Bakers Delight tests smaller stores to cut costs, expand reach

High electricity prices remain a key barrier to growth.

Bakers Delight is rolling out smaller-format stores as it tries to manage surging energy costs and rising retail rents, whilst widening its footprint in high-traffic locations.

The model, launched on 28 August at Camberwell Place in Victoria, occupies just 38 square metres and runs on 80 amps of power, compared with the typical 140 amps required for a standard bakery.

David Christie, joint CEO at the Australian bakery chain, said the shift came after a review of barriers to growth identified electricity requirements as a major hurdle.

“We know that is a trend that is going to continue here in Australia,” he told QSR Media. “With the energy transition, the cost of power will go up before it goes down.”

Electricity costs in Australia jumped 24.6% year on year in August, according to government data. Energy analysts have warned that prices would remain elevated as the country accelerates efforts to meet its net-zero goals.

Lower power demand makes new sites viable for the chain, Christie said.

“In a lot of sites, depending on how those locations have been set up, we may need to upgrade the power,” he said via Zoom. “That can run for tens of thousands of dollars to upgrade, and often, landlords aren’t willing to make that investment. Then we have to factor that in our fitout costs.”

The downsized format also offers a buffer against higher rents. Major shopping centres in Australia have posted a more than 2% rent increase this year, Knight Frank LLP said in a report in September.

Christie said the smaller bakery design allows entry into premium but costly locations such as train stations, central business districts, and high-end shopping centres. “We’re targeting about a 20% reduction in setup costs, and then going to savings of about 20% rent and power usage.”

The compact bakery uses a Metro Oven—a one-metre rack oven with a self-condensing hood—removing the need for exhaust systems. Traditional deck ovens offer more flexibility but can be inefficient if misconfigured, Christie said.

“The efficiency of the oven from a power point of view, and the ability to install it without having to build a canopy and extraction, that’s huge, just in terms of setup and ongoing running costs,” he said. “It does almost force you in your production planning to be a lot more efficient.”

The bakery's menu has been pared back to 54 products from more than 150, covering about 90% of Bakers Delight’s usual range, including its high-fibre, low-glycemic index breads and popular snacks. Christie said adjustments could be made depending on trial results, but the leaner menu is deliberate. The site also includes a self-serve coffee machine.

For now, the rollout remains experimental, Christie said, adding that elements such as Grab-and-Go zones and heated cabinets could be applied to existing stores.

Bakers Delight plans to add 20 to 40 bakeries to its 700 stores now in the next five years, with half in Australia and the remainder in New Zealand, Canada and the US.