diff --git a/Dockerfile b/Dockerfile
index fa89debcee..174548a90c 100644
--- a/Dockerfile
+++ b/Dockerfile
@@ -1,9 +1,14 @@
 FROM nginx:mainline
 
+# The purpose of this image is to serve the frontend app content separately.
+# By default the Backstage backend uses the app-backend plugin to serve the
+# app from the backend itself, but it may be desirable to move the frontend
+# content serving to a separate deployment, in which case this image can be used.
+
 # This dockerfile requires the app to be built on the host first, as it
 # simply copies in the build output into the image.
 
-# The safest way to build this image is to use `yarn docker-build`
+# The safest way to build this image is to use `yarn docker-build:app`
 
 RUN apt-get update && apt-get -y install jq && rm -rf /var/lib/apt/lists/*
 
diff --git a/app-config.development.yaml b/app-config.development.yaml
new file mode 100644
index 0000000000..da274ba1a8
--- /dev/null
+++ b/app-config.development.yaml
@@ -0,0 +1,11 @@
+app:
+  baseUrl: http://localhost:3000
+
+backend:
+  baseUrl: http://localhost:7000
+  listen:
+    port: 7000
+  cors:
+    origin: http://localhost:3000
+    methods: [GET, POST, PUT, DELETE]
+    credentials: true
diff --git a/app-config.yaml b/app-config.yaml
index 2620f6b9b7..da2f5f2d11 100644
--- a/app-config.yaml
+++ b/app-config.yaml
@@ -1,15 +1,11 @@
 app:
   title: Backstage Example App
-  baseUrl: http://localhost:3000
+  baseUrl: http://localhost:7000
 
 backend:
   baseUrl: http://localhost:7000
   listen:
     port: 7000
-  cors:
-    origin: http://localhost:3000
-    methods: [GET, POST, PUT, DELETE]
-    credentials: true
   database:
     client: sqlite3
     connection: ':memory:'
diff --git a/docker-compose.yaml b/docker-compose.yaml
index d32928b4e3..a9922cfb6c 100644
--- a/docker-compose.yaml
+++ b/docker-compose.yaml
@@ -1,14 +1,10 @@
 # Make sure that before you
 # run the docker-compose that you have run
-# $ yarn docker-build:all
+# $ yarn docker-build
 version: '3'
 
 services:
-  frontend:
-    image: 'spotify/backstage:latest'
-    ports:
-      - '3000:80'
-  backend:
+  backstage:
     image: 'example-backend:latest'
     ports:
       - '7000:7000'
diff --git a/docs/getting-started/deployment-other.md b/docs/getting-started/deployment-other.md
index 3b7796f8fe..d3fb9d932b 100644
--- a/docs/getting-started/deployment-other.md
+++ b/docs/getting-started/deployment-other.md
@@ -10,21 +10,20 @@ title: Other
 Run the following commands if you have Docker environment
 
 ```bash
+$ yarn install
 $ yarn docker-build
-$ docker run --rm -it -p 80:80 spotify/backstage
+$ docker run --rm -it -p 7000:7000 -e NODE_ENV=development example-backend:latest
 ```
 
 Then open http://localhost/ on your browser.
 
 ### Running with `docker-compose`
 
-Run the following commands if you have docker and docker-compose for a full
-example, with the example backend also deployed.
+There is also a `docker-compose.yaml` that you can use to replace the previous
+`docker run` command:
 
 ```bash
-$ yarn docker-build:all
+$ yarn install
+$ yarn docker-build
 $ docker-compose up
 ```
-
-Then open http://localhost:3000 on your browser to see the example app with an
-example backend.
diff --git a/docs/overview/architecture-overview.md b/docs/overview/architecture-overview.md
index 9f1d6d3291..55a1aeec04 100644
--- a/docs/overview/architecture-overview.md
+++ b/docs/overview/architecture-overview.md
@@ -171,21 +171,19 @@ The frontend container can be built with a provided command.
 ```bash
 yarn install
 yarn tsc
-yarn build
-yarn run docker-build
+yarn run docker-build:app
 ```
 
 Running this will simply generate a Docker container containing the contents of
-the UIs `dist` directory. The resulting container will be about 50MB in size.
+the UIs `dist` directory.
 
-The backend container can be built by running the following command in the
-`packages/backend` directory.
+The backend container can be built by running the following command:
 
 ```bash
-yarn run build-image
+yarn run docker-build
 ```
 
-This will create a ~500MB container called `example-backend`.
+This will create a container called `example-backend`.
 
 The lighthouse-audit-service container is already publicly available in Docker
 Hub and can be downloaded and ran with
diff --git a/package.json b/package.json
index bf2dfc3246..93f8f694a6 100644
--- a/package.json
+++ b/package.json
@@ -18,8 +18,8 @@
     "lint:all": "lerna run lint --",
     "lint:type-deps": "node scripts/check-type-dependencies.js",
     "docgen": "lerna run docgen",
-    "docker-build": "yarn workspace example-app build && docker build . -t spotify/backstage",
-    "docker-build:all": "yarn tsc && yarn build && yarn docker-build && yarn workspace example-backend build-image",
+    "docker-build:app": "yarn workspace example-app build && docker build . -t spotify/backstage",
+    "docker-build": "yarn tsc && yarn workspace example-backend build-image",
     "create-plugin": "backstage-cli create-plugin",
     "remove-plugin": "backstage-cli remove-plugin",
     "release": "if [ \"$(git symbolic-ref --short HEAD)\" = master ]; then echo \"don't try to release master\"; exit 1; else lerna version --no-push --force-publish; fi",
diff --git a/packages/backend/package.json b/packages/backend/package.json
index 03d768ca0b..d944ac6535 100644
--- a/packages/backend/package.json
+++ b/packages/backend/package.json
@@ -10,7 +10,7 @@
   },
   "scripts": {
     "build": "backstage-cli backend:build",
-    "build-image": "backstage-cli backend:build-image example-backend",
+    "build-image": "backstage-cli backend:build-image --build --tag example-backend",
     "start": "backstage-cli backend:dev",
     "lint": "backstage-cli lint",
     "test": "backstage-cli test",
diff --git a/packages/cli/src/commands/backend/buildImage.ts b/packages/cli/src/commands/backend/buildImage.ts
index 258ef102d7..36d4ef7129 100644
--- a/packages/cli/src/commands/backend/buildImage.ts
+++ b/packages/cli/src/commands/backend/buildImage.ts
@@ -15,28 +15,64 @@
  */
 
 import fs from 'fs-extra';
+import { join as joinPath, relative as relativePath } from 'path';
 import { createDistWorkspace } from '../../lib/packager';
 import { paths } from '../../lib/paths';
 import { run } from '../../lib/run';
+import { Command } from 'commander';
 
 const PKG_PATH = 'package.json';
 
-export default async (imageTag: string) => {
+export default async (cmd: Command) => {
+  // Skip the preparation steps if we're being asked for help
+  if (cmd.args.includes('--help')) {
+    await run('docker', ['image', 'build', '--help']);
+    return;
+  }
+
   const pkgPath = paths.resolveTarget(PKG_PATH);
   const pkg = await fs.readJson(pkgPath);
+  const appConfigs = await findAppConfigs();
   const tempDistWorkspace = await createDistWorkspace([pkg.name], {
+    buildDependencies: Boolean(cmd.build),
     files: [
       'package.json',
       'yarn.lock',
-      'app-config.yaml',
+      ...appConfigs,
       { src: paths.resolveTarget('Dockerfile'), dest: 'Dockerfile' },
     ],
   });
   console.log(`Dist workspace ready at ${tempDistWorkspace}`);
 
-  await run('docker', ['build', '.', '-t', imageTag], {
+  // all args are forwarded to docker build
+  await run('docker', ['image', 'build', '.', ...cmd.args], {
     cwd: tempDistWorkspace,
   });
 
   await fs.remove(tempDistWorkspace);
 };
+
+/**
+ * Find all config files to copy into the image
+ */
+async function findAppConfigs(): Promise<string[]> {
+  const files = [];
+
+  for (const name of await fs.readdir(paths.targetRoot)) {
+    if (name.startsWith('app-config.') && name.endsWith('.yaml')) {
+      files.push(name);
+    }
+  }
+
+  if (paths.targetRoot !== paths.targetDir) {
+    const dirPath = relativePath(paths.targetRoot, paths.targetDir);
+
+    for (const name of await fs.readdir(paths.targetDir)) {
+      if (name.startsWith('app-config.') && name.endsWith('.yaml')) {
+        files.push(joinPath(dirPath, name));
+      }
+    }
+  }
+
+  return files;
+}
diff --git a/packages/cli/src/commands/index.ts b/packages/cli/src/commands/index.ts
index e8406231a5..4e031cdbc1 100644
--- a/packages/cli/src/commands/index.ts
+++ b/packages/cli/src/commands/index.ts
@@ -36,9 +36,12 @@ export function registerCommands(program: CommanderStatic) {
     .action(lazy(() => import('./backend/build').then(m => m.default)));
 
   program
-    .command('backend:build-image <image-tag>')
+    .command('backend:build-image')
+    .allowUnknownOption(true)
+    .helpOption(', --backstage-cli-help') // Let docker handle --help
+    .option('--build', 'Build packages before packing them into the image')
     .description(
-      'Builds a docker image from the package, with all local deps included',
+      'Bundles the package into a docker image. All extra args are forwarded to docker image build',
     )
     .action(lazy(() => import('./backend/buildImage').then(m => m.default)));
 
diff --git a/packages/cli/src/lib/packager/index.ts b/packages/cli/src/lib/packager/index.ts
index fda85dd68a..5584e1fc21 100644
--- a/packages/cli/src/lib/packager/index.ts
+++ b/packages/cli/src/lib/packager/index.ts
@@ -48,6 +48,11 @@ type Options = {
    * Defaults to ['yarn.lock', 'package.json'].
    */
   files?: FileEntry[];
+
+  /**
+   * If set to true, the target packages are built before they are packaged into the workspace.
+   */
+  buildDependencies?: boolean;
 };
 
 /**
@@ -68,6 +73,13 @@ export async function createDistWorkspace(
 
   const targets = await findTargetPackages(packageNames);
 
+  if (options.buildDependencies) {
+    const scopeArgs = targets.flatMap(target => ['--scope', target.name]);
+    await run('yarn', ['lerna', 'run', ...scopeArgs, 'build'], {
+      cwd: paths.targetRoot,
+    });
+  }
+
   await moveToDistWorkspace(targetDir, targets);
 
   const files: FileEntry[] = options.files ?? ['yarn.lock', 'package.json'];
diff --git a/packages/create-app/templates/default-app/app-config.development.yaml b/packages/create-app/templates/default-app/app-config.development.yaml
new file mode 100644
index 0000000000..da274ba1a8
--- /dev/null
+++ b/packages/create-app/templates/default-app/app-config.development.yaml
@@ -0,0 +1,11 @@
+app:
+  baseUrl: http://localhost:3000
+
+backend:
+  baseUrl: http://localhost:7000
+  listen:
+    port: 7000
+  cors:
+    origin: http://localhost:3000
+    methods: [GET, POST, PUT, DELETE]
+    credentials: true
diff --git a/packages/create-app/templates/default-app/app-config.yaml.hbs b/packages/create-app/templates/default-app/app-config.yaml.hbs
index dea37814c1..f774ba8174 100644
--- a/packages/create-app/templates/default-app/app-config.yaml.hbs
+++ b/packages/create-app/templates/default-app/app-config.yaml.hbs
@@ -1,6 +1,6 @@
 app:
   title: Scaffolded Backstage App
-  baseUrl: http://localhost:3000
+  baseUrl: http://localhost:7000
 
 organization:
   name: Acme Corporation
@@ -9,10 +9,6 @@ backend:
   baseUrl: http://localhost:7000
   listen:
     port: 7000
-  cors:
-    origin: http://localhost:3000
-    methods: [GET, POST, PUT, DELETE]
-    credentials: true
   {{#if dbTypeSqlite}}
   database:
     client: sqlite3
diff --git a/packages/create-app/templates/default-app/packages/backend/package.json.hbs b/packages/create-app/templates/default-app/packages/backend/package.json.hbs
index 53bfd6d990..044ee1560a 100644
--- a/packages/create-app/templates/default-app/packages/backend/package.json.hbs
+++ b/packages/create-app/templates/default-app/packages/backend/package.json.hbs
@@ -9,7 +9,7 @@
   },
   "scripts": {
     "build": "backstage-cli backend:build",
-    "build-image": "backstage-cli backend:build-image example-backend",
+    "build-image": "backstage-cli backend:build-image --build --tag example-backend",
     "start": "backstage-cli backend:dev",
     "lint": "backstage-cli lint",
     "test": "backstage-cli test",