How Much Do Bagel Shops Make?

How Much Do Bagel Shops Make? (Bagel Shop Profit Margin)

If you’re thinking now might be the perfect time to open a bagel shop, you may be right! Data from Statista projects that more than 205 million Americans will consume bagels in 2024. 

Better yet, Grand View Research reports that they expect the market to grow 5.1% each year between 2024 and 2030.

However, this industry is also highly competitive. In fact, Tastewise reports that 11.59% of all restaurants offer bagels on their menu. With all that competition, it’s essential that you know how to manage the finances for this type of business.

So, in this article we’ll explore how much both independent and franchise bagel shops can expect to make. Additionally, we’ll take a look at how to manage costs and strategies for boosting your bagel shop revenue.

Key takeaways

• To run a profitable bagel shop, it’s crucial that you manage your costs while implementing strategies to increase revenue.

• Rent, labor, and cost of goods sold (COGS) are typically the most expensive costs for bagel shops to manage.

• High-level strategies for increasing your bagel shop revenue include improving your marketing efforts, leveraging technology, increasing average order value, and increasing customer frequency.

Are bagel shops profitable?

Bagel shops can be quite profitable, but success largely depends on effective cost management and revenue-boosting strategies. Additionally, the revenue and profit potential for bagel shops is dependent on several other factors, such as:

• Location

• Local competition

• Type of bagel shop (ie, independent or franchise)

Generally, bagel shops can expect to attain net profit margins between 5% and 15%, with top-performing franchise locations potentially reaching as high as 25%. We elaborate more on these margins in the next two sections.

Overall though, bagel shops that effectively manage their expenses and attract a steady stream of customers are well-positioned to achieve and sustain profitability.

How much do independent bagel shops make?

Independent bagel shops typically benefit from a strong local customer base, as well as unique product offerings and branding. However, they also usually contend with higher operational costs compared to franchises.

Unfortunately, we weren’t able to find any data regarding revenue and profit margins specifically for independent bagel shops. However, we can make some inferences based on similar types of businesses.

For example, Sharp Sheets reports that the average annual revenue for donut shops is a little over $663,000. Meanwhile, Majesty Coffee reports that small coffee shops can expect to make around $500,000 in revenue each year.

Given the similarity between bagel, donut, and coffee shops, it’s reasonable to assume that independent bagel shops are likely to make between $500,000 and $700,000 in annual revenue.

As far as profits go, Airmart suggests that a good profit margin to aim for is somewhere between 5% and 10%. So, if your independent bagel shop generates $600,000 in annual revenue, you can expect to make between $30,000 and $60,000 per year in net profits.

How much do franchise bagel shops make?

Unlike independent bagel shops, franchise bagel shops often achieve higher revenues because they benefit from:

• Established brand recognition

• Marketing support

• Standardized operations

• Economies of scale

• Reliable and consistent supply chains

For example, according to Franchise Times, Einstein Bros. Bagels, which is owned by Panera Brands, generated a total of $521 million in revenue with 698 stores in 2023. 

This means that, on average, each location earned close to $750,000 in annual revenue, with some stores performing better and others performing worse.

Meanwhile, Vetted Biz reports that profit margins for the bagel shop chain typically fall in the 10% to 15% range. So, if you operate one of these franchises and earn $750,000 in annual revenue, you could expect to make net profits between $75,000 and $112,500.

However, keep in mind that top-performing bagel shop chains in high-traffic areas can achieve net profit margins as high as 25%. For a business making $750,000 in yearly revenue, this translates to $187,500 per year in net profits.

For other bagel shop franchises, average revenue was also in the same ballpark. For instance, Zippia reports Bruegger’s Bagels generates an annual revenue of $130 million. Since there are 192 locations, this means each location makes an average revenue of more than $675,000 per year.

How to manage bagel shops costs

If you hope to achieve profitability, it’s essential that you effectively manage your bagel shop’s costs. Typically, the largest expenses for these businesses are:

1. Rent: To keep rent costs manageable, consider negotiating lease terms or choosing a location that balances foot traffic with affordability.

2. Labor: Efficient scheduling and cross-training employees can help keep labor costs under control. Use employee scheduling software and sales data to optimize staff shifts according to peak and off-peak hours.

3. Cost of Goods Sold (COGS): To manage COGS, which includes ingredients like flour and yeast, negotiate better prices with suppliers and buy in bulk. Additionally, use inventory management tools to track ingredient stock levels, predict future needs based on sales data, and alert you to low stock levels. This will help you reduce waste by avoiding overstocking.

Remember, as revenue grows, it's crucial to manage these costs carefully to maintain or improve profit margins. By focusing on these cost areas and implementing strategies to keep them flat or even reduce them as revenue grows, you can ensure the long-term success of your business.

How to increase bagel shop revenue

While controlling costs is crucial to maximizing your bagel shop’s profits, so is increasing revenue. Fortunately, there are lots of strategies you can employ to start driving more sales.

1. Improve your marketing efforts

If you want to boost your revenue, it’s crucial that you’re able to attract new customers. By developing a comprehensive marketing plan, you can entice potential patrons to give your bagels a try.

While there are lots of different marketing tactics you can employ, we cover a few of the most effective strategies below.

Local partnerships

Forming partnerships in your local community is a great way to help build a loyal customer base and increase foot traffic. You might consider collaborating with groups like:

• Local businesses

• Schools

• Community organizations

For example, you could team up with nearby offices to offer exclusive discounts to their employees. Likewise, you might think about creating a “Bagel Day” event at a local school where you donate a portion of the proceeds to a non-profit.

Lastly, consider hosting your own events to build connections within the community. For instance, you could organize:

• Bagel-making workshops

• Tasting events

• Charity fundraisers

Ultimately, engaging and interacting with your local community not only boosts brand awareness, but also fosters customer loyalty.

Social media marketing

In today’s day and age, having a social media presence is a must for most businesses, and the same is true for bagel shops.

To make the most of social media platforms like Instagram and Facebook, create appealing content that highlights your bagels and your shop. For example, consider posting:

• High-quality photos and videos of your products

• Behind-the-scenes looks at your baking process

• Team member bios

• Customer testimonials

• Contests and giveaways

While the strategies above are largely free to implement, you might also think about using geo-targeted ads to reach local customers. This can be especially effective if your business is new and you don’t yet have an established following.

Email marketing

While the strategies above are great for increasing your visibility and reach, email marketing is perfect for encouraging repeat customers.

To create an effective email marketing campaign, you’ll first need to build an email list of your customers. From there, you can send regular newsletters that include:

• Updates on new bagel varieties

• Special promotions

• Upcoming events

Lastly, consider segmenting your email list to tailor your emails based on customer preferences and purchase history. This will allow you to send hyper-targeted emails offering exclusive offers to the right subset of your customers.

2. Leverage technology

To keep up with the competition and consistently meet customer expectations, it’s also key that you integrate technology into your operations.

By using the right tools, you can streamline your operations to increase efficiency and provide a better overall customer experience.

Point-of-sale (POS) systems

Investing in a modern POS system is important for several reasons. Firstly, it helps to simplify the payment process and reduce human error. 

Additionally, it can provide real-time data on key business insights, including:

• Sales trends

• Customer behavior

• Inventory levels

Lastly, it’s important to note that a comprehensive POS system can help streamline all of your operations in one easy-to-use platform. For example, you can manage inventory, schedule employees, and much more in one integrated system.

Online ordering and delivery

Offering online ordering and delivery has become essential for running a successful bagel shop.

So, it’s important that you implement an online ordering platform that allows customers to place orders for both pickup and delivery. 

Likewise, you might consider partnering with popular third-party delivery services like DoorDash or Uber Eats. However, you can also choose to set up an in-house delivery service if you want more control over the delivery process or don’t want to pay third-party delivery fees.

3. Increase average order value (AOV)

You can also boost your revenue by implementing strategies to increase the average amount customers spend on each visit.

However, this doesn’t mean you should simply raise the prices of your bagels. Instead, consider employing the following tactics to encourage your patrons to spend more.

Premium products

To attract customers willing to pay more for quality, think about introducing high-margin, premium items to your menu.

For example, you could offer gourmet bagels with artisanal toppings, such as smoked salmon with cream cheese and capers or a bagel with avocado and a poached egg.

Ultimately, these upscale options can appeal to customers seeking a premium dining experience. Just keep in mind that this strategy may work better for some brands than others. For instance, if your business emphasizes value and low costs, this tactic may be less effective.

Bundling

Bundling involves creating enticing combo offers. By providing a discount that makes the total price cheaper than buying each item separately, you can encourage customers to make bigger purchases.

For example, you could design a breakfast combo that includes a:

• Bagel

• Cup of speciality coffee

• Side of fruit or yogurt

Overall, bundling not only increases the average order value, but also provides customers with a complete dining experience. Better yet, customers may feel like they’re getting more value from their purchase because of the discount.

Upselling

You can also entice customers to make larger purchases by training your staff to upsell complementary items or upgrades. 

For instance, if a customer orders a plain bagel, suggest adding a premium spread or a side of fresh fruit.

Ultimately, your staff should be knowledgeable about product pairings and able to make personalized recommendations based on customer preferences.

4. Increase customer frequency

One more effective strategy to boost your bagel shop revenue is to employ tactics encouraging customers to visit your business more often.

In an interview with Knock Sense, Lester Pereira, whose been the owner of Mumbai-based The Bagel Shop for 17 years, said:

“We have a significant number of regular customers here, constituting about 40-50% of our guest base, which is indeed remarkable. Repeat guests is what business is all about.”

Since repeat customers are essential to the long-term success of your shop, be sure to consider the following ideas to increase customer retention.

Loyalty program incentives

Implementing loyalty programs can be a great way to entice customers to visit your store more often.

For example, you might offer rewards like a free bagel or significant discount after a customer makes a certain number of purchases.

Additionally, you could launch a tiered loyalty program where customers can unlock better rewards as they reach different spending thresholds.

Running promotions

Running promotions is one of the best ways to attract more customers during slower times. 

For example, you could introduce a “Bagel Happy Hour” with discounts on select items. Likewise, you might consider offering a “Buy One, Get One Free” deal on a specific day of the week.

Additionally, promotions can be a great strategy for getting customers excited to visit your business. You can accomplish this by offering seasonal flavors or limited-time items.

For instance, think about offering pumpkin spice bagels in the fall or a special holiday-themed bagel during festive seasons.

Ultimately, promotions are great for boosting sales during slow periods, as well as creating a sense of urgency and excitement around your bagel shop.

Collecting and implementing feedback

Collecting customer feedback through surveys or suggestion boxes is a great way to understand their preferences and improve your offerings. This can help you provide a better overall customer experience, which can improve customer retention.

For example, if customers frequently suggest adding more vegan options to your menu, you might add a plant-based bagel or spread to meet the demand.

Remember, acting on feedback demonstrates that you value their opinions. In turn, this also encourages repeat business, as customers feel their input directly influences your bagel shop’s offerings.

Earn more profits by maximizing bagel shop revenue and controlling costs

While running a successful bagel shop requires thoughtful financial management, it can certainly be a profitable venture.

Ultimately, by maximizing your bagel shop revenue and minimizing costs, you can create long-term sustainability for your business. However, because there’s so much to manage, it’s crucial that you have the right tools to achieve profitability.

Fortunately, Toast’s POS system has everything you need to streamline your operations and reduce costs, as well improve your customer experience and increase revenue.

To discover all the ways Toast can help you run a more profitable bagel shop, be sure to check out all the great features!