Bakery Business Rescue: Fresh From The Oven

July 9, 2024

A “Proven” track record in helping and rescuing bakeries

The bakery industry has faced many financial challenges in recent times, but you “knead” not worry as we have dealt with a number of bakeries that have found themselves in financial difficulties over the past few years. These have ranged from family run bakeries that have served local communities for a number of years; as well as Artisan bakeries serving the most modern of products.

In a recent advisory role, we supported the board of directors on how to restructure its bakery business without an insolvency process being required by ultimately removing the threat of creditors taking action and allowed the business to trade at a level above its break-even point.

A recipe of challenges for the bakery industry – Why are bakeries facing insolvency?

Although one may be forgiven for assuming that the popularity of cooking programmes based around baking, particularly the one with British, bake, great and off all in the title, would have led to an appreciation and demand for beautifully baked produce, unfortunately for commercial operators the picture is much more complicated. The rising costs of energy in recent years – obviously baking requires a great deal of electric/gas – as well as the rising costs of ingredients (the war in Ukraine causing global issues with wheat prices) along with wage pressures following last year’s inflation increase, hike in delivery costs when the fuel price escalated and the ongoing recovery from Covid period closures, are a series of challenges that have been very hard to overcome for bakers. 

Dealing with the assets of a bakery during insolvency or recovery

Not surprisingly, our experiences have shown that many of the assets with potential value that belong to a Bakery will be found in the main kitchen. Industrial mixers and ovens are often the items that required significant outlay by the business, possibly alongside investment in the premises in order to accommodate the machinery.

It is also often the case that unless the business and premises can be taken on as they are then the costs of dismantling and removing the industrial equipment will have little re-sell value. Similarly, with most businesses leasing their premises, upon insolvency the value of the investment is then lost as the property is returned to the landlord. It may even cause a greater liability as the landlord seeks to return the premises to the original conditions in order to let to other types of businesses.

Presenting a positive message to your creditors

The key to achieving the best outcome will often be found in finding a willing purchaser to take on the premises, along with the assets within, as a going concern or create some breathing space for the board to recover the business. When this is done the landlord’s claim is greatly mitigated and suppliers benefit from an ongoing revenue stream for their own businesses. Working with the landlord and suppliers on the backdrop of this information will help to find a positive solution for everyone involved.

We have also found that finance can be obtained to provide some much needed working capital injection.  With the support of the company’s trusted advisor or accountant, the new funds can suddenly be used in a manner that will allow the business to recover and thrive.

Can we assist your bakery business through restructuring or recovery?

We have experience of dealing with many businesses, across many different sectors including bakeries of all types. This wealth of knowledge enables us to understand the challenges different businesses face and identify the correct solutions.

Therefore, whether you are an artisanal bakery serving the up the most sophisticated bread related products on the market or a family run bakery business which has provided loaves and rolls to your local community for decades, if you are facing challenging times and need assistance please do not hesitate to contact one of our offices for a free and confidential initial consultation.