A donut shop is a great business if you have a passion for feeding people tasty treats! You’ll be fulfilled by putting smiles on the faces of your customers on a daily basis. A baking background is beneficial and food service, especially quick food service will be a valuable skill set as well.
Is investing in a donut shop a good idea?
Donuts are one of the cheapest items to produce. Owning a donut shop can be highly profitable if you can find a good location where customers can get to you easily and you can create delicious donuts!
What do you need to start a donut shop?
On average, to start a donut shop you’re going to need between $75,000 and $120,000. The start up costs of a donut shop include equipment, furniture and leasehold improvements. Broken down, your FF&E is going to account for $25,000 to $40,000 and your leasehold improvements will be around $50,000- $80,000.
This will leave you with enough starting capital to maintain the business and its operational costs with the money in the bank. If you are looking for loan options to keep this much liquid capital on hand, check out our Securing Funding for your business article.
What are the monthly operational costs for running the donut shop? Software and services, rent, insurance, and other operational costs for a small donut shop should be about $6500.
What is a good advertising budget for a donut shop? A good thing about having a donut shop is that you should be able to capture that customer and keep them for a long time! Compared to other businesses the cost of customer acquisition is relatively low. You should be spending about $500 per month on advertising your businesses and that could be through local Google ads or good signage nearby your location. Many of your customers will come to you because they are near your location.
How many customers does a donut shop see per day? A donut shop with a good location should be able to see between 350 and 500 customers per day. Obviously as you grow you should be able to find new customers through your advertising efforts while maintaining your current customer base as well.
How much does a customer spend at a donut shop? The average purchase price per customer per customer is $7. This is going to include any drinks or other food items for an average total ticket price per customer. Obviously this is going to vary widely by where you are located and what kind of donut shop you operate.
What is the average revenue of a donut shop? To get the average revenue of the donut shop you will have to account for all food items sold at the business including donuts, single and by the dozen, drinks, and other food items. If your average customer spends $7 and you see 425 customers per day, your gross revenue is $2975 per day. Extended to the average of 30 days per month, this brings gross revenue projections to $89,250 per month and yearly projections to over 1 million dollars!
How much does it cost to make a donut? Donuts are very cheap to make. With all ingredients including frosting, fillings, and all the baking ingredients your cost usually comes in at 30% of your sale price. In this example this brings your cost of goods to about $27000, on the high side.
What are the expected labor costs for a donut shop? Labor costs are dependent on many different factors. Are you going to be open for 24 hours a day or just 8? Are you going to have a manager or will you be running the business? For the sake of this deep dive we’re going to assume you are going to be open 8 hours per day and you will be running the shop. This way we can maintain the projection numbers from above.
Say you have 3-4 part time employees making minimum wage. This brings your labor costs to about $4500 per month. Also keep in mind what you’re going to pay yourself as the manager. Depending on your business structure you could also be required by law to take a reasonable income. Lets call it another $4500 per month for a total of $9000.
How much net profit can a donut shop make? Considering the income, COGs and total expenses a donut shop should be able to make a net income of $46,750 per month and $561,000 yearly. Broken down in this little Profit and Loss statement:
Income $89,250
COGs $27,000
Operational Cost $6500
Payroll $9000
Net Income- $46,750