Do you want to start a donut shop? If YES, here is a complete guide to starting a donut shop business with NO money and no experience.
Okay, so we have provided you an in-depth sample donut shop business plan template. We also took it further by analyzing and drafting a sample donut shop marketing plan backed up by actionable guerrilla marketing ideas for donut shops. In this article, we will be considering all the requirements for starting a donut shop business. So put on your entrepreneurial hat and let’s proceed.
Why Start a Donut Shop Business?
Donut is one snack that is made all over the world. It is no wonder that some folks are in love with it. This is enough reason to want to start a donut shop so that you can have a share of the market. Starting a donut shop business may sound easy but the truth is that it is quite challenging when you consider all the basics. A lot needs to be done to ensure that your donut business takes flight within the projected period.
Starting a donut shop business means that you have some plans, plans like how you intend to compete in the market, how you intend to make your business known to people, as well as other important factors that must not be overlooked.
The donut shop business is one of the businesses that an entrepreneur can easily start in the corner of a busy street or on a mobile shop without breaking the bank for cash. At the same time, big-time investors can also leverage on the high demand for donuts to set up their own donut shops in strategic locations all around key cities in the United States of America.
Before launching this type of business, it will pay you to carry out your market research, economic and cost analysis and of course feasibility studies. If you get things right before launching your donut shop business, it will not take you long before you break-even and start smiling to the bank.
Thus, if you want to start your own donut shop business, all you need to do is read this article and you will be well equipped.
Starting a Donut Shop Business – A Complete Guide
- Industry Overview
The donut store franchise/restaurant industry comprises of chain restaurant franchises that primarily sell donuts, snacks and may also sell alcoholic and other beverages.
The Donut Store Franchises/Restaurant industry has managed to excel during the past five years right through the recovery. Keeping consumers’ appetites satisfied, donut stores have created new menu options that capitalize on the trend of increasing awareness of the health risks associated with high – fat diets.
The industry has also thrived by developing products at price points attractive enough to weather the slow recovery, resulting in strong revenue growth. As a result of this, these trends are expected to continue to contribute to revenue growth going forward.
The donut store franchises/restaurant industry is a thriving sector of the economy of the United States which generates a whooping sum of $22 billion annually from more than 26,740 registered donut store franchises/restaurants scattered all around the United States of America.
The industry is responsible for the employment of well over 518,188 people. Experts project the donut restaurant industry to grow at a 2.4 percent annual rate. DonutKing Corporation, Jack in the Box, McDonald’s and Wendy’s are the leaders in the donut store franchises/restaurant industry; they have a lion market share in the industry.
The donut shop line of business has minimal barriers to entry with low startup capital and no specific licensing requirements. The majority of donut shops operate as non – employers and the capital costs of establishing retail outlets are not substantial relative to many other retail industries, such as department stores.
On the other hand, the high level of competition and market saturation in a declining industry can prove challenging to aspiring entrepreneurs who want to start their own donut shop – business. Most players in the donut shop line of business are small to medium size establishments that cater to the local community.
With this kind of business, if you want to start on a small scale, you can choose to start it as a part time business from your home. All you need are contacts, business cards and good marketing and customer service skills. However, if you intend starting it as a full – time business, then you should consider renting a shop in an area that is prone to high human and vehicular traffic.
The good thing about ensuring that your donut shop is visible to all is so that people can easily walk into your shop to make enquiries even if they aren’t buying at that moment. With that you will be able to build a client list that you can use for marketing purposes.
The donut shop business will continue to blossom because people will always want to eat when they are hungry and can’t afford to go home to fix meal for themselves. Despite the fact that the industry seems over saturated, there is still room big enough to accommodate aspiring entrepreneurs who intend opening their own donut shops in the United States of America.
The donut shop line of business is a profitable industry and it is open for any aspiring entrepreneur to come in and establish his or her business; you can choose to start on a small scale in a street corner like the average mom and pop business or you can choose to start on a large scale with several outlets in key cities or buy an existing and successful donut shop franchise.
Starting a Donut Shop Business – Market Research and Feasibility Studies
- Demographics and Psychographics
Donuts are eaten by all and sundry and that is why the demographic and psychographic composition of those who buy donuts and other snacks from donut shops cut across all genders and age groups, hence the demographic composition of the donut shop business is all encompassing.
The truth is that when it comes to selling donuts and other snacks, there is indeed a wide range of available customers. In essence, your target market can’t be restricted to just a group of people, but all those that reside around the locations where you have your donut shops and who have the purchasing power.
List of Niche ideas Within the Donut Shop Business That You Can Specialize in
If you are thinking of going into the donut business, then you need to take out time to carve a niche for yourself or better still choose from the existing niche ideas in the donut store franchises/restaurant industry. These are some of the niche ideas within the donut store franchises/restaurant industry that an aspiring entrepreneur can choose from;
- Take-out food service
- Drive-thru food service
- On-premise food service
The Level of Competition in the Donut Store Franchises/Restaurant Industry
The competition that exist in the donut shop line of business goes beyond competitions amongst donut shops in your location; you are expected to compete with fast food restaurants, mobile food trucks regular restaurants and canteens and any other outlets that also sell donuts, food and other snacks. So, it will be right to say the competition in the donut shop business is tough.
The truth is that no matter the level of competition in an industry, if you brand and promote your products or business properly, you will always make headway in the industry. Just ensure you are good at preparing the varieties of donuts and other snacks you have on your menu, you can deliver excellent customer care services and you know how to attract and reach out to your target market.
There are several donut shops and fast food restaurants, mobile food trucks, regular restaurants and canteens scattered all around the United States. So, if you choose to start your own donut shop business in the United States, you will definitely meet stiff competitions amongst them. Besides, there are larger donut shops that determine the trends in the industry and you should be ready to compete with them for customers.
List of Well – Known Brands in the Donut Shop Industry
In every industry, there are always key players. Some of these brands are those that have been in the industry for a long time, while others are best known for how they conduct their businesses and the results they have achieved over the years.
These are some of the leading donut shops in the United States of America and in the globe;
- USA Donuts
- Great American Donut Shop
- USA Donuts & Croissants
- Krispy Kreme Doughnuts
- Family Donut Shop
- The Donut Shop Bloomingdale
- The Donut Shop
- US Donuts & Yogurt
- Donutville U.S.A.
- Hole In One Bakery and Coffee Shop
- Shipley Do-Nuts
- Jolly Pirate Donuts
- Adrienne and Co. Donuts and Desserts
- Donut Bank
- DK’s Donuts
- Happy Donut & Breakfast
- The 5280 Donuts
- Mary Lee Donuts
- Baker’s Dozen Donuts
- Original Country Donuts
If you are looking in the direction of successfully launching a business and maximizing profits, then you need to ensure that you get your economic analysis right and try as much as possible to adopt best practices in the industry you choose to build a business in.
Donut shop business is not a green business; as a matter of fact, you will come across several donut restaurants/shops, fast food restaurants, mobile food trucks regular restaurants and canteens and any other outlets that also sell burger, food and snacks when you drive through town.
So, if you are mapping out your economic analysis, you should carry out thorough market survey and costing of what is required to rent a space where you are expected to open your donut shop business and the amount required to purchase cooking utensils and equipment, and also the cost to successfully run the business.
Over and above, if you are making an allowance for starting a donut shop business, then your concern should not be limited to the cost of renting a shop facility and purchasing cooking utensils and equipment, but also on branding and on how to build a robust clientele base. The truth is that if you are able to build a robust clientele base, you are sure going to maximize profits in the business.
Starting Your Donut Shop Business from Scratch vs Buying a Franchise
When it comes to starting a business of this nature, it will pay you to buy the franchise of a successful and well – established fast food restaurant or donut shop as against starting from the scratch. Even though it is relatively expensive buying the franchise of an established fast food restaurant or donut shop brand, but it will definitely pay you in the long run.
But if you truly want to build your own brand after you must have proved your worth in the Donut Store industry, then you might just want to start your own donut shop business from the scratch. The truth is that it will pay you in the long run to start your donut shop business from the scratch. Starting from the scratch will afford you the opportunity to conduct thorough market survey and feasibility studies before choosing a location to launch the business.
Please note that most of the big and successful donut shop businesses and fast food restaurants around started from the scratch and they were able to build a solid business brand. It takes dedication, hard work and determination to achieve business success and of course you can build your own donut shop business – brand to become a successful brand with clients from all across the city where your donut shop business is located and through the length and breadth of the United States of America and other countries of the world if you decide to go into franchising.
Possible Threats and Challenges You Will Face When Starting a Donut Shop Business
If you decide to start your own donut shop business today, one of the major challenges you are likely going to face is the presence of well – established donut shops and fast food restaurants, mobile food trucks, regular restaurants and canteens and other outlets that also sell burger, food and snacks. The only way to avoid this challenge is to create your own market.
Some other challenges and threats that you are likely going to face is economic downturn; if the economy is in bad shape, history has it that businesses such as donut shops, fast food restaurants, mobile food trucks regular restaurants and canteens and other outlets that also sell donuts, food and snacks usually struggle to maintain their old customers or even welcome new customers.
So also, unfavorable government policies can also hamper the growth of your donut shop business. There is nothing you can do as regards these threats and challenges other than to stay positive that things will work well for you.
Starting a Donut Shop Business – Legal Matters
- Best legal entity to use for this type of business
You have the options of either choosing a general partnership, limited liability company, or even a sole proprietorship for a donut shop business. Ordinarily, sole proprietorship should have been the ideal business structure for a small – scale donut shop business especially if you are just starting out with a moderate startup capital in a small neighborhood and with just one outlet.
But people prefer limited liability Company for certain reasons. As a matter of fact, if your intention is to grow the business and have chains of donut shops across the United States of America and other countries of the world via franchising, then choosing sole proprietor is not an option for you. Limited Liability Company, LLC or even general partnership will cut it for you.
Setting up an LLC protects you from personal liability. If anything goes wrong in the business, it is only the money that you invested into the limited liability company that will be at risk. Limited liability companies are simpler and more flexible to operate and you don’t need a board of directors, shareholders meetings and other managerial formalities.
These are some of the factors you should consider before choosing a legal entity for your donut shops business; limitation of personal liability, ease of transferability, admission of new owners, investors’ expectation and of course taxes.
If you take your time to critically study the various legal entities to use for your donut shop business with the ability to sell franchise and open chains of donut shops all across the United States of America, you will agree that limited liability company; an LLC is most suitable. You can start this type of business as limited liability company (LLC) and in future convert it to a ‘C’ corporation or an ‘S’ corporation especially when you have the plans of going public.
Catchy Business Name ideas Suitable for a Donut Shop Business
When it comes to choosing a name for your business, you should be creative because whatever name you choose for your business will go a long way to create a perception of what the business represents. Usually it is the norm for people to follow the trend in the industry they intend operating from when naming their business.
If you are considering starting your own donut shop business, here are some catchy names that you can choose from;
- Mercy Taylor® Donut Shop, LLC
- Crunchy Bites™ Donut Shop, LLC
- Kong Tappers© Donut Shop, Inc.
- Donut Queens® Donut Shop, Inc.
- Donut Bae™, Inc.
- Tammy Brown™ Donut Shop, Inc.
- Remington Way© Donut Shop, Inc.
- One Stop® Donut Shop, LLC
- Big Mike© Donuts, Inc.
- You First© Donut Shop, Inc.
In the United States and in most countries of the world, you can’t operate a business without having some of the basic insurance policy covers that are required by the industry you want to operate from. So, it is important to create a budget for insurance and perhaps consult an insurance broker to guide you in choosing the best and most appropriate insurance policies for your donut shop business.
Here are some of the basic insurance covers that you should consider purchasing if you want to start your own donut shop business in the United States of America;
- General insurance
- Health/Medical insurance
- Liability insurance
- Workers compensation
- Overhead expense disability insurance
- Business owner’s policy group insurance
- Payment protection insurance
Intellectual Property Protection/Trademark
If you are considering starting your own donut shop business, usually you may not have any need to file for intellectual property protection/trademark. This is because the nature of the business makes it possible for you to successfully run it without having any cause to challenge anybody in court for illegally making use of your company’s intellectual properties.
But if you just want to protect your company’s logo and other documents or software that are unique to you or even jingles and media production concepts, then you can go ahead to file for intellectual property protection. If you want to register your trademark, you are expected to begin the process by filing an application with the USPTO. The final approval of your trademark is subjected to the review of attorneys as required by USPTO.
Is Professional Certification Needed to Run a Donut Shop Business?
When it comes to operating a donut shop business, you do not need to have any formal training or special certification before you can be allowed to open and operate a donut shop business in the United States of America and in all countries of the world. All you need is informal training that will expose you to the in and out of preparing varieties of donuts and other snacks and effectively running the business.
On the other hand, if you come across any form of certification that can aid you to conduct your donut shop business, then by all mean try and pursue such certification.
List of Legal Documents You Need to Run a Donut Shop Business
These are some of the basic legal documents that you are expected to have in place if you want to legally run your own donut shop business in the United States of America;
- Certificate of Incorporation
- Business License
- Tax Payer’s ID/Tax Identification Number
- Food and drink handlers certificate
- Health inspection Certificate
- Proof of district-issued food and drinks manager identification card
- Copy of license for the service support facility and/or a recent inspection report
- Business Plan
- Non – disclosure Agreement
- Employee Handbook
- Employment Agreement (offer letters)
- Operating Agreement for LLCs
- Insurance Policy
- Company Bylaws
- Memorandum of Understanding (MoU)
- Building License
- Franchise or Trademark License (optional)
Financing Your Donut Shop Business
Starting a donut shop business can be cost effective if you choose to start on a small scale by running a small donut shop business in a street corner. Securing a standard and well – positioned store, and purchasing bread toaster, cooking utensils and equipment, baking and food supplies and serving wares et al are part of what will consume a large chunk of your startup capital. If you choose to start the business on a large scale, you would need to go source for fund to finance the business because it is expensive to start a standard large scale donut restaurant/shop business.
When it comes to financing a business, one of the first things you should consider is to write a good business plan. If you have a good and workable business plan document in place, you may not have to labor yourself before convincing your bank, investors and your friends to invest in your business.
Here are some of the options you can explore when sourcing for startup capital for your donut shop business;
- Raising money from personal savings and sale of personal stocks and properties
- Raising money from investors and business partners
- Sell of shares to interested investors
- Applying for loan from your bank
- Pitching your business idea and applying for business grants and seed funding from donor organizations and angel investors
- Source for soft loans from your family members and your friends
Choosing a Suitable Location for a Donut Shop Business
When it comes to choosing a location for your donut shop business, the rule of thumb is that you should be guided by the demand for donuts and other snacks and easy access to wholesale food ingredient supplies from farmers or wholesale food distributors. Of course, if you are able to secure a central location for your donut shop business, it will give people easy access to your shop.
It cannot be overemphasized that the location you chose to open your donut shop business is key to the success of the business, hence entrepreneurs are willing to rent or lease a facility in a visible location; a location where the demography consists of people with the required purchasing power and lifestyle.
Before choosing a location for your donut shop business, ensure that you first conduct a thorough feasibility studies and market survey. The possibility of you coming across similar business that just closed shop in the location you want to open yours can’t be ruled out.
These are some of the key factors that you should consider before choosing a location for your donut shop business;
- The demography of the location
- The demand for donuts and other snacks in the location
- The purchasing power of the residents of the location
- Accessibility of the location
- The number of donut shops, fast food restaurants, mobile food trucks, regular restaurants and canteens et al and any other outlets that also sell donuts and other snacks in the location
- The local laws and regulations in the community
- Traffic, parking and security
Starting a Donut Shop Business – Technical and Manpower Details
On the average, there are no equipment needed to run this type of business except for bread toaster, cooking utensils, food service equipment (microwave, dishwasher, refrigerator, blender, etc.), Storage hardware (bins, utensil rack, shelves, food case), Counter area equipment (counter top, sink, ice machine, etc.), receipt issuing machines, sound system (for playing music), Point of Sale Machines (POS Machines), CCTV cameras and flat screen TVs. You will also need computers, internet facility, telephone, fax machine and office furniture (chairs, tables, and shelves) amongst others and all these can be gotten as fairly used.
As regards leasing or outright purchase of a store facility, the choice is dependent on your financial standing, but the truth is that to be on the safe side, it is advisable to start off with a short term rent/lease while test running the business in the location. If things work out as planned, then you go on a long – term lease or outright purchase of the property but if not, then move on and source for other ideal location/facility for such business.
When it comes to hiring employees for a standard donut shop business with more than one outlet, you should make plans to hire a competent Chief Executive Officer (you can occupy this role), Admin and Human Resources Manager, Merchandize Manager, Bakers/Cook/Chef, Donut Shop Manager, Sales and Marketing Officer/Sales Girls and Sales Boys, Accounting Clerk and Cleaners. On the average, you need a minimum of 5 to 10 key staff members to run a small – scale but standard donut shop business.
The Business Services Process Involved in a Donut Shop Business
When it comes to the business services process of a donut shop, there are no hard and fast rules about it. Basically, it is the duty of the merchandize manager to help the organization purchase food ingredients and packaging/serving materials. They go out there to source for good purchasing deals and they also ensure that they only purchase at the right prices that will guarantee them good profits.
Once the donut shop business is in full operation, the donuts and other snacks are prepared and they are listed on the menu. Donuts, snacks and drinks purchased from a donut shop is usually take away since they may not have the capacity to accommodate all their customers per-time except on-premises donut restaurants.
It is important to state that a donut shop business may decide to improvise or adopt any business process and structure that will guarantee them efficiency and flexibility; the above stated donut shop business process is not cast on stone.
Starting a Donut Shop Business – The Marketing Plan
- Marketing ideas and strategies
Running a business requires that you should be proactive when it comes to marketing your goods or services. If you choose to launch a donut shop business, then you must go all out to employ strategies that will help you attract customers or else you will likely struggle with the business because there are well – known brands that determine the market direction for the fast food restaurants industry cum donut business.
These are some of the marketing ideas and strategies that you can adopt for your donut shop business;
- Introduce your donut shop by sending introductory letters alongside your brochure to corporate organizations, car owners, taxi companies, transport companies, households, sports organizations, gyms, schools and other key stakeholders throughout the city where your donut shop is located
- Advertise on the internet on blogs and forums, and also on social media like Twitter, Facebook, LinkedIn to get your message across so that those on the social media or those who read blogs will know where to go when they need to purchase donuts and other snacks within your location
- Create a basic website for your business so as to give your business an online presence
- Directly market your products
- Engage in roadshows in targeted communities from time to time to promote your donut shop business
- Join local donut shops/fast food restaurant business associations for industry trends and tips
- Provide discount days for your customers
- Advertise your business in community based newspapers, local TV and radio stations
- List your business on yellow pages ads (local directories)
- Encourage the use of word of mouth marketing (referrals)
Factors That Will Help You Get the Right Product Pricing
One key factor that will help you sell your donuts and other snacks and beverages at rock bottom prices is to purchase your food ingredient supplies directly from farmers or from food ingredient wholesalers in pretty large quantities. The truth is the higher the quantity of items that you purchase directly from farmers and wholesalers, the cheaper you tend to get them.
Another strategy that will help you retail your donuts and other snacks and beverages at the right price is to ensure that you cut operational cost to the barest minimum, and channel your efforts towards marketing and promoting your brand name. Aside from the fact that this strategy will help you save cost, it will also help you get the right pricing for your products.
Strategies to Boost Your Donut Shop Brand Awareness and Create Your Corporate Identity
If your intention of starting a donut shop business is to grow the business beyond the city where you are going to be operating from to become a national and international brand by opening chains of donut shops and franchising, then you must be ready to spend money on promotion and advertisement of your brand.
No matter the industry you belong to, the truth is that the market is dynamic and it requires consistent brand awareness and brand boosting cum promotion to continue to appeal to your target market. Here are the platforms you can leverage on to boost your brand awareness and create a corporate identity for your donut shop business;
- Place adverts on both print (newspapers and food magazines) and electronic media platforms
- Sponsor relevant community based events
- Leverage on the internet and social media platforms like Instagram, Facebook, Twitter, YouTube, Google + et al to promote your donut shop business
- Install your billboards in strategic locations all around your city or state
- Engage in roadshows from time to time in targeted neighborhoods to create awareness of your donut shop business
- Distribute your fliers and handbills in target areas
- Contact corporate organizations, car owners, taxi companies, transport companies, households, sports organizations, gyms, schools, socialites, celebrities and other key stake holders throughout the city where your donut shop is located informing them about your donut shop business and the donuts and other snacks and beverages you sell
- List your donut shop business in local directories
- Advertise your donut shop business in your official website and employ strategies that will help you pull traffic to the site
- Position your Flexi Banners at strategic positions in the location where donut shop business is located
- Ensure that all your staff members wear your branded shirts and all your vehicles and trucks/vans are well branded with your company logo et al.