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How to Start a Funnel Cake Business

Do you want to start a funnel cake company? If YES, here is a complete guide to starting a funnel cake business with NO money and no experience plus a sample funnel cake business plan template.

Funnel cakes are those lacy fried-batter discs dusted with powdered sugar. The demand for these cakes is now an opportunity for an entrepreneur to cash in on a perennial crowd-pleaser. The materials needed to successfully start this business are neither fancy nor highly expensive.

You just have to comply with state and local laws and ordinances. It’s very important to state that this business is recession-proof and very lucrative.

To succeed in this market, you’ll have to find out useful selling locations such as seasonal fairs and carnivals, as well as school sporting events. Always make sure you obtain permission from the schools in question before slinging your fried treats. You will also need several key items to make funnel cakes on a concession basis.

You will need a fryer that is big enough to accommodate at least two funnel cakes at a time for faster service. You will also have to choose between gas or electric models, the latter being more economical but less portable. You also need funnel cake rings or moulds to retain the shape of the fritter as it is being poured, a pitcher with a funnel tip, tongs, and industrial oil such as block shortening, batter mix, and paper plates and utensils.

The funnel cake business just like any other food industry in the united states is quite regulated. To start this business without legal problems you will have to contact your state, city, and county licensing authorities to find out what permits you must obtain to operate as a funnel cake business. Also, note that you may have to acquire permits for every district in which you operate a stand.

You should obtain a sales tax permit from your state, as well as an employer identification number from the Internal Revenue Service. To ascertain if your business meets up to health standards, you will be inspected by your local or state health department before the business opens. It’s very important that you observe the safety regulations of your state.

Steps to Starting a Funnel Cake Business

1. Understand the Industry

According to industry reports, the global cakes market is expected to depict a substantial growth, at a CAGR greater than 3% over the forecast period. It is believed that rising urbanization and the growth in disposable income will favor industry growth.

With more than 40% of the world population living in urban areas, the industry is likely to experience massive growth over the next seven years. Statistics have shown that this industry has always been a growing sector especially due to the globally increasing population, but the recent trend of the western-style bakery in the Asia Pacific region may further grow demand.

It is very important to state that the Asia Pacific accounts for more than 50% of global revenue as the growing population provides a stable nesting ground for bakers.

Due to the fact that the majority of the players are small privately-owned businesses, expansion into different economies could be a daunting task. But, the upsurge of logistics providers may provide solutions for local players to grow their market.

The global cake market is segmented into artisanal and in-store bakers. Although artisanal cakes have been a unique selling point in growing industry demand, the upcoming trend of in-store bakeries may further heighten growth opportunities.

Experts believe that the in-store bakeries offer a one-stop solution for pastries and other bakery items. Have it in mind that recent trends of designer products and continuous innovations in product offerings are likely to keep the industry alive.

It is believed that consumer preference for food acts as the biggest driving factor for any food-related industry. But note that the market may take a hit if users’ eating habits change over time. Healthy diet trends may affect the industry growth, however continuous innovations to bake healthy products with low calories may sustain growth.

Some businesses in this industry tend to offer small bite-sized pastries for people preferring on-the-go snacks. The high convenience provided by such a product is also expected to catapult demand over the forecast period.

The pastries section is expected to be the highest contributor to revenue over the forecast period. One of the major challenges faced by this industry is Food perishability. Even though the cakes market is not threatened by excessive demand, any delay in the supply chain may immediately lead to reduced sales. This acts as a challenge for artisan cake makers who do not bake their own bread.

2. Conduct Market Research and Feasibility Studies

  • Demographics and Psychographics

Careful planning and a lot of research are a must if you want your business to succeed. You might know the equipment you need but it’s very helpful if you know where to buy them at an affordable rate. This principle also goes for all the ingredients of the funnel cake. If you can save up on your expenses, you will have more income going into your pocket.

During the course of that research, you will have to identify your target market. It’s advisable you research other bakers in the area and identify community needs that aren’t being met. Once you’ve noted the facets of the business that most appeal to you, you can begin to build your buyer persona and target them in marketing efforts. This business is ideal for anyone who enjoys baking.

3. Decide Which Niche to Concentrate On

Funnel cakes are no longer pigeon-holed strictly into the “fair food” category. In this modern era, customers will search high and low for a great funnel cake at virtually any entertainment or sports venue. First, you will have to decide how you want to start this business and the market needs you will want to satisfy.

Whether you open a retail location or focus solely on custom orders, your funnel cake business’ revenue will be generated from the sale of each cake.

Each creation will have special pricing, based on a variety of factors. You can also decide to start a mobile funnel cake business and choose whether to sell in schools or the business districts of your city. Most funnel cake business owners start out small, working out of their homes or in a small public kitchen.

A lot of them choose to remain small and local, content with servicing the needs of their community. But you need to note that the opportunity is there, to expand your business based on your personal and professional goals. Once you’ve established a name in the industry, you could share your secrets with other aspiring bakers, opening additional locations in your area.

The Level of Competition in the Industry

Reports had it that the growing population of the Asia-Pacific region may provide long-term opportunities for bakers. Although small bakers may not be able to capitalize on these opportunities, larger bakery chains may have the competitive advantage to reap benefits from India and Turkey.

Also, note that the online product delivery options are expected to further catalyze industry growth. Note that the industry is mostly localized with regional suppliers commanding market share. Competitive pricing and product offerings play the differentiating factor for successful bakers enabling them to extract high profit.

It’s very important to state that the ongoing trend of healthy eating is expected to add focus on bread quality and product innovation.

In the industry, a good number of bakers offer healthy alternatives and this is believed will serve as a major positive factor for the industry. Also, industry experts expect the introduction of new flavors to positively impact industry growth.

The market is highly fragmented in nature with numerous players operating in a region leading to fierce competition on the basis of product offerings, pricing, brand recognition, and technology. The barriers to entry for this industry are moderate.

New entrants may have difficulty competing with established operators that have achieved a reputation for quality. These companies experience high brand and customer loyalty and have considerable resources to invest in advertising and promotions to protect and grow their market share.

4. Know Your Major Competitors in the Industry

  • Artisan Cake Company
  • Little Venice Cake Company
  • Ele Cake Company
  • The Blue Cake Company
  • Mj’s Funnel cakes
Economic Analysis

Growing health consciousness, changing consumer tastes, and competition from fresh bakery items have hampered demand for traditional industry products. But as a response to these trends, businesses in this industry have focused on reformulating their existing selections with healthier, higher quality ingredients.

They are also experimenting with new flavor combinations while launching single-serving varieties that appeal to a wider range of health-conscious consumers. Innovation and creativity will be very much needed in this business. Your day will be structured differently from the next, depending upon the orders you have lined up and how you’ve decided to structure your business.

For instance, if you choose a brick and mortar location, you will need to spend additional time baking, so that custom orders are met and displays are filled regularly. Once cakes are baked and decorated, orders should be packaged for delivery.

Note that some prospective customers will also want to have a taste-testing session before placing an order. This is an opportunity to build a relationship with the client, showing them how your creations stand out above the competition.

It also gives them a chance to make decisions regarding the flavours. Also, have it in mind that cleanliness is what sets the professional apart from the hobbyist. A baker’s kitchen is like a sanctuary and must be treated as such. It should be thoroughly cleaned after each order is filled, and at the end of the day.

Since each creation requires a different set of ingredients, replenishing baking supplies is typically done on a weekly or bi-weekly basis. As a funnel cake business owner, you may want to split your attention between perfecting new recipes/sharpening your skills, and tending to administrative tasks.

Your customers will have questions and concerns that must be addressed and books must be balanced. To insure a steady flow of clients, it’s also critical that a marketing strategy be implemented and remains a consistent part of each day.

5. Decide Whether to Buy a Franchise or Start from Scratch

Experts have explained why buying a franchise is a better business option than starting from scratch. But in the Funnel cake industry, start-up bakers typically suffer when it comes to brand recognition because, unlike entrenched competitors, new brands do not have visibility and history with their customers.

Buying into a franchise is indeed a better way for aspiring entrepreneurs to enter a competitive industry. To venture into the funnel cake industry and succeed, it’s advisable you buy into a cake business to get an established brand. Even in ideal circumstances, it can take years to create an effective brand presence.

Also, note that buying into a cake business franchise can put you at the helm of a brand that is already highly trusted by your target market. But note that franchising comes with its own challenges and barriers. Always ensure you research and choose a franchise that aligns with your business vision.

6. Know the Possible Threats and Challenges You Will Face

Starting a successful Funnel cake business can be a daunting task if you don’t have prior experience in this line of business. But if you are hardworking and you are willing to learn, you will surely find it a bit easier. But have it in mind that the profit you stand to make from this type of business is largely dependent on your marketing and sales strategies.

Another challenge you will face is the issue of licenses. Indeed applying for a license essentially means undergoing a full background check; hence, your record should be spotless. You need to prove that you’re an outstanding citizen with a clean family history.

Questions asked can be about your top investors, loans, and even personal questions. Authorities will be inquiring about your security plan in case of hazards like theft and fire, among others.

Most entrepreneurs willing to start up a Funnel cake business are faced with the challenges of writing a business plan. Putting together a good business plan is half the work, and creating a competitive advantage by being innovative is also a sure thing if you’re willing to succeed in the industry.

7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)

On one side, choosing the legal entity for your funnel cake business will depend on the size and scale of your business and services. While on the other side, the best legal entity for your Funnel cake will involve a number of considerations, including taxation, owner liability, governance, capital structure, potential exit strategies, etc.

Notwithstanding, the best legal entity for a Funnel cake business in the United States is the LLC. A Limited Liability Company (LLC) is an unincorporated entity in which one or more individuals called “members” have limited liability for the company’s debts and claims even if they participate in management.

Members of an LLC have great flexibility in structuring the management of their business through the LLC’s governing document, known as an “operating agreement”. The benefits of creating an LLC outweigh any disadvantages it may have.

It is advisable that you consult with an experienced attorney and accountant while preparing your business plan to make sure your facts and figures are accurate and legal because you should avoid creating loopholes.

8. Choose a Catchy Business Name

  • Riley cakes
  • Funnel X
  • Dexter Cakes
  • Cakes Manor
  • Energy Seeker
  • Kosovan

9. Discuss with an Agent to Know the Best Insurance Policies for You

You will need insurance to protect yourself and your business from possible dangers that might happen. It’s advisable you meet with a business insurance agent to help you understand the insurance policy requirements for the funnel cake industry as well as for the business in general. They may include;

  • General Liability Insurance
  • Property insurance
  • Workers’ compensation insurance
  • Commercial Auto insurance
  • Umbrella liability insurance

10. Protect your Intellectual Property With Trademark, Copyrights, Patents

Intellectual property rights are needed in the Funnel cake industry to protect the business trademarks and patent protection. You will need IP to protect your unique flavors and methods, signs, and ad specifics. It’s advisable that you constantly research the essentials of patenting.

For the sake of your business, this does not include the oil you use in baking but for your tagline, logo, and other marketing designs.

You should know that without proper protection, your ideas may be developed by someone else which can jeopardize your business. You should consider researching about trademarks, copyrights, and the other legalities of the funnel cake business by meeting with an expert in the industry.

Registering your trademark helps to protect the marks you create to identify goods and services, not the goods and services themselves.

Proper protection of your trademark and patent can lead to successful brand development and greatly heighten the value of your company or product in the industry. You can also have your key employees sign an employment agreement. A written employment agreement is very important for those employees who know your product formulas.

11. Get the Necessary Professional Certification

It is always advisable that you research your state and the laws concerning your product to make sure your business has the correct licensing and certifications. In any food-related industry, without proper licensing, regulating agencies can shut your business down and you may face heavy fines for regulation violations.

Also, certification programs are very beneficial as they show your level of knowledge and expertise. They are also a uniquely transportable baseline of industry knowledge. Professional certification you may choose to acquire for a Funnel cake business may include;

  • Hazard Analysis and Critical Control Points – HACCP Certification
  • HAZMAT Training
  • SIx Sigma
  • Occupational Safety and Health Administration (OSHA)
  • Safe Quality Food (SQF) Certification
  • Total Quality Management
  • Certified Supply Chain Management
  • Certified in Production and Inventory Management (CPIM)
  • ISO 22000 Food Safety Management
  • Better Process Control Schools
  • Certified Food Scientist (CFS)

12. Get the Necessary Legal Documents You Need to Operate

Right before you start serving your classic treat, you have to obtain the proper licenses and permits. These licenses and permits may differ from state to state and municipality to municipality. A number of fees may be associated with temporary vending and, in most cases; you’ll need a license to sell food at fairs, festivals, or events.

You’ll also need a health inspection, the thoroughness of which will vary depending on location. As a funnel cake business owner, you will also need to keep track of your sales so you can pay local, state, and federal taxes on any revenue you generate. A list of legal documents you may need for a Funnel cake business is;

  • Business license
  • Certificate of incorporation
  • Employment agreements
  • Federal licenses
  • State licenses
  • Local licenses
  • Proof of Insurance
  • Federal tax identification number

13. Raise the Needed Startup Capital

Adequate funding is very important for the success of any business. Initial startup costs are usually the deal-breaker for many entrepreneurs. The first thing to do is to put together a detailed business plan. A business plan will serve as the road map of your business and it is what investors will want to see.

It will tell how much you need. Ensure you have an account for your personal expenses especially if you plan to sell your funnel cake product full time without other sources of income.

If you need external funding, you can sit down with the bank to discuss getting a business loan. You can also seek the help of professional investors who will expect a return on their investment. It’s advisable that you start out by asking friends and family to be the initial investors in your business.

No matter how you plan to fund your business, always ensure it’s all done by a professional to avoid problems when your product sales take off.

14. Choose a Suitable Location for your Business

There are so many options to consider, both business and legal, when choosing a suitable location for your funnel cake business. If you plan to start as a brick and mortar store, then these issues may include whether the premises have adequate space for both present and future operations.

Are the utility systems (electrical and plumbing) enough to handle operations and waste disposal? Is there enough office storage space? You will have to consider land use and zoning requirements for parking; legality of the commercial venture on the premises; loading and unloading; and compatibility with local Waste Management systems.

Also, consider factors for acquiring the premises. If the space will be leased, the third-party landlord must be amenable to the nature of the business operation.

Also, the landlord may demand a long-term lease. Will a long-term lease be compatible with your vision and growth? Do you have the ability to exit the lease if your business needs to change before the expiration of the lease term? Do you have the ability to extend your lease under favorable terms?

15. Hire Employees for your Technical and Manpower Needs

Starting a funnel cake business can be said to be easy due to the price of the equipment you need. You may prefer the mobility a trailer or food truck can provide, or you may want to rent space at your local flea market or an existing concession stand. Although one may have fewer start-up costs, another may grant more foot traffic. Once you’ve secured the structure that will house your funnel cake stand, you can begin equipping it.

The basic things you need will include a funnel cake fryer, cake moulds, funnels, a few utensils, and some mix for a few batches. Your funnel cake business can be as simple as that, but there are some other options you can choose if you’re going all out.

If you choose to supplement your menu by adding the occasional funnel cake, a simple and cost-effective solution would be to get a small, countertop fryer. There are also high-output, gas, or electric fryers that can cook 6-8 cakes at a time with quick recovery times to help you reduce long lines and increase profit potential.

According to research, flat bottom fryers are best for funnel cakes because they are wide. Note that flat bottoms that are heated from below allow plenty of space for your cakes to float on top of the oil. They also typically don’t have heating elements in the oil, which means the plentiful loose batter pieces produced in cooking funnel cakes won’t stick around and burn.

Have it in mind there are units that run on electricity and those that run on gas. LP tanks will probably be your best option as those can go anywhere, but with the increasing popularity of natural gas, you may find places that offer those alternatives.

Funnel cake fryers have no distinct sediment zone, so it is advisable you clean your fryer regularly to keep sediment from affecting flavor. It will also ensure that your oil is clean and fresh, and can extend the life of your oil, the most expensive part of owning a fryer, significantly.

Oil that has begun to break down will result in an undercooked, greasy mess that will have the taste of the turning oil. That is never good for business. So to avoid this, you will have to drain the oil, remove the fry baskets, and remove residue build-up on a regular basis.

Once a week, you should scrub the machine using dishwashing detergent and warm water. Rinse well, and you’ll be ready to fry another week.

As with any business, good help can be hard to come by. Always ensure you hire dependable people who will help take care of your equipment and your customers. You should consider getting insurance that covers them and you in case of necessities.

The Service Delivery Process of the business

It is advisable you spend some time working in the industry to gather industry experience before starting out on your own. Identify well-respected bakers in the community and work closely with them. If you plan to be in this business long-term, you should consider staying under several different cake artists.

Observe their strengths, both in and outside of the kitchen. Compiling this information into your own business plan will assist in positioning you as a well-respected cake baker.

One of the most important aspects of serving excellent funnel cakes is the quality of your oil. Even though peanut oil will turn out a delicious product, a lot of people are allergic to peanut and peanut products. Peanut oil is also very expensive.

Safflower, sunflower, soybean, and canola are good options you should consider. Thanks to their abilities to handle high heat without smoking and the fact they won’t impart their own flavor on your cakes. General vegetable oil tends to be the least expensive and is a blend of corn, soybean, and sunflower oils.

Note that funnel cake batter can easily be made from scratch and you need only flour, eggs, sugar, milk, and baking powder or soda.

The technique is very important in this business as it will decide how your cake taste and look. A simple measuring cup will work, but a funnel will help to ensure the right speed for the batter to work. You should consider starting with a batter that is about the same consistency as a cake batter.

If it’s too thin, the batter won’t hold together when it hits the hot oil and your cake won’t have form. If the batter’s too thick, it won’t pour properly and you’ll end up with an unevenly cooked cake.

The speed with which you pour the batter will also have an effect on the finished product, so take your time to create the classic favorite. If you plan to offer toppings for your cakes, you may need topping dispensers and ways to make sure your fruit and whipped cream, cold or ice cream stay frozen.

You can decide to opt for a reach-in refrigerator or freezer, or you may want a dispenser that keeps whipped cream cold as it’s pumped. You may also want to serve hot fudge or caramel sauce, and there are dispensers that will keep those warm as well.

Also, note that you will need a sifter to present the classic cake with a topping of powdered sugar. The typical service for a funnel cake is a paper or Styrofoam plate, but new variations use finger-shaped moulds to create smaller versions that are easier to eat and serve up in cones or disposable food trays.

16. Write a Marketing Plan Packed with ideas & Strategies

Word of mouth remains your strongest marketing tool in this business. While building your reputation, consider free online resources, such as social media and local business registries. If you become a member of any organization, inquire about their online listings, which are often offered free of charge to members.

You should also distribute mailers within the community and become a sponsor for local charity events. A lot of communities have charity events that feature local chefs; take part in these to gain exposure. When creating your business plan, it is important that you identify several key components in your marketing plan which may include:

  • Target audience

While developing your marketing plan, you need to consider the audience you want to attract. This can be based on the type of funnel cake you will be producing. If you can identify your target audience, then you can find out the best way to reach them.

  • Competition

When looking to market your funnel cakes, it is important you tell your target audience how it differs from all of the other funnel cakes in the market. If you fail to determine the difference between your competitors, how will the consumers tell the difference?

  • Market Entrance

This part of your marketing plan will require an outline of your initial introduction into the market and a timeline for growth and expansion in the industry. Do you wish to start locally, selling your product at fairs and festivals? Do you think you will be seeking distribution deals on a national level? Do you plan to sell your products online? Your business strategy for getting entrance into the market is very necessary if you plan to develop an outstanding marketing plan.

  • Your Sales Strategy

There are a lot of businesses selling funnel cakes in the United States, but having a substantial plan will aid you to do it more efficiently.

To develop a good marketing plan, you will need to understand your sales strategy from the start and have a plan for increasing sales in a specific period of time. Ensure your account for all costs for advertising your product – print ads, online ads, website, and social media pages.

  • Business visions and products

To gain the attention of Americans, you have to think outside the box for good promotional ideas. T-shirts, free giveaways, and other special offers are a good way to get your product to a larger audience in the industry. You also have to decide the cost of buying additional merchandise and include it in your startup costs.

17. Develop Iron-clad Competitive Strategies to Help You Win

It is very necessary that you find out who your competitors are before thinking of ways to outsmart them. If there are a number of competitors in the same industry (meaning that it is not feasible to describe each one) then outline the number of businesses that compete with you, and why your business will provide customers with service/products that are of better quality or less expensive than your competition. Ways to overtake them may include;

  • Advertise in industry journals, on the Internet, and on your website
  • Attend/sponsor exhibitions and trade shows
  • Continual PR: press write-ups; personal interviews; testimonials; product trials
  • Seek out the decision-makers in large baking corporations
  • Undertake a campaign of personal selling, targeting decision-makers

18. Brainstorm Possible Ways to Retain Clients & Customers

You need to understand that your clients are looking for the ultimate, mouth-watering experience. You don’t need many words because a good recipe speaks for itself. You should consider offering a perfect blend of flavors and design. That, coupled with premier customer service will help you build a solid foundation of customers.

When considering new recipes or designs, consider asking your customers for input. Your clients will see that you consistently strive for new innovation and that their opinions matter to you. Ways to increase customer retention in your funnel cake business include;

  • Create an online presence
  • Go beyond and above
  • Set customer expectations
  • Be the expert
  • Build trust through relationship
  • Implement anticipatory services

19. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity

It’s important you build your brand’s image early on and maintain consistency throughout the life of the product. Be creative and remember that you can’t develop a logo then change it later. Basics to be included in your brand’s design include:

  • An attractive Logo

Your business logo represents the spirit and personality of your product. If you are not experienced in graphic designing, hire someone who is to design your logo and other graphics to ensure a professional, clean look. Try to make a concrete decision early on so you won’t have to make changes once the product is already on the shelves.

  • Scheduling

If you plan to take your business mobile, you have to check with those in charge of the place you plan to set up. Sometimes, space can be limited, and you’ll want to make sure there’s space for your cart or truck. Some long-standing fairs and events even have waitlists for vendors, so you’ll want to do your homework.

  • Unique product designs

Most funnel cake products in the industry are recognized by their flavors and designs. Always keep an open mind when designing your cakes because it could become part of your signature look in the industry. You should try something extraordinary and choose a design to attract more attention to your product.

  • Social media and Business website

Even if you don’t plan to sell your products online, having a presence online is important in this millennium. You should create a standard website that is professionally designed and easy to navigate. Also, do the same for your social media pages and have a strategy in place to make sure these pages get updated frequently and are used for marketing and positive interaction with your target market.

  • Supplement Your Cakes

A proven way to generate additional profits and keep your customers happy is to add other options to your funnel cake business. As with any starchy food, a drink is a critical follow-up. You can add canned or bottled soft drinks or water. You can also opt for fountain drinks with drink dispensers and portable ice makers.