I am a professional chef that now is running a cafe/bakery as a general manager (for the past 4 years). I have a question regarding cost of goods for the business.
Backstory: The bakery and cafe are run as separate entities..including a different general manager for each. Since its inception (4 years ago), the cafe has received its baked goods from the bakery without paying for the items. The cafe is the main retail front for the bakery, however the main revenue source for the bakery are farm markets and wholesale. Bakery Sales at the cafe represent about 6-10% of net sales...so a low figure. The profit margin of the bakery sales is about 15-18%. The employees/inventory for the bakery is paid for by these accounts.
Question: Recently, the cafe has begun to reimburse the bakery for the breads/pastries that it receives daily for retail sales. It is viewed that this will create an atmosphere of greater accountability and less waste at the cafe with these baked goods. Since the bakery management has many accounts, it views this cafe as just another one and would like to handle the business like this, as well. It is my assumption that the push for this system is to aid with cash flow, labor/inventory cost, etc.
The cafe purchases the baked goods for 50% the retail price...$4 retail..we pay $2.
This new system has made a drastic impact on our cash flow and it just does not seem to make sense. One of my biggest concerns is that I must maintain a full and complete stock of the bread line (even if it does not sell that well)...which creates waste/loss that I incur. Does anyone have experience with a bakery that is primarily a wholesale/market bakery and has this kind of system? I am crunching the numbers to find a pay back % that will be good to the cafe business as well as fair to the bakery (which of course should be seeing some of this money.)