How to Start a Bagel Shop

Do you love bagels? You’re not alone. Bagels were once an East coast phenomenon, but now people across the country enjoy them plain, with a cream cheese smear, toasted and buttered, as sandwich bread and in other ways. 

If you’re a bagel lover aiming to become a bagel master, you could open a bagel shop and join a billion-dollar industry. But before you start mixing the dough, you’ll want to understand the process of starting a business. 

Fortunately, this step-by-step guide lays out all you need to know to open your shop, become a bagel mogul and make some real dough! 

Step 1: Decide if the Business Is Right for You

Pros and cons

Bagel shop industry trends

Industry size and growth

• Industry size and past growth – The U.S. bagel store industry is worth $1.4 billion in 2023 after steady growth the last five years.((https://www.ibisworld.com/industry-statistics/market-size/bagel-stores-united-states/#:~:text=What%20is%20the%20market%20size,to%20increase%201%25%20in%202023.))
• Growth forecast – The U.S. bagel store industry is projected to expand 1% in 2023. 
• Number of businesses – In 2023, 1,578 bagel store businesses are operating in the U.S.((https://www.ibisworld.com/industry-statistics/number-of-businesses/bagel-stores-united-states/))
• Number of people employed – In 2023, the U.S. bagel store industry employs 30,094 people.((https://www.ibisworld.com/industry-statistics/employment/bagel-stores-united-states/))

Trends and challenges

Trends

• Popular bagel flavors include French toast, blueberry, garlic, pumpernickel, and sesame seed.
• More customers are seeking low-calorie, vegan, and kosher bagels.

Challenges

• Bagels are generally not considered healthy, which is a problem for bagel shops as consumers seek to cut down on carbohydrates.
• Supply chain issues make sourcing cream cheese difficult, creating a challenge for bagel shops, who may have to turn to homemade cream cheese.

Consumer spending

• Potential customer base –  202.07 million Americans consumed bagels in 2020.((https://www.statista.com/statistics/281888/us-households-consumption-of-bagels-trend/))
• Average prices – A dozen bagels cost between $7 and $15.((https://www.howmuchisit.org/dozen-bagels-cost/))

Demand hotspots

• Most popular states – The most popular states for bakers are New Jersey, New Hampshire, and New York.((https://www.zippia.com/baker-jobs/best-states/))
• Least popular states – The least popular states for bakers are Mississippi, Oklahoma, and Arkansas.

What kind of people work in bagel shops?

• Gender – 54% of bakers are female, while 46% are male.((https://www.zippia.com/baker-jobs/demographics/))
• Average level of education – The average baker is high school educated.
• Average age – The average baker in the US is 41.7 years old.

How much does it cost to start a bagel business?

Startup costs for a bagel shop range from $35,000 to $80,000. The largest expenses are the space rental, equipment, and an operating budget. 

You’ll need a handful of items to successfully launch your bagel shop business, including: 

• Commercial mixers
• Dough sheeters and rounders
• Commercial ranges and ovens
• Bagel boards and scoops
• Bagel baskets
• Bagel slicers

Start-up Costs	Ballpark Range	Average
Setting up a business name and corporation	$100 - $500	$300
Business licenses and permits	$200 - $500	$350
Insurance	$100-$500	$300
Website	$200 - $1,000	$600
Initial Marketing Budget	$300 - $500	$400
Space rental deposit	$3,000 - $5,000	$4,000
Equipment	$10,000 - $30,000	$20,000
Initial Ingredients Supply	$5,000 - $10,000	$7,500
Initial operating budget	$15,000 - $30,000	$22,500
Total	$33,900 - $78,000	$55,950

How much can you earn from a bagel shop business?

Prices for bagels, cream cheese, bagel sandwiches, beverages, and other items vary, depending on location and other factors. These calculations assume an average sale per customer of $10 and a profit margin of 20%.

In your first year or two, you could have 75 customers per day, bringing in $273,750 in annual revenue. This would mean close to $55,000 in profit, assuming that 20% margin. 

As you gain traction, you might have 150 customers per day. With annual revenue of $547,500, you’d make a tidy profit of nearly $110,000.

What barriers to entry are there?

There are a few barriers to entry for a bagel shop. Your biggest challenges will be:

• Funding the startup costs
• Competing with chain bagel shops

Step 2: Hone Your Idea

Now that you know what’s involved in starting a bagel shop, it’s a good idea to hone your concept in preparation to enter a competitive market. 

Market research could give you the upper hand even if you’ve got the perfect product. Conducting robust market research is crucial, as it will help you better understand your customers, your competitors, and the broader business landscape.

Analyze your Competitors 

Research bagel shops in your area to examine their products, price points, and customer reviews.

• Make a list of bagel shops that offer similar products. 
• Review your competitors’ menus – their features, pricing, and quality – and marketing strategies
• Check out their online reviews and ratings on Google, Yelp, and Facebook to get an idea of what their customers like and dislike.
• Identify your competitors’ strengths and weaknesses. 

This should identify areas where you can strengthen your business and gain a competitive edge to make better business decisions.

Why? Identify an opportunity

You’re looking for a market gap to fill. For instance, maybe the local market is missing a bagel shop that offers breakfast and lunch sandwiches, or a bagel shop with fantastic, fair-trade coffee. 

This could jumpstart your word-of-mouth marketing and attract clients right away. 

What? Crafting the perfect bagel menu for your bagel shop

You’ll need to create a menu of bagel flavors, including creative ones, such as baked salmon or jalapeno and cheddar.

You can also offer bagel breakfast and lunch sandwiches, side items, pastries and desserts, and a variety of beverages. 

How much should you charge for bagels?

Your prices will be based on your local market, as well as your ingredients and other costs.

Once you know your costs, use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Who? Identify your target market

Your target market largely depends on your location. If you’re in an area filled with college students and young professionals, you might zero in on TikTok, Instagram, and LinkedIn. 

Where? Choose a bagel shop location

You’ll need to rent a space for your bagel shop, preferably in an area with high traffic for breakfast and lunch, such as a metro area. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.

When choosing a commercial space, you may want to follow these rules of thumb:

• Central location accessible via public transport
• Ventilated and spacious, with good natural light
• Flexible lease that can be extended as your business grows
• Ready-to-use space with no major renovations or repairs needed

Step 3: Brainstorm a Bagel Shop Name

Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.

Here are some ideas for brainstorming your business name:

• Short, unique, and catchy names tend to stand out
• Names that are easy to say and spell tend to do better 
• Name should be relevant to your product or service offerings
• Ask around — family, friends, colleagues, social media — for suggestions
• Including keywords, such as “bagels” or “bagel shop”, boosts SEO
• Name should allow for expansion, for ex: “Everything Euphoria” over “Worldwide Whirl Bagels”
• Avoid location-based names that might hinder future expansion
• Use online tools like the Step by Step Business Name Generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Finally, make your choice among the names that pass this screening and go ahead and reserve your business name with your state, start the trademark registration process, and complete your domain registration and social media account creation. 

Your business name is one of the key differentiators that sets your business apart. Once you pick a name, reserve it and start with the branding, it’s hard to switch to a new name. So be sure to carefully consider your choice before moving forward. 

Step 4: Create a Bagel Shop Business Plan

Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:

• Executive Summary: Provide a brief summary of your business plan, highlighting its key points and objectives.
• Business Overview: Describe the nature of your bagel shop, its location, and the range of bagel products and services it will offer.
• Product and Services: Detail the types of bagels, spreads, beverages, and additional items your shop will serve to customers.
• Market Analysis: Analyze the local market for bagel shops, including customer preferences, demographics, and potential demand for your offerings.
• Competitive Analysis: Identify existing bagel shops and other breakfast food establishments in your area, emphasizing what sets your shop apart.
• Sales and Marketing: Explain your strategies for attracting and retaining customers, which might include promotions, loyalty programs, and online presence.
• Management Team: Introduce key team members involved in your bagel shop, highlighting their relevant experience and roles.
• Operations Plan: Outline the daily operations of your bagel shop, covering everything from sourcing ingredients to baking, serving, and maintaining the shop.
• Financial Plan: Present financial projections, including startup costs, revenue forecasts, and profit margins.
• Appendix: Include supplementary materials, such as sample menus, supplier contracts, or market research data, to support your business plan.

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.

Step 5: Register Your Business

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to bagel shops. 

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state. 

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your bagel shop will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

Here are the main options:

• Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
• General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
• Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts. Here’s how to form an LLC.
• C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation. Read how to start a corporation here.
• S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have. 

Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN. 

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

• Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
• SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
• Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
• Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
• Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
• Personal: Self-fund your business via your savings or the sale of property or other assets.

Bank and SBA loans are probably the best option, other than friends and family, for funding a bagel shop business. You might also try crowdfunding if you have an innovative concept.  

Step 8: Apply for Licenses/Permits

Starting a bagel shop business requires obtaining a number of licenses and permits from local, state, and federal governments.

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

You’ll definitely need some sort of food and health safety licenses, so be sure to check with your state and local governments for health and food service requirements. You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your bagel shop business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account. 

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

• General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
• Business Property: Provides coverage for your equipment and supplies.
• Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
• Worker’s compensation: Provides compensation to employees injured on the job.
• Property: Covers your physical space, whether it is a cart, storefront, or office.
• Commercial auto: Protection for your company-owned vehicle.
• Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
• Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.

Step 11: Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.  

You may want to use industry-specific software, such as Toast, eHopper, or Lavu, to manage your menu, inventory, online pickup orders, and customer loyalty program.

Accounting

• Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero. 
• If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.

Create a website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism. You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

Your customers are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. SEO will help your website appear closer to the top in relevant search results, a crucial element for increasing sales. 

Make sure that you optimize calls to action on your website. Experiment with text, color, size, and position of calls to action such as “Order To Go”. This can sharply increase purchases.

Marketing

Here are some powerful marketing strategies for your future business:

1. Social Media Teasers: Leverage the visual appeal of bagels by posting high-quality images and short videos on social media platforms, teasing upcoming flavors, specials, or behind-the-scenes glimpses to create anticipation among your audience.
2. Loyalty Programs and Specials: Implement a loyalty program offering discounts or freebies after a certain number of purchases, and regularly introduce limited-time specials or promotions to keep customers excited and encourage repeat visits.
3. Local Partnerships and Events: Forge partnerships with local businesses or sponsor community events to increase brand visibility. Consider participating in farmers’ markets or food festivals to introduce your bagels to a broader audience.
4. Creative Sampling: Offer free samples of new or signature bagel flavors during peak hours to entice curious customers. Word of mouth is a powerful tool, and providing a taste of your delicious bagels can convert samplers into regulars.
5. Innovative Catering Packages: Develop attractive catering packages for events, meetings, or gatherings. Highlight the convenience of a diverse bagel spread and emphasize customization options to appeal to a wider range of clients.
6. Engaging Email Campaigns: Build an email subscriber list and send out regular newsletters with exclusive promotions, news, and insider insights. Engaging content will keep your bagel shop top-of-mind for subscribers.
7. Themed Nights or Specials: Introduce themed nights or specials, such as “Bagel and Brew Fridays” or “Family Brunch Sundays,” to create a recurring schedule that customers can look forward to, fostering a sense of community around your bagel shop.
8. Online Reviews and Testimonials: Encourage satisfied customers to leave positive reviews on popular review platforms. Highlight these testimonials on your social media and in-store to build trust and credibility with potential customers.
9. Student and Corporate Discounts: Offer discounts for students and nearby businesses to attract regulars from local schools and offices, providing a steady stream of customers during peak hours.
10. Interactive Workshops or Classes: Host bagel-making workshops or classes to engage with the community. This not only provides a unique experience but also creates an emotional connection, turning participants into loyal patrons.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your bagel shop meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your bagel shop business could be: 

• Brilliant bagels made fresh all day!
• On the go? Grab a yummy bagel sandwich  
• The biggest bagel selection in town 

Networking

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a bagel shop business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in bagel shops for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in bagel shops. You’ll probably generate new customers or find companies with which you could establish a partnership. 

Step 12: Build Your Team

If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a bagel shop business include:

• Counter Clerk – take orders, customer service
• Bagel Maker – prepare and bake bagels
• Sandwich and Food Preparer – prepare sandwiches and other foods
• General Manager – scheduling, inventory management, accounting

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent. 

Step 13: Start Making Money!

Bagels are beloved, so you can make great money with your own bagel shop! It takes a bit of capital, but it can be very profitable and you could soon expand to multiple locations. Someday your business might even be the next Einstein Bros Bagels! 

Now that you’ve got some business know-how, you’re ready to hit the kitchen and achieve big-time bagel success.