A bread route is just like any other routing business. You will typically operate as an independent contractor, delivering products to various accounts in a specific territory. That means you’ll be putting items in grocery stores, bakeries, offices, delicatessens, and many other businesses.
Since the average price of purchase a bread route in the United States is $10,000, the pros and cons of this decision must be carefully evaluated before proceeding. That expense doesn’t include any vehicles, insurance, or other necessities that might be required for you to do your work.
List of the Pros of Buying a Bread Route
1. A bread route provides a stable income opportunity.
You can purchase a bread route for a lot less than what it would take to buy into most other business opportunities. Once you establish your territory and get a regular stream of deliveries going, then your income will become very stable. Distributors will determine your final cut, so you’ll want to pay attention to what your commission will be. One of the most common structures is to sell you the bread at 80% of retail, allowing you to sell the product to your accounts at 100%. That means you get to pocket the 20% difference.
2. It is up to you to decide your income levels.
Your bread route income will depend entirely on how much product you can sell each day. Motivated owners can add new products and accounts regularly, expanding their revenue base to earn plenty of money. If you can secure additional display space or provide other services that businesses need, then there are additional opportunities that might come your way. The potential that you have in this business opportunity is undeniable. If you’re a self-starter, then this venture could be one that is highly profitable.
3. There is always the potential for growth with a bread route.
Bread is a food product that most households keep available regularly. That means you can work with several businesses in your area to keep a steady number of accounts supplied with items. Every time you add a new client to your routine, there are more chances to earn money. You’re not limited to one territory with this business either. You can expand into other areas to keep building up your base to create a lot of residual income opportunities. The only limitation on your success with this advantage is the amount of time you’re willing to work.
4. You get to be your own boss when operating a bread route.
When you decide to purchase a bread route, then you get to be your own boss. That means you have some flexibility in setting your schedule and the hours you choose to work. Some of your accounts will have specific receiving hours that you must meet to make money, but you won’t be dealing with someone trying to micromanage you. Being an independent operator often makes you a small business owner in your community. There are a lot of perks that come with that status.
5. You’re working with a very simple business model.
You won’t be dealing with a lot of variable costs when you start operating a bread route. Your workload and schedule is pretty much the same each week. Since it is up to you to decide how big your business grows, you can limit the management tasks that come with the status of being a business owner. You’ll need to do some accounting work and manage other administrative tasks without receiving compensation for that output, but software tools like QuickBooks can make that work fairly easy to do.
6. You can sell your business at any time.
You are self-employed when operating a bread route to a certain extent. If you work harder and longer than other people in your territory, then you’ve got an opportunity to make a lot of money. Since you are an independent operator, there is always the option to sell the route later on if you decide this career option isn’t for you. If you purchase a route for $10,000 and can build its value to $25,000, then there is some pure profit potential that you can pocket if you’re willing to put in the time.
7. You get to choose what company and products you sell.
If you decide to get into a bread route, then your products will be baked goods. You might have the option to provide bagels, rolls, and similar items to your accounts. Where the real freedom lies is in the ability to pick the company that you represent. Each one offers specific advantages and disadvantages that you’ll need to consider before making your investment. When you know what you’re looking for before you even start the process of finding an opportunity, then the rewards can start flowing faster.
8. Many route providers offer access to financing.
If you purchase a bread route directly from the product provider, then there is an excellent chance that you’ll have access to financing options for this employment opportunity. Since personal loans in this area are often limited to $20,000 or less, you might not have enough cash liquidity available to break into this business right away. By working with the provider, you can form a relationship with your “employer” while creating new opportunities to work.
This advantage does come with some significant issues that you must consider, especially when reviewing what would constitute a breach.
9. If you sell the route, then you hold the note of the remaining balance.
Any balance remaining on a bread route after making a down payment is usually held by the seller. If you decide that this business is not right for you, then this role can start to provide you with passive income opportunities. The notes that you hold are personally guaranteed by the buyer, so there are recovery options if the payments don’t come through. Most payments are monthly and equal about one week of the net for the route. Interest rates on the balance can be as high as 8%, which is why buying one to increase its value is a popular way to make money.
10. Most routes include the vehicle as part of the cost.
If you decide to purchase a bread route, then most of the time, the truck is included in part of the initial cost. You can expect to pay more for a new truck than you would a used one, so it is essential to review the condition of it before agreeing to anything. If the vehicle weighs more than 18,000 pounds, then a CDL is necessary to operate your route. This advantage does come with some expenses, but at least you’ll know that your transportation needs are already met when you make that initial investment.
List of the Cons of Buying a Bread Route
1. There are a lot of financial risks to consider with a bread route.
Once you get beyond the startup costs for a bread route, there are still several financial risks that you must consider. Most distributors will require you to purchase the product from them directly before you start to service your accounts. Since you’re paying for these items in advance, all of the risk falls on your shoulders. Failing to sell the items means that you’re taking a financial loss. Depending on what your agreement is with the route, any damaged or spoiled items could also be your responsibility.
2. Some bread routes might require you to use a broker.
Brokers can market bread routes at the local, regional, or national level. If you’re trying to sell one, then they can put you in touch with a lot of different prospective buyers. Some of them even have the ability to pre-qualify interested parties if you’re looking to get out of the business. When you want to purchase a route, it may be wise to avoid this type of purchasing arrangement because the appraisal might be higher than what it should be.
Most valuations involve a 20-to-1 ratio based on the amount of profit you earn in a week. That means a $1,000 route would sell for $104,000. You can find some ratios as high as 24-to-1 in the industry today. If you encounter an offer that is higher than that, then the bread route is probably over-priced.
3. Working with major brands can require a significant investment.
The ratio-based pricing doesn’t always apply when looking at the true cost of purchasing a bread route. If you work for a major international brand moving product, such as Pepperidge Farms or PepsiCo, then you might see a price at four times what your net profits are for the year. Using the example from above, that would mean you’d need a $208,000 investment to get profits of $1,000 per week.
Most of the route owners who are willing to hold a note will want a minimum of 50% down for the purchase to take place. You might see a refusal to move on an offer unless you can put 70% down in some situations.
4. It can take a lot of time to purchase a route.
The process of buying a bread route can take up to 10 weeks to complete in some areas. The length of time that you face with this disadvantage depends on the financing requirements that are necessary. The type of route you purchase can be a deciding factor as well. Once you agree with a seller on a final price, then an intent to purchase can be submitted. This documentation holds the route for the buyer until all of the paperwork is in for processing. If you want an immediate income opportunity, this option might not be it since it could be three months before you start seeing some profits come your way.
5. You will probably need to have excellent credit to obtain a financing package.
Financing is possible if you need money for the down payment for your bread route. A personal loan is an option if you only need $10,000 to $20,000 to make this opportunity happen. Since the Small Business Administration in the United States doesn’t usually provide a business loan for a route, it will be your credit score that becomes the foundation of your financing package. If you don’t have great credit right now and there isn’t enough money to complete the sale, then you’ll want to look for a different employment opportunity.
6. Protected routes can become unprotected in some circumstances.
There are two different types of routes to consider. If you work in a protected route, then no other contractors from the same distributor can deliver product to your territory or attempt to open a new account. Unprotected routes are the opposite, but the increase in competition typically earns you a higher income.
If you decide to purchase a bread route, then you will want to read the contract carefully to see what your protected status will be. There are circumstances in some agreements where the provider can decide to change or limit your territory to increase competition levels. You might also receive a protected spot, but only have a 1-mile circumference where you can operate independently from the competition. That’s why it might be useful to have an attorney review any agreement before you put your signature on the dotted line.
7. It is not unusual to encounter distributor issues with a bread route.
If you start operating a bread route, then you will quickly discover that there can be specific problems that happen with your distributor. One of the most common complaints is that there isn’t enough of a product to go around, which is problematic if you operate in an unprotected territory. The warehouse that supplies your bread might be a long way from your usual route. There can even be delivery issues that prevent you from receiving items in a sellable condition. All of these problems can happen at once, leaving you without anything to sell to your accounts.
If you have nothing to sell, then there is no way for you to make money from your bread route investment.
8. You must operate as a small business owner.
There are zero flexibility options when you purchase a bread route. You will function as an independent operator, which means the government classifies you as a small business owner. Your income will be subject to the self-employment tax in the United States. That expense is the employer’s share of Social Security and Medicare that people pay when they work for themselves. You can deduct that amount from your income at tax time, but it is an additional expense that some people forget to budget.
If you end up being sick or want to take a vacation, you’ll need to find someone to cover your route for you. Some service providers offer relief services for a percentage of the profit, but it will still be up to you to cover the deliveries.
9. You must still comply with specific standards despite being self-employed.
Even though you are an independent operator when running a bread route, you must still comply with numerous standards and guidelines. Companies have specific store standards that you must follow. You’ll discover that there are individual accounts that can become a headache for you because you’re making a delivery that takes away their free time. You’ll need to find ways to be political and positive in situations where the opposite reaction is your first one. If you can avoid adverse interactions, then you can earn some money. If you struggle to get along with certain personalities, it could cause you to lose your route.
10. Some companies will not allow absentee owners to operate the route.
Some companies require that you be the face of the bread route when you purchase the opportunity. That means you need to be the one servicing your accounts. You might have the blessing to hire employers or independent contractors to help you, but it may not be part of your contract. This disadvantage means that you might not have the option to take a vacation or a sick day when needed.
The best way to avoid this issue is to know your contract. If your provider finds that you are in breach, then the remedy is to take your route without providing any compensation for it. Expend to work normal vending days with Wednesday and Sunday being your standard pull-up day.
If you have some money to invest and time to work, then a bread route can be a fantastic investment. You’ll have the opportunity to earn a steady income while building the value of your accounts. This combination of circumstances can lead to a significant profit margin in time that you can pocket. Then you can repeat the process.
Delivery routes are usually very stable. Your income is rather predictable. There are several opportunities for you to grow your business, even if you don’t operate in a protected territory. That also means success only comes when you’re willing to put in all of the hard work.
The pros and cons of a bread route are essential to consider if you’re looking at this career opportunity today. If you’re a self-starter who enjoys interacting with people and providing a high-quality product to your community, then this could be the right position for you.
Blog Post Author Credentials
Louise Gaille is the author of this post. She received her B.A. in Economics from the University of Washington. In addition to being a seasoned writer, Louise has almost a decade of experience in Banking and Finance. If you have any suggestions on how to make this post better, then go here to contact our team.