Mr Bakery Master Business Plan — Unit Economics and Prime Cost
The economics of a single unit, and prime cost at 63.2% of revenue — the ingredient plus labour ratio that governs the bakery.
Unit Economics and Prime Cost
Jump to section
- Overview & contents
- i. Important Notice
- 1. Executive Summary
- 2. A Note on the Name
- 3. The Market and Why Scale Is the Enemy
- 4. The Product Strategy
- 5. SWOT and Competitive Position
- 6. Route to Market
- 7. Unit Economics and Prime Cost
- 8. Returns: The Wholesale Bakery Tax
- 9. Energy
- 10. The Five-Year Build and Its Gates
- 11. Funding
- 12. People and Production
- 13. Food Safety and Compliance
- 14. Financial Projections
- 15. Break-Even
- 16. Sensitivity and Scenarios
- 17. Risk Management
- 18. Implementation Timeline
- 19. Returns
- 20. Key Performance Indicators
- 21. Key Assumptions
- 22. Conclusion
- A. Appendix A: Consolidated Financial Summary
- B. Appendix B: Capital Schedules
- C. Appendix C: Funding and Debt Schedules
- D. Appendix D: Risk Register
- E. Appendix E: Glossary
- 7.1 Ingredients
- 7.2 Labour
|
% of revenue |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|---|---|---|---|---|---|
|
Ingredients |
37.2% |
36.5% |
35.8% |
35.2% |
34.5% |
|
Packaging |
4.1% |
4.0% |
3.9% |
3.8% |
3.7% |
|
Labour |
27.8% |
27.1% |
26.4% |
25.7% |
25.0% |
|
Prime cost |
69.1% |
67.6% |
66.1% |
64.7% |
63.2% |
|
Energy |
5.8% |
5.9% |
6.0% |
6.1% |
6.2% |
|
Distribution |
5.6% |
5.3% |
4.9% |
4.5% |
4.2% |
Prime cost is ingredients plus packaging plus labour, stated as a percentage of net revenue. It falls from 69.1 per cent to 63.2 per cent across the plan. Energy and distribution sit outside it and are reported separately because they behave differently: energy rises as a share of revenue while distribution falls.
7.1 Ingredients
Ingredient cost is the largest single line at 34.5 per cent of revenue by Year 5. Two disciplines control it: buying flour on contract rather than at spot, and weighing every batch. A bakery that scales recipes by eye rather than by scale loses several percentage points of margin invisibly.
|
Discipline |
Practice |
Value |
|---|---|---|
|
Contract buying on flour |
Forward-priced volume rather than weekly spot purchase |
Flour is roughly half the ingredient line; spot exposure is the single largest input risk |
|
Weighing every batch |
Scales at every station; no scaling by eye |
A three per cent yield loss on ingredients is R177 000 a year at Year 5 |
|
Recipe book under version control |
One documented recipe per line, changed only deliberately |
Prevents the drift that occurs when three bakers each make it slightly differently |
|
Yield measured per batch |
Actual output against theoretical output, logged |
Surfaces a problem on the day rather than in the monthly account |
|
Waste and rework recorded separately |
Distinguishes production waste from customer returns |
Two different problems with two different fixes |
|
Ingredient stock counted weekly |
Against issues and production |
The check that makes the weekly prime cost calculation reliable |
7.2 Labour
Labour falls from 27.8 per cent of revenue to 25.0 per cent — a gain of 2.8 points across five years while output triples. That modest improvement is the honest position: a bakery is not a business where labour scales away. The bake is a fixed sequence of operations and a larger volume mostly means more of them.
What does improve is shift utilisation. The same production team that bakes 880 units in Year 1 can bake materially more within the same shift before a second shift is needed, and the gain in Years 2 and 3 comes almost entirely from filling that shift. Beyond it, labour scales close to proportionally, which is why the improvement flattens after Year 3.