If you’re looking to invest in a business, a bread route could be a viable option to make good money. First things first — What is a bread route?
A bread route is a small-scale business where an independent operator purchases bread from a company’s warehouses and resells the bread to the accounts in his sales territory. The bread route owner makes money from the commission of selling items for grocery stores and bakeries.
It is a good business opportunity for people looking to make some extra money. There are many national bread companies that outsource their distribution process to bread route owners.
The route owners need to have a box truck in which they can make their deliveries, it is one of the key requirements of running a smooth operation.
In this article, I’ll guide you on how to start a bread route business, its pros, cons, and other helpful information you’ll need to grow a successful bread route business.
Keep reading!
How Does a Bread Route Business Work?
Bread routes are sales-oriented businesses of independent contractors who obtain bread from famous companies like Sara Lee, Pepperidge Farm, Gold Medal, Flowers Bread, etc. They resell it to their accounts, usually convenience stores, bakeries, and restaurants in a specific territory.
Here’s what a typical day at work looks like for a bread route owner:
Bread routes have to collect bread from companies and deliver it to their accounts between the hours of 5 am to 1 pm, where they take Wednesdays and Sundays off from work.
They start the route by picking up the fresh baked goods from the local warehouse, loading the products in their trucks, and driving to the accounts to deliver the goods.
The orders are usually placed one week ahead of time and prices are generally consistent, except if there’s a sale going or there’s a seasonal increase in prices.
The owner then restocks the items, takes off the stale items from the shelves, and rotates the older bread to the front. There are some accounts that have more sales than others, so they require services throughout the week, while others require lesser restocking.
The services can increase during the holiday season like Pepperidge Farm and Arnold/Brownberry make huge sales during Thanksgiving.
» This could also be something for you: Are Food Trucks a Good Investment?
Things You Need to Run a Bread Route Business
Here are some crucial things you must have in order to run a bread route business:
A Functional Truck
To deliver the bread, you need to have a truck, so that is part and parcel of running a bread route business.
Fuel
Other than that you need to pay for the gas, and the rent if it’s a rented vehicle.
Laptop
You have to have assets like a laptop with business software to manage your inventory, and financial and route planning.
MyRouteOnline is a good online software for bread route business and can help sort financial and route plans for you.
How Do Bread Route Owners Make Money?
The distributors sell bread to route owners at 80% of the retail price, which they resell to their accounts at 100%. So the route owners get to keep 20% of the difference, that is their commission on the sales.
Bread route owners make money from the efforts they put into their sales. They get a commission of 15-20% on the sales that they get from selling bread to their accounts in a specific region.
For example, if you buy bread from Sara Lee for $8,000 and you resell it for $10,000 to your accounts, you get to keep the difference.
How Much Do Bread Route Owners Make?
Bread route owners make an average of $60,000/year in the United States. This includes their base pay and commissions. The sales commissions vary from city to city and their market trends.
According to Glassdoor, bread route owners make somewhere between $4,000 to $6,500 monthly.
If you tend to grow your sales continuously, you can enjoy a very healthy income out of this business and can easily make a living.
What Are Bread Routes Usually Worth?
A bread route is worth between 15 and 25 times the free cash flow it generates on average. The average weekly route sales are multiplied by an industry multiplier to find the cost of a bread route.
For example, Pepperidge Farms’ bread route in the Texas area may use a multiplier of 20. If the route is making an average of $8,000 per week in sales then the asking price would be $160,000 (8,000 x 20).
The industry multiplier, however, varies from city to city. The same route in Boston may be using a 22 multiplier. The worth is measured by the sales and market trends in a particular area.
How to Buy a Bread Route?
To buy a bread route, approach companies online like Pepperidge Farm, Flower Foods, and Bimbo Bakeries. You need to pay a 15% down payment for the Pepperidge Farm bread route, so if a bread route is worth $160,000 in Texas, the buyer will have to pay $24,000 as an initial installment.
The purchase isn’t solely dependent on the asking price, the seller company then organizes a credit review and interviews the buyer which significantly affects the purchasing process.
It takes up to 10 weeks to buy a route after all the routine checks.
I’d also suggest you go online to search and buy a bread route. Pepperidge Farms, Flower Foods, Arnold, and Sara Lee (part of the Bimbo bakeries) have put up the rates on their websites.
A buyer can have clarity while reviewing the websites, their industry multiplier, and the average sales to estimate the cost.
Some other sites are offering to sell bread routes:
- Bizbuysell
- Bizquest
- Dealstream
- Routesforsale
- Loopnet
- Therouteexchange
» Read my blog post: Is $40,000 A Good Salary? — A Budget Breakdown by State
#1 Financing
The wholesale companies also offer to finance (through lenders) bread routes. Each company’s financing program is different, and they first have a look at the buyer’s credit score, etc.
If a company does not offer to finance, you can always check options that are available online. You may want to check Fundera, which is affiliated with Nerdwallet and offers financing options for small business owners.
You can check the lender’s pricing and fill out an application form to see the one that suits you best.
#2 Insurance
Other than purchasing a vehicle and paying a downpayment for your bread route business, I’d say you look up Bread Truck Insurance and National IDA for insurance plans and ensure financial security.
#3 Set Up an LLC
To register your business as an entity (some bread suppliers require this) you need to set up an LLC which also requires money, so keep some cash reserved for that. Either get a lawyer or search Google for help.
#4 Miscellaneous Costs
Keep some cash in reserve because there are suppliers who hold route owners accountable for inventory purchases and may hold back your sales commissions.
You could also use this cash to smoothly run the operations of the companies you’re working with and not be worried when an unexpected expense comes up, or you have to pay for the truck’s repair.
Before starting, always consult an accountant and ask them to help you make sense of the numbers. Sit down with them to understand the process behind running a business and research properly.
Double-check the sales, the condition of the vehicle, the laptop, run a background check on the company, etc, and begin once you’re completely sure of everything.
#5 Signing the Contract
Once you’ve done all the research, and passed through all the steps, the last part is to make an offer to the company, it can be through a broker, too. The sellers can negotiate the prices, so you’ll have to mutually reach an agreement.
Once the deal is done, you get to sign the contract with the seller. After closing the deal, the seller will transfer the ownership to you. This process usually takes a minimum of 10 weeks.
Is Bread Route a Profitable Business?
Bread route is quite a profitable business as it does not require much investment, and owners start earning immediately after starting the venture. However, the income depends on the motivation and effort you’re willing to put into the business.
I’d say adding new products and accounts to your business grow exponentially.
If you independently run your business, then you will have to maintain a relationship with the wholesalers and the key accounts. Good camaraderie with both of these can help you get introduced to new accounts and wholesalers.
Once you manage to expand your business, your sales will eventually go up. A good relationship can also lend you additional space and as a good businessman, try to offer other services for your accounts to make more money.
The bread route business has immense potential and the money you make depends largely on the effort you’re willing to put in to make it grow.
Buying a bread route is usually less expensive than buying into most other business options. Your income will become more stable if you establish a territory and make regular deliveries. Bread is often seen as a recession-proof product.
Do Bread Routes Bring Passive Income?
Bread route business income can be totally passive once you decide to hire employees to manage the deliveries, restocking, purchasing the products, etc. In return, you’ll have to give up on a percentage of your commissions and pay the employees their salaries.
You can still enjoy having money in your account with minimal involvement in the business.
A word of caution though, there are some suppliers who do not allow the route owners to outsource the operations and want them to be actively involved in the business, so you’ll have to check that.
If your company allows you to hire employees, then it is a win-win situation and if you own multiple routes, then you definitely have to hire help to oversee a portion of the business operations.
Now that I have covered almost everything on the bread route business, now is the time to shed light on the advantages and drawbacks of owning a bread route business.
The Pros Of Owning A Bread Route Business
- It is a good opportunity to make a stable monthly income.
- You can always upscale your business and increase your average revenue.
- They are a good source of passive income once you outsource operations.
- They are easy to sell; you can make a profit from reselling.
- You get to be your own boss, no shifts, no overtime, nothing.
- It is an easy to run business model.
- Low initial investments.
- Low maintenance costs.
- There are multiple financing options.
- You get to decide the company and accounts for your business.
The Cons Of Owning A Bread Route Business
- Purchasing a route can take longer than usual.
- You may have to consider a lot of financial risks.
- You need to have a great credit score and interview performance to buy a bread route.
- The owner may need a broker to purchase a bread route.
- The routes may drain you.
- Suppliers can hold you accountable for inventory.
- Minimal time off if you’re an independent contractor.
- Independence is restricted because of company guidelines and standards.
- You get to be listed as a small-business owner.
- You may not be able to outsource with some companies.
Bread Route FAQs
Can a Bread Route Lose Value?
Yes, a bread route may lose value if it fails to properly deliver to its accounts and customers just like any other route business. Your business may also lose value if your sales and net decrease. Moreover, a bread route business may also lose value if one of its accounts stops taking the services and hire another contractor.
Do Bread Routes Offer Medical Benefits and Vacation Plans?
Most of the bread routes do not offer any medical and healthcare assistance. However, there are companies that do have medical benefits for route owners.
Some of the big distributor companies offer vacation plans but mostly the route owners have to find a substitute to take over the responsibilities during their time away from work.
What Are Protected Bread Routes and Independent Bread Routes?
A protected bread route can be defined as a geographic place or a series of protected stops (e.g., specific addresses instead of an area or region).
You can provide services to more than one supplier on an autonomous route, so your options aren’t as limited in independent routes. Independent routes are often less expensive and have better profit potential, but they are also more competitive.
Are Bread Routes Recession-Proof?
Bread routes are considered to be recession-proof and provide a stable income source as the overheads are comparatively low than other small-scale businesses. Therefore, Owners have more control over their income.
Conclusion
Like every other route business, this one needs some work too. You cannot just start making money at the get-go.
But, it is still worth the effort and a great way to be your own boss and make good money to become financially independent.
