A donut shop is a shop where different varieties of donuts are made and retailed. The dough is mixed and shaped, usually only recognized as a circular pastry with a hole in the middle, dropped into hot oil and fried, and glazed or dusted with sugar.

They can also be baked. Donuts are a common type of lunch food often eaten as part of a packed lunch. Available statistics show that the market size of the doughnut sector in the United States reached 7.16 billion U.S. dollars in 2020, reflecting a decrease over the previous year’s size of 7.49 billion U.S. dollars.

The doughnuts market is expected to grow at a CAGR of 3.83% during 2019-2024. There are 18,010 donut shops in the U.S. and although “donuts shops” get top billing in the quick-service restaurant (QSR) category, consumers visit them more for the coffee than the donuts, reports The NPD Group.

Steps on How to Start a Donut Shop Business

  1. Conduct Market Research

If you are considering starting a donut shop, you would need reliable market research to be able to maximize profits from the business. The first step in the market research process for your donut shop should be to develop market-based research questions in line with your overall business goal and objective.

In this regard, you should source for information that will help you maximize your business, information that will give you a clue of what your potential market will be looking out for from a donut shop and also help you operate your donut shop with less stress and of course, build the business to profitability.

a. Who is the Target Market for Donut Shop Business?

If you are thinking of opening a donut shop then you should make target demographics all-encompassing. It should include; students, migrants, entrepreneurs, tourists, and every adult in the neighborhood where your donut shop will be located.

b. Is Donut Shop a Profitable Business?

Yes, the donut shop business is quite profitable. In the United States alone, about 10 billion doughnuts are made every year.

c. Are There Existing Niches in the Industry?

No, there are no existing niches when it comes to donut shops because donut shop is a niche idea in the sub store franchises/restaurant industry.

d. Who are the Major Competitors?
  • Dunkin’ Donuts
  • Shipley Do-Nuts
  • Great American Donut Shop
  • USA Donuts & Croissants
  • Krispy Kreme Doughnuts
  • Family Donut Shop
  • The Donut Shop Bloomingdale
  • 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.
e. Are There County or State Regulations or Zoning Laws for Donut Shop Business?

Yes, there are county, state, and zoning laws for donut shops in the United States. Please note that the Food and Drug Administration (FDA) sets the federal Food Code, but it doesn’t oversee individual donut shops. Instead, the various states use the Food Code as the basis for their own food codes.

They may adopt its rules, interpret them differently or set their own rules. It is important to also state that in the United States, you are required to follow your own state’s foodservice code. Visit the FDA website for a list of food service codes by state.

f. Is There a Franchise for Donut Shop Business?

Yes, there are franchise opportunities for donut shops. Here are some of them;

  • Dunkin’ Donuts
  • Duck Donuts Franchising Co.
  • Shipley Do-Nuts
  • Donut Bar
  • Peace, Love & Little Donuts®
  • Randy’s Donuts
  • Daylight Donuts.
g. What Do You Need to Start a Donut Shop Business?
  • A Feasibility Report
  • Business and Marketing Plans
  • Business Licenses and Permits
  • A Good Shop facility
  • EIN (Employer Identification Number)/Federal Tax ID Number
  • A Corporate Bank Account
  • Supplies of ingredients
  • Employees
  • Startup Capital
  1. Memorable Donut Shop Business Names

  • Mercy Taylor® Donut Shop, LLC
  • Fluffy 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.
  • Larry Duncan® Donut Shop, LLC
  • King Baker® Donut Shop, LLC
  • Lowey Martins™ Donut Shop, LLC
  • Benny Blanco© Donut Shop, Inc.
  • Alex Core® Donut Shop, Inc.
  • Mouth Full™ Donut Shop, Inc.
  • Rees Morgan™ Donut Shop, Inc.
  • Big Bite© Donut Shop, Inc.
  • Tripple Bites® Donut Shop, LLC
  • Plaxton Foods™ Donut Shop, Inc.
  1. Register Your Business

a. What Type of Business Structure is Best for Donut Shop?

The truth is that there are several options when it comes to the business structure for a donut shop, but the one that most players in this line of business consider is an LLC. It is common to consider an LLC because providers want to protect themselves from lawsuits. Please note that an LLC will need an EIN if it has employees or if it will be required to file any of the excise tax forms listed below.

b. Steps to Form an LLC
  • Choose a Name for Your LLC.
  • File Articles of Organization.
  • Choose a registered agent.
  • Decide on member vs. manager management.
  • Create an LLC operating agreement.
  • Comply with other tax and regulatory requirements.
  • File annual reports.
c. What Type of License is Needed to Open a Donut Shop Business?
  • General Business License
  • Health and Safety Permit
  • Food Handlers’ License
  • Zonal Permits
  • Signage Permit
  • Operational State Facility Inspections
  • A music license if you want to play recorded or stream music in your donut shop
  • A dumpster placement permit that specifies where you can put your dumpster outside your donut shop
  • A valet parking permit if you plan to offer valet parking for customers
  • Sidewalk permits if you plan to offer outside seating
d. What Type of Certification is Needed to Open a Donut Shop Business?

You don’t need any certifications to open a donut shop business.

e. What Documents are Needed to Open a Donut Shop Business?
  • DBA
  • EIN
  • Business and liability insurance
  • Federal Tax Payer’s ID
  • State Permit and Building Approval
  • Certificate of Incorporation
  • Business License
  • Business Plan
  • Employment Agreement (offer letters)
  • Operating Agreement for LLCs
  • Insurance Policy
  • Online Terms of Use
  • Online Privacy Policy Document
  • Contract Document
  • Company Bylaws
  • Memorandum of Understanding (MoU)
f. Do You Need a Trademark, Copyright, or Patent?

If you are considering opening your own donut shop business, usually you may not have any need to file for intellectual property protection or 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.

  1. Cost Analysis and Budgeting

a. How Much Does It Cost to Start a Donut Shop Business?

There is no clear-cut startup cost for a donut shop, but available data shows that the cost of starting a donut shop ranges from between $35,000 to $250,000. But if you intend to buy a donut shop franchise, then the average turnkey investment is approximately $350,000.

b. What are the Costs Involved in Starting a Donut Shop
  • Business Registration Fees – $750.
  • Legal expenses for obtaining licenses and permits – $1,300.
  • Marketing, Branding and Promotions – $1,000.
  • Business Consultant Fee – $2,500.
  • Insurance – $1,400.
  • Rent/Lease – $35,000.
  • Other start-up expenses like commercial satellite TV subscriptions, and phone and utility deposits ($1,800).
  • Operational Cost (salaries of employees, payments of bills et al) – $30,000
  • Start-up Inventory – $15,000
  • Store Equipment (cash register, security, ventilation, signage) – $1,750
  • Furnishing and Equipping the Shop and Kitchen – $50,000
  • Website: $600
  • Opening party: $3,000
  • Miscellaneous: $2,000
c. What Factors Determine the Cost of Opening a Donut Shop Business?
  • The size of the donut shop
  • The choice of location
  • The required licenses and permits
  • The type of facility
  • The types of donuts and related products retailed in the shop
  • The cost of hiring and paying a business consultant and attorney
  • The cost for branding, promotion, and marketing of the donut shop
  • The cost for furnishing and equipping the donut shop
  • The cost of insurance
  • The cost for registering the business
  • Source of your supplies and ongoing expenses
  • Cost of recruiting and training your staff
  • The cost for the purchase and customizing of uniforms
  • The cost for the grand opening of the donut shop business
d. Do You Need to Build a Facility? If YES, How Much Will It Cost?

It is not compulsory to build a new facility for your donut shop, but if you have the required finance, it will pay you to build your own facility. The truth is that building or reconstructing a facility will help you come up with a facility that will perfectly fit into your overall business goals and vision.

e. What are the Ongoing Expenses of a Donut Shop Business?
  • Supplies (inventory expenses)
  • Utility bills (internet subscriptions, phone bills, signage and software renewal fees et al)
  • Salaries of employees
f. What is the Average Salary of your Staff?
  • Shop Manager (Owner) – $45,000 Per Year
  • (Cashier) Accountant – $32,630,000 Per Year
  • Donut Maker – $30,000 Per Year
  • Delivery Guys – $28,100 Per Year
  • Cleaners – $25,000 Per Year
  • Security Guard -$24,000 Per Year
g. How Do You Get Funding to Start a Donut Shop Business?
  • Raising money from personal savings and sale of personal stocks and properties
  • Raising money from investors and business partners
  • Sell shares to interested investors
  • Applying for a loan from your bank/banks
  • Source for soft loans from your family members and friends.
  1. Write a Business Plan

a. Executive Summary

Donut Queens® Donut Shop, Inc. is a registered donut shop business that will be located in one of the busiest business and residential districts in Mamaroneck, New York. We have been able to lease a shop facility along a major road that is big enough for the kind of donut shop we intend launching and the shop facility is located in a corner piece property directly opposite the largest shopping mall in Mamaroneck, New York.

b. Products and Service
  • Varieties of Donuts (Frosted Doughnut, Cinnamon Twist Doughnut, Cruller, Old-fashioned Doughnut, Jelly Doughnut, Blueberry Doughnut, and Glazed Doughnut)
  • Beverages and water
c. Mission Statement

Our mission is to establish a donut shop business that will make available a wide variety of donuts at affordable prices to the residents of Mamaroneck, New York, and other cities in the United States of America where we intend opening of chains of donut shops.

Vision Statement

Our vision is to build a business that is highly successful and listed among Fortune500 companies in the United States.

d. Goals and Objectives

The goals and objectives of a donut shop business are to provide a retail outlet where patrons can go to buy or order donuts if the shop has delivery options.

e. Organizational Structure
  • Shop Manager (Owner)
  • Accountant
  • Donut Makers
  • Delivery Guys
  • Cleaners
  • Security Guard

Marketing Plan

a. SWOT Analysis
Strength:
  • Ideal location for a donut shop business
  • Highly experienced and qualified employees and management
  • Access to finance from business partners
  • Unique donut recipe
  • Reliable and efficient inventory management system.
Weakness:
  • Financial constraints may restrict the publicity and branding of the business
  • A new business that will be competing with well-established donut shops in the city.
  • Inability to retain our highly experienced employees longer than we want during the teething stage of the business.
Opportunities:
  • A rise in the number of donut lovers within our market space
  • Online market, new services, new technology, and of course the opening of new markets.
Threat:
  • The arrival of a new donut shop within our market space
  • Economic uncertainty
  • Liability problems
  • The U.S. Food and Drug Administration (FDA) could change its regulatory status and decide to enforce strict regulations that can strangulate new businesses like ours.
b. How Do Donut Shops Make Money?

Donut shops make money by selling the following products;

  • Varieties of Donuts (Frosted Doughnut, Cinnamon Twist Doughnut, Cruller, Old-fashioned Doughnut, Jelly Doughnut, Blueberry Doughnut, and Glazed Doughnut)
  • Beverages and water
c. Payment Options
  • Payment with cash
  • Payment via credit cards/Point of Sale Machines (POS Machines)
  • Payment via online bank transfer
  • Payment via mobile money transfer
d. Sales & Advertising Strategies
  • Introduce your donut shop business by sending introductory letters alongside your brochure to households, gyms, schools, and other key stakeholders throughout the city where your donut shop business is located.
  • Advertise on the internet on blogs and forums and also on social media like Twitter, Facebook, LinkedIn to get your message across
  • Create a basic website for your business to give your business an online presence
  • Directly market your products.
  • Join local donut shop associations for industry trends and tips
  • Provide discount days for your customers
  • Advertise our 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)

Financial Projection

a. How Much Should You Charge for your Product/Service?

The price of donuts depends on the size and type of donuts but the median prices of donuts range from $1.29 to as much as $14.99.

b. How Much Profit Do Donut Shop Owners Make a Year?

Available data shows that the average donut shop or bakery makes $577 per day. A small shop in a popular location can make up to $150,000 in profit annually. Furthermore, it’s important to keep in mind that sales can fluctuate seasonally.

c. What Factors Determine the Amount of Profit to Be Made?
  • The capacity of the donut shop
  • The types of donuts and related products retailed in the shop
  • The location the donut shop is covering
  • The management style of the donut shop
  • The business approach of the donut shop
  • The advertising and marketing strategies adopted by the donut shop.
  • The number of years the donut shop is in business
d. What is the Profit Margin of a Donut Shop?

The profit margin of a donut shop is not fixed. On average, donut shops tend to have an overall profit margin of between 7.5% and 13% annually.

e. What is the Sales Forecast?

Below is the sales forecast for a donut shop. It is based on the location of the business and other factors as it relates to such startups in the United States;

  • First Fiscal Year: $220,000
  • Second Fiscal Year: $350,000
  • Third Fiscal Year: $480,000
  1. Set Up your Shop 

a. How Do You Choose a Perfect Location for Donut Shop?
  • The demography of the location especially as it relates to people that eat donuts regularly
  • The demand for donuts in the location
  • The purchasing power of businesses and residents of the location
  • Accessibility of the location
  • The number of donut shops, and related businesses in the location
  • The local laws and regulations in the community/state
  • Traffic, parking and security et al
b. What State and City are Best to Open a Donut Shop?
  • Atlanta, Georgia
  • Boston, Massachusetts
  • Palm Beach, Florida
  • Las Vegas, Nevada
  • Los Angeles, California
  • New York City, New York
  • San Francisco, California
  • Washington DC
  • Chicago, Illinois
  • Dallas-Fort Worth, Texas
c. What Equipment is Needed to Operate a Donut Shop?
  • Industrial Oven
  • Dough Cutters
  • Dough Scrapers
  • Oil
  • Dough box trolleys
  • Donut boxes
  • Heat-resistant gloves
  • Donut delivery bag.
  1. Hire Employees

When it comes to hiring employees for a standard donut shop, you should make plans to hire a competent shop manager (you can occupy this position), account clerk, donut makers, delivery guys, cleaners, and security guards.

  1. Launch the Business Proper

In recent times, no donut shop opens its door for business without first organizing an opening party to officially launch the business. You can choose to do a soft opening if you are operating on a low budget or you can go for a grand opening party. The bottom line is that with a proper launching of the donut shop, you will officially inform people in your city that your donut shop is open for business.

a. What Makes a Donut Shop Business Successful?
  • Choose a good location and shop facility to launch the business
  • Make available varieties of donuts (give your customers options)
  • Throw a grand party before officially opening the donut business
  • Be deliberate with your marketing sales approach
  • Encourage the use of word of mouth to promote your donut shop business
  • Leverage on all available online and offline platforms to promote your donut shop business
b. What Happens During a Typical Day at a Donut Shop?
  • The shop is open for the day’s work
  • The kitchen, ingredients, serving areas, serving wares, chairs, and tables are cleaned and properly arranged
  • Walk-in customers are attended to
  • Deliveries of orders are made
  • Stocks are taken and reports are written and submitted to superior officers
  • The business is closed for the day.
c. What Skills and Experience Do You Need to Build a Donut Shop Business?
  • Excellent baking and culinary skills
  • Excellent customer services skills
  • Interpersonal skill
  • Accounting and bookkeeping skills
  • Business management skills
  • Bargaining skill
  • Work experience in a donut shop environment
  • Experience in managing people
  • Experience in business administration
  • Experience in making different types of donuts.