Did you know that you could buy a bread route and make money off every loaf of bread that you sell to supermarkets and huge retailers in your territory?
I am talking about selling well-known bread brands, like Wonder, Nature’s Own, Pepperidge Farm and Sara Lee to major retailers like Walmart and Target. And the best thing is that many of these distributorship arrangements are exclusive, so if the supermarket in your area wants to carry your brand of bread, they must buy through you.
Most bread routes are stable, established businesses and can generate reliable income from day one. It’s a business model that has been in place for a long time and there is a robust marketplace for these types of routes.
In this article, we will provide a beginner’s guide to buying a bread route.
We will also cover the pros and cons of owning a bread route so you have a more complete picture of what’s really involved in operating this type of business.
Before we dive into this, let’s tackle some basic (but important) questions around bread routes.
What Is a Bread Route?
A bread route is a bread distribution route within a defined territory. Bread routes are typically owned by independent businesses that have been granted the right to distribute bread products from a particular bread supplier within that territory.
The bread route owner orders bread from the supplier, picks it up from the supplier’s warehouse, and distributes the bread to businesses (usually supermarkets and big-box retailers like Walmart, etc.) that have agreed to purchase the bread.
How Do You Make Money Owning a Bread Route?
You make money owning a bread route by earning a commission (usually around 20%) on your sales to various businesses in your territory who buy bread from you. Because you are the distributor for the bread company, you can buy bread from the company at wholesale prices and resell that bread to your accounts at a designated mark-up (which equals your commission).
For example, if you buy $5,000 worth of product from Pepperidge Farm and resell it to your accounts for $6,000, you keep the difference as your commission.
What Are the Best Bread Routes to Own?
The leading bread companies offering bread routes are Pepperidge Farm, Arnold (includes Orowheat and Brownberry), Sara Lee, and Flower Foods (which includes Wonder, Nature’s Own, Homepride, Sunbeam, and many more).
How Much Do Bread Routes Cost?
The cost of a bread route is its average weekly sales volume multiplied by an industry multiple that ranges between 15 and 25.
But I have noticed that Pepperidge Farm routes sometimes have much higher multiples (some above 40).
The route brokers selling these routes claim it is due to lower required work hours (about half) and the prestige associated with the brand.
Not sure I buy it, but whatever the reason, you may need to shell out a lot more for Pepperidge Farm bread routes than for other bread routes that generate comparable revenue.
Are Bread Routes Passive?
Bread routes can be largely passive if you choose to hire employees or third parties to run the delivery routes. Doing this will impact your profits, but it may be worth it if you want a business that runs its day-to-day operations without your involvement.
Unfortunately, some bread suppliers will not allow you to be an absentee owner. You (and your lawyer) will need to carefully review your contract with the bread company to determine if you can outsource your delivery obligations.
That being said, many companies do allow you to outsource delivery functions. In fact, when I reviewed FAQs from the bread companies, some clearly state that many route owners hire employees to operate all (or a portion) of their business.
And since many route owners own multiple routes, they often have no choice but to outsource the route delivery functions to employees.
Passive income is great, however, there are trade-offs to having a mostly passive business. For example, your growth opportunities may suffer. Part of owning a bread route is building and strengthening relationships with the businesses that are buying your product.
When you are doing the deliveries, you have a chance to interact with your buyers almost daily. You can build rapport and trust. You do this so that you can gradually increase sales with that business over time.
Furthermore, you may also want to reach out to new businesses within your territory that may be interested in your bread products so that you can grow the number of accounts in your route.
When you outsource deliveries to employees or third parties, this type of relationship building and outreach may suffer or not exist at all.
How Do You Buy a Bread Route?
The easiest way to find and buy a bread route is to go online. Certain bread companies, like Pepperidge Farm and Flower Foods offer bread routes on their websites. Arnold and Sara Lee are part of Bimbo Bakeries, which also offers routes for sale on their website. But for the Bimbo routes, you can’t see the actual listings on their site – instead, you have to fill out a contact form if you are interested in buying one.
You can also find bread routes for all of the above companies on third party sites.
Here is a list of sites offering bread routes for sale:
Can You Finance a Bread Route?
Financing is generally available for bread routes. The terms of the financing arrangement will vary according to the company’s financing program, your credit score, and other factors.
In cases where company financing (through its approved lenders) is not available, you may ask the seller to finance part of the purchase. In some cases, the route brokers may also have lenders that they may be able to introduce to you.
If you prefer to operate online, you may want to check out Fundera. They are affiliated with Nerdwallet and offer small business financing options from a variety of potential lenders. You fill out one application and the provide you with a list of lenders suited for your situation.
How Much Down Payment is Needed To Finance a Bread Route?
As a general rule, if you want to finance your bread route purchase, you will need between 10%-20% of the purchase price as a down payment.
When I reviewed some of the listings in my area on Pepperidge Farm’s website, they indicated that in most cases only 10-15% of the initial purchase price is needed at contract signing.
Similarly, Flower Foods expressly states on their website that financing obtained through the company’s program requires a 10% down payment.
Those are pretty attractive down payment requirements.
Starting Costs For Your Bread Route
In addition to the down payment, you may need to purchase a handheld computer and printer for ordering products, etc. In the case of Pepperidge Farm, they estimate it will cost you $5,000.
You will also need a route delivery vehicle. The route listing may include the vehicle as part of the purchase, but if it doesn’t you will need to buy a suitable vehicle.
Having adequate insurance is also important, so you should budget for that as well. Here are some insurance providers for this industry that you can look at to start your search for this.
If you are going to incorporate or set up an LLC or other entity to buy the route (some bread suppliers may require this), there will be costs associated with that too. You can use a lawyer to do this (but they tend to be quite expensive) or one of the many online services out there.
I like Northwest because they can get you up and running quickly and easily. They are also one of the most affordable options that I was able to find that still offered great customer service ($39 as of the date of this article).
According to their website, they are the only national registered agent service that lets you use their office address so you don’t have to use your own. That’s a killer privacy advantage.
Definitely worth checking out.
In some cases, you will be required to come out of pocket for inventory purchases, but many suppliers do not require this. However, most suppliers will hold you responsible for inventory that cannot be accounted for through your sales.
Finally, as with most businesses, you should have a healthy cash reserve for working capital. This can help smooth out any unexpected expenses that may arise, such as repairs needed for your truck, etc.
Conducting Due Diligence On Your Bread Route
Like with any due diligence process when buying a business, you should examine the numbers to make sure they make sense. An accountant should be able to help you sort through the numbers.
You also want to make sure that the accounts that are part of the route are solid. It helps if they are long-time accounts and have a very reliable sales history.
If a truck is part of the sale, make sure it is in good working condition and being valued reasonably as part of the purchase price.
Finally, you want to make sure you set up a “ride-along” toward the end of the due diligence process to get a clear understanding of what is involved in the day-to-day routes.
Contracting and Closing
After you have decided on a bread route that you like, you will need to make an offer (often through the broker). At that point, there may be negotiations on price but if you and the seller agree to a deal, you will sign a contract.
Once the financing, due diligence, and other preparatory pieces are completed, you will close on the deal, at which point, the transfer of route ownership will occur.
The timing for the whole process may vary, but can take up to 10 weeks.
Pros and Cons of Owning a Bread Route
Now that we have covered the basics of how to buy a bread route, I want to turn to the pros and cons of owning a bread route. It’s important to fully understand the key benefits and drawbacks so you have a more complete picture of what is involved in owning this type of business. Let’s get into it!
| Pros of Owning a Bread Route | Cons of Owning a Bread Route |
|---|---|
| Bread routes can be profitable | Bread routes can be expensive |
| Bread routes can provide passive income | Bread routes can be physically demanding |
| Bread routes are stable businesses | Stale or damaged goods |
| You can grow your bread route business | Trucks will need maintenance |
| Bread routes are easy to sell | Vacations are rare if you do not outsource deliveries |
| Independence | Unprotected routes |
| Distributorship issues |
Pros of Owning a Bread Route
Bread Routes Can Be Profitable
As we showed earlier, you can make around a 20% commission on each sale within your territory.
If your sales are robust and you maintain or grow your accounts over time, you can enjoy a very healthy income from this business.
Bread Routes Can Provide Passive Income
We discussed this in detail earlier, so I won’t cover it again, but a bread route can provide mostly passive income when set it up correctly (i.e., you train and hire employees to do the deliveries). Although doing this will eat into your profits, you will get to enjoy passive income from your business.
If you grow and expand into multiple routes (all with delivery performed by employees), that can turn into multiple streams of passive income that can fully sustain your lifestyle.
That’s the dream, isn’t it?
Bread Routes Are Stable Businesses
Bread is a staple of the American diet and will always be in high demand. And most routes that you buy will have established accounts that can provide reliable income from day one. That is a huge benefit and should give you tremendous peace of mind.
Of course, you will need to conduct thorough due diligence on the numbers and make sure that the accounts in the route are in fact high quality and dependable accounts. Assuming they are, you can reasonably expect them to provide a stable source of income for you.
You Can Grow Your Bread Route Business
As mentioned earlier, your bread route business is scalable. You can grow your business in several ways. You can sell more products to existing accounts, find new accounts within your territory, or buy new routes within your area.
Each of these methods will take some time and effort, but can yield terrific results.
Bread Routes Can Be Easy to Sell
There is a robust market for bread routes. That should be apparent if you look through the bread route listings on the websites I provided above.
Bread routes provide stable income opportunities at relatively affordable prices (at least when compared to other route businesses like FedEx routes), so they tend to be very marketable. That means that you can generally sell your route when you are ready to move on.
Independence
Owning a bread route can be liberating, especially if you feel trapped by your current job. You need to make sure your operations are running smoothly and you keep your accounts happy, but at the end of the day, you are your own boss and don’t need to answer to anyone. Hard to put a price on that.
Cons of Owning a Bread Route
Bread Routes Can Be Expensive
We already covered the costs of buying a bread route (including down payment requirements). So, by now, you know that you are buying a real business and it is going to cost you thousands (or tens of thousands) of dollars.
That being said, there are a lot of benefits to owning a bread route so the cost may be worth it.
Bottom line: It’s a lot of money any way you look at it.
Related reading: Interested in a route business that is more affordable to start? You may want to check out my articles on these other route businesses that have a much lower cost of entry:
Or if you don’t want to spend any money to start earning passive income, here are 15 truly passive income ideas that require no money to start.
Bread Routes Can Be Physically Demanding
If you don’t outsource your deliveries, you will need to load and unload bread products throughout the day.
And you have to do that several times per week.
In addition, operating a bread route usually requires that you get up very early to collect the product from the warehouse so that you can meet the required delivery times for your accounts.
All of this can be physically demanding when you do this day after day.
Stale or Damaged Goods
In some cases, you may need to deal with stale or damaged bread products. Based on listings I saw on routesforsale.net, some suppliers, like Pepperidge Farm, will provide an allowance for these situations, but many will not. That could cause you to take a financial loss when these situations occur.
Trucks Will Need Maintenance
Your truck will see a lot of miles as it services your route. With that much use, it is bound to have issues from time to time. You will need to address them as soon as possible so that your route deliveries do not suffer.
Obviously, fixing your truck when it breaks will cost you money. But it’s not just about the cost. You will need to find a reliable mechanic that will promptly take care of your repairs at a fair price so that your truck is back on the road as soon as possible.
Vacations Are Rare If You Do Not Delegate Deliveries
If you choose to service your routes yourself, it will be very difficult to take a week or two off for vacation. Of course, there are relief services available for just this purpose, but many owner-operators do not trust that a relief service will properly handle their route.
So they often go for years without taking any type of lengthy vacation. Brutal.
Unprotected Routes
In some arrangements, your route may be unprotected, which means that you are not the only authorized distributor for your bread supplier. Obviously, that creates risk for you because another distributor may take your account away from you.
You (and your lawyer) should read the contract with the bread company to figure out if the route is unprotected.
Distributorship Issues
Sometimes you may face distributorship issues, including a shortage of product. This could present an issue, especially if your route is not protected, since others may be able to get product while you may not.
In addition, there may be delivery issues from your supplier or the warehouse may be far from your usual route. These can all conspire against you at the exact wrong time, leaving you with little product to sell.
Bear in mind that one of your top goals is to keep your accounts happy, so failing to deliver product when promised can be a real problem.
Final Thoughts
Buying a bread route can be a terrific way to earn great income and get out of the rat race.
But as you can see by now, it’s not as simple as buying a route and waiting for the money to roll in. There can be some tremendous benefits to owning a bread route, but make sure you fully understand (and are comfortable with) the risks as well before you pull the trigger.
Related Reading
If you want to learn about more about businesses that can be run passively, check out my article on businesses that run themselves. In that article, I cover some great businesses that can generate attractive levels of return without a lot of day to day involvement by the owner (obviously, bread routes are included in the list, but there are many more).