Friday, October 7, 2011

Can Portland Support a $50/hr Rental Kitchen?

Yes, I’m back, well at least for now. Time will tell. As you can see, something incited me to put fingers to keyboard. I almost titled this post “The dudette does not abide”, but in the interest of not attracting just Jeff Bridges fans, I thought better of it.

When I was still living in NYC and doing cost analysis for whether it was feasible to get my business off the ground there (which, it wasn’t), commissary (or rentable commercial kitchen) time was running about $25 an hour. Yes, costs have gone up everywhere so I imagine the same space, if it was available would be closer to $50/hr. However, everything is relative to location and what the market will bear.

So let’s do some math, I’m assuming you’re just starting out or have been in business for a short time. Let’s take the $50/hr as a base hourly rent you’re paying for kitchen rental space. Now let’s assume you’ve budgeted rent as 20% of your forecasted income (Note: everyone has their own formula of how much rent/sales ratio should be, I’ve seen it as low as 8% and high as 32%). This means you need to produce $250 an hour of product, outside of additional labor, food costs, and packaging.

Perhaps you’re a cake baker, and selling your cakes wholesale at $25. Can you bake, cool and frost/finish 10 cakes an hour to stay with your budgeted percentage? Say you’re scheduled for a four hour kitchen rental - $200. That’s $1000 of product (or 40 cakes).

The pricing could work a little better if you were a caterer and only needed 4 hours to put together a $1500 event, where your margins tend to be higher than wholesale.

Is there a market demand in the Portland area for this level of pricing? Time will tell, and if so, prepare to have your favorite $2 coffeehouse cookie set you back $4.