Established as a single bakery in Melbourne in 1980, Bakers Delight is now the largest Australian-owned bakery franchise, with over 700 bakeries around the world.
Find out how a Bakers Delight franchise works and how to apply as well as compare your finance options below.
How does a Bakers Delight franchise work?
Bakers Delight operates on a franchise model, meaning potential business owners can purchase a bakery from the franchisor or another franchisee. The new owners will then need to manage the business day to day.
You are given extensive training and you'll benefit from the existing Bakers Delight brand awareness and business infrastructure. You will also receive ongoing operational and marketing support in return for paying compulsory franchise fees. You do not need to be a qualified baker to become a franchisee, but you are expected to manage the business on a full-time basis.
How much does a Bakers Delight franchise cost?
Initial costs
The initial cost to establish a new Bakers Delight bakery is between $450,000 and $550,000 on average, depending on the size and location of the proposed new franchise.
Alternatively, you have the option of purchasing an existing Bakers Delight bakery. The cost to purchase an existing bakery will generally be higher than starting a new bakery and could cost up to $1.2 million. The cost will always depend on the location, the size and the past financial performance of the franchise as well as on the length of the lease and the franchise agreement term.
In addition to the initial set-up and establishment costs, you are liable to pay $50,000 plus GST to secure a 10-year franchise agreement. You are also expected to have between $10,000 and $15,000 of unencumbered cash as working capital.
Ongoing costs
You will also need to pay ongoing weekly royalties of 6.5% plus GST of net sales, as well as a 2% advertising contribution fee per week.
This is in addition to the standard costs of running a retail business, such as rent, wages, insurance and the cost of goods sold.
Profitability
When it comes to retail bakeries, Bakers Delight is considered to be relatively low risk and a good overall investment. Bakers Delight is accredited with the Franchise Council of Australia and has won its Franchise of the Year award twice.
Unlike many franchises, Bakers Delight is upfront about how much its franchisees make and the benefits on offer, such as the following:
- >$140k average operating profit
- >$900k average bakery sales
- >10 years franchise tenure
- 40% of their franchisees are multi-site operators
- 60-70% bank accredited business model
For Bakers Delight franchises to be successful, they may generally need to be in high foot-traffic areas, such as the food court of a busy shopping centre. Businesses in prime locations may bring in more than $10,000 in weekly sales, but will have correspondingly higher rental costs and potentially increased wages for the prime location and increased foot traffic.
How do I apply to become a Bakers Delights franchisee?
To apply to become a Bakers Delight franchisee, there is a step-by-step application process:
- Enquire through their website. You must submit an application form through the Bakers Delight website. You will need to include the following information:
- Whether you are an Australian citizen or permanent resident
- The state and region in which you are interested in buying a Bakers Delight
- The specific bakery that you are interested in purchasing (bakeries currently for sale are advertised on their website)
- Your investment range (up to $500,000)
- Your application will be reviewed by a member of the franchising team. They will respond by sending you an information booklet to your email address for you to read through.
- Phone interview. The franchising team will arrange a 10-15 minute call with you to answer any questions you may have.
- Speak with franchisees. You will be required to visit some Bakers Delight bakeries and speak with some existing franchisees.
- Face to face interview. You will be required to have a meeting in the office of your home state to chat about your plans.
- Two days working in a Bakers Delight. Ensure that Bakers Delight is the right fit for you by working alongside a franchisee in a bakery.
Successful franchisees will be enrolled on a 16-week intensive training program before they begin running their own Bakers Delight, so no experience is necessary to apply.
How to finance a Bakers Delight franchise
Given its length of time in the Australian bakery industry and its market share when it comes to bakeries and bread products, Bakers Delight is an approved franchise with several major lenders in Australia.
This makes obtaining finance easier for potential Bakers Delight franchisees, with many major banks looking favourably upon loan applications to purchase a new or existing franchise.
Consider which of these finance options may best suit your circumstances:
- Unsecured business loan. Many unsecured business loans have loan terms of two years, but this can vary from three months to five years. To be eligible for an unsecured business loan, you will need to have been operating a business for a certain period of time and have achieved a minimum amount of revenue over that time. Business financial requirements make unsecured business loans a good alternative to secured business loans. Loan amounts tend to be a maximum of $500,000.
- Secured business loan. Lenders will typically lend around 70-80% of franchise costs with a secured business loan, provided you own residential property of an appropriate value that you are willing to offer up as security for the loan. The terms of the loan will inevitably vary between lenders, but loan terms from 25-30 years are common for secured business loans. The lender will require a professional valuation of the property before making an offer and, depending on the results of the valuation and the loan amount sought, may require additional security for the loan.
- Franchise loan. Franchise loans involve borrowing against the value of the proposed franchise business itself and do not require the applicant to put up residential property as security for the loan. Franchise loans also have the advantage of requiring a smaller deposit or a lower amount of equity, but they will also have a much shorter loan term than that of a business loan. This is because the loan term of a franchise loan is directly linked to the initial term of the franchise agreement, which is unlikely to be longer than 10 years.
Bakers Delight also has accreditation with a number of Australian banks, which may lend up to 60% of the value of the purchase price of the franchise. You will then need to fund the remaining 40% using your own capital or by using the equity you have in other assets.
How to get approved for finance
Applying for finance to purchase a Bakers Delight bakery is similar to attending a job interview. Not only must the lender be satisfied that the proposed business is a good investment and that you have the financial backing and security necessary to service the loan, the lender must also be satisfied that you, as the prospective business owner, have the ability to run a successful, profitable business and service your ongoing loan repayments.
When attending your appointment with your prospective lender, plan ahead and bring as much detailed, professionally prepared information and documentation as possible. Prior preparedness will show the lender that, not only are you being open and honest about your financial situation, but you have the ability to plan ahead and take a professional approach to your new business venture.
At a minimum, prepare and bring the following documents:
- Your updated resume, highlighting relevant business experience, qualifications, education, skills and training.
- The proposed franchise agreement.
- A detailed business plan, including at least 12 months of profit and loss and cash flow projections.
- Your personal tax returns for at least the last two years.
- If you own or run a business, full audited financial statements for the business for at least the last two years.
- Full bank statements for all bank accounts, loan accounts and credit card accounts in your name.
Compare Bakers Delight business loans
Updated November 15th, 2019
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