My kids have been to a few of these at grocery store community rooms - and the people there organized it all.
They had a 2 part party - the first part, they were handed mini pizzas already ready to go - they just 'decorated' them with sauce, meat, toppings, cheese etc.
While those cooked in oven, the kids went on to 'decorate' cakes (single layer 9 inch round cake) that they brought home. So they were already baked - they just had icing, gummy worms, sprinkles, etc. and could decorate as they liked.
They ate the pizzas as their meal/snack, and then there was a larger cake afterwards for the birthday cake. All the kids brought home their cakes they decorated as party favors and we had at home. Very proud of their creations.
All that roughly took 2 hours (with opening gifts afterwards).
They did not make the batter and dough, but I think they had more fun decorating any how. If you're doing it at home, it may be easier to have things ready for them to use. Or if you did sugar cookies, you could have the dough already in fridge and they could cut them out (get fun cookie cutters). Then they can decorate. And take some home.
I think I'll do that in future for my little baker. They each got an apron (just cheap) too to keep their clothes clean.
I think it's a great idea. Have fun :)
Added: mine were young at these, so for 12 I'm sure they could handle more of the baking if interested. I like the station idea as others have mentioned and breaking into groups too.