customers it can serve in a day, week, month, or year. For this reason, choosing a suitable location is essential to the success of a bagel shop.

Sales Forecast and Breakeven Analysis

1. Startup Costs: $242,000
2. Average Price per Bagel: $2.50
3. Variable Costs per Bagel: $0.50 (ingredients, etc.)
4. Fixed Costs (rent, utilities, salaries, etc.): $8,000 per month or $96,000 annually.
5. Annual Growth Rate in Sales Volume: 10%

Year 1 Forecast

• Initial Sales Volume: Determine based on the breakeven analysis.
• Revenue: Price per bagel number of bagels sold.
• Total Variable Costs: Variable cost per bagel number of bagels sold.
• Total Costs: Variable Costs + Fixed Costs.

Breakeven Analysis for Year 1

To find the breakeven point where total costs equal total revenue:

Breakeven Volume = Fixed Costs ÷ (Price per Bagel − Variable Cost per Bagel)

Breakeven Volume = 96,000 ÷ (2.50−0.50)

 = 96,000 ÷ 2.00

 = 48,000 bagels

Sales Volume Assumptions for Forecast

• Year 1: 50,000 bagels (just over breakeven)
• Year 2: 50,000 × 1.10 bagels
• Year 3: 55,000 × 1.10 bagels

Revenue and Costs

• Year 1:
  • Revenue: 50,000 × 2.50
  • Total Costs: (50,000 × 0.50) + 96,000 = $121000
• Year 2:
  • Revenue: 55,000 × 2.50 = $137,500
  • Total Costs: (55,000 × 0.50) +96,000 = $123,500
• Year 3:
  • Revenue: 60,500 × 2.50 = $151,250
  • Total Costs: (60,500 × 0.50) + 96,000 = $126,250

Profits

• Year 1 Profit: 125,000 − 121,000 = $4,000
• Year 2 Profit: 137,500 − 123,500 = $14,000
• Year 3 Profit:151,250 − 126,250 = $25,000

Breakeven Point: 48,000 bagels per year at $2.50 each.

3-Year Sales Forecast Summary:

• Year 1: 50,000 bagels sold with $125,000 revenue and $4,000 profit.
• Year 2: 55,000 bagels sold with $137,500 revenue and $14,000 profit.
• Year 3: 60,500 bagels sold with $151,250 revenue and $25,000 profit.

These forecasts assume consistent growth and do not factor in possible changes in the market or additional costs for marketing and promotions that could drive higher sales volume.

Factors That Influence the Cost of Opening a Bagel Shop

1. The Type of Bagel Shop Business

The fact that anyone who wants to open a bagel shop may either decide to start the business from a kiosk, makeshift shop, or a standard shop facility means that the cost will be different.

The truth is that it is far cheaper to open a bagel shop from a kiosk or makeshift facility than from a shop facility. As a matter of fact, the cost of renting and equipping a shop facility will consume the bulk of your budget.

2. The Location Where You Want to Start the Business

In the United States of America, some cities are pretty expensive to start and run a business. If perchance you settle for a city that is expensive to run a business, then it will cost you more when compared to someone who chooses to start his or her bagel shop in a city that is way cheaper to start a business.

3. The Cost of Equipping Your Bagel Shop

Aside from getting comfortable furniture such as stools, couches, sofas, tables, shelves et al, you will also need electronics such as flat-screen televisions, sound systems, and perhaps a public address system.

When it comes to your working equipment, you will need to purchase a bagel dough mixer, bagel forming machine, bagel proofer, bagel boiler, bagel oven, bagel slicer, dough divider, dough sheeter, proofing racks, baking trays, sinks and dishwashing equipment, shelving and storage units and ice machine et al.

4. The Number of Staff You Want to Recruit

The only reason why this might not be an issue for you is if you choose to open your bagel shop from a kiosk or as a one-man business where you can handle all aspects of the business.

But if you choose to open a standard bagel shop, then you must make plans to recruit and train key employees who will occupy different roles in your organization.

You should make plans to recruit a Manager, an Accountant or cashier, a bagel maker, salesgirls and salesboys, and kitchen staff. As expected, the budget for recruiting and training your employees is going to take a significant portion of your budget.

5. The Cost of Obtaining the Needed Licenses and Permits

Interestingly, this cost may vary across different states and jurisdictions in the United States. The fact that different states require different types of licenses and permits means that your budget for permits and licenses will be determined by the state you want to open your bagel shop.

As expected, you should budget for a general business license, seller’s permit, food handlers permit, building permit, fire and safety permit, zonal permit, and signage permit amongst others.

6. Your Ongoing Expenses

Anyone who wants to open a bagel shop should have a budget for ongoing expenses such as ingredients (flour, yeast, toppings), utilities (electricity, water, gas), rent or mortgage payments, equipment maintenance and repairs, insurance (liability, property), marketing and advertising costs, payroll for staff, permits and licenses, and any other miscellaneous expenses related to running the business.

7. Miscellaneous Expenses

Although there is no specific amount when it comes to miscellaneous expenses for a bagel shop, you may decide to include the cost of hiring and paying a business consultant and attorney, the cost of branding, promotion, and marketing of the bagel shop, the cost for logistics, the cost of the purchase and customizing of uniforms, shoes, and caps for your employees, and the cost of the grand opening of the bagel shop as part of your miscellaneous expenses.

Conclusion

Starting a bagel shop can cost way more than expected and you are advised to research your market extensively before investing your funds. A bagel shop business can set itself apart by making authentic bagels. Many places, including coffee shops, grocery stores, and diners, offer bagels.

These are often frozen products that are thawed, though. A fresh-baked bagel will taste much better, and many people will specifically seek out great bagels. For this reason, business owners should take a bagel-making course.

You can also increase your business profitability by up-selling customers. Featuring bagel sandwiches, which sell for more than a bagel with cream cheese, and offering other options like espresso beverages and granola, can increase the average ticket price.