A funnel cake shop is a business that bakes and sells funnel cakes. Please note that the name “funnel cake” was derived from the method of squeezing batter through a funnel in a circular pattern into hot oil to achieve a dizzying pattern of crispy-fried dough.

The funnel cake business is a niche idea in the cake and bakery industry and available statistics have it that the global bakery product market size was estimated at USD 203.8 billion in 2018, and it is projected to expand at a CAGR of 3.2% from 2019 to 2025. Interestingly, the market size of the Bakery Cafes industry in the US has grown 1.3% per year on average between 2017 and 2022.

Steps on How to Start a Funnel Cake Business

  1. Conduct Market Research

Conducting market research before starting any business is key to the success of the business hence you must not open a funnel cake business without conducting market research. This is because market research provides critical information about your market and your business landscape.

It can tell you how your business is perceived by the target customers and clients you want to reach. It can help you determine who and where your customers are, and which customers are most likely to purchase funnel cakes from you. In essence, thorough market research will help you understand how your target customers think and adapt to their needs to turn them into regular customers and brand advocates.

a. Who is the Target Market for Funnel Cake Business?
  • Facility managers
  • Event and Party Planners
  • Retailers
  • Schools
  • Tourists
  • Everyone who resides in the location where you intend to sell your funnel cakes.
b. Is Funnel Cake Business a Profitable Business?

Yes, the funnel cake business is very profitable. Americans spent $140 million on cakes in 2016, which equals 100.1 million cakes eaten in the year so far.

c. Are There Existing Niches in the Industry?

No, there are no existing niches when it comes to the funnel cake business because the funnel cake business is a niche idea in the cake and bakery industry.

d. Who are the Major Competitors?
  • County Fair Funnel Cakes
  • Evy Funnel Cakes & Tacos
  • Funnel Cake Friday’s
  • The Funnel House
  • Cameron’s
  • Preppy Kitchen
  • The Spruce Eats
  • Churro Factory
  • Cravings
  • Bjorn Cakes
  • Meez Meals
  • Sprinkles Chicago
  • The Hungry Miner Funnel Cakes & Hot Dogs.
e. Are There County or State Regulations or Zoning Laws for Funnel Cake Business?

Yes, there are county and state regulations and zoning laws for funnel cake businesses in the United States. Please note that the Food and Drug Administration (FDA) sets the federal Food Code, but it doesn’t oversee individual funnel cake businesses. Instead, the various states use the Food Code as the basis for their food codes. They may adopt its rules, interpret them differently or set their own rules.

Please note 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 Funnel Cake Business?

Yes, there are franchise opportunities for the funnel cake business. Here is one of them;

  • The Hungry Miner Funnel Cakes & Hot Dogs.
g. What Do You Need to Start a Funnel Cake Business?
  • A Feasibility Report
  • Business and Marketing Plans
  • Business Licenses and Permits
  • A Good Production facility
  • EIN (Employer Identification Number)/Federal Tax ID Number.
  • A Corporate Bank Account
  • Equipment
  • Supplies
  • Employees
  • Startup Capital
  1. Memorable Funnel Cake Business Names

  • Cake Delight® Funnel Cake Company, Inc.
  • Orange Label© Funnel Cake Company, Inc.
  • Tandy Foods© Funnel Cake Company, Inc.
  • Regan Molly® Funnel Cake Company, LLC
  • Ryan Townsend® Funnel Cake Company, LLC
  • Evelyn Williams™ Funnel Cake Company, LLC
  • Cake Gang© Funnel Cake Company, Inc.
  • House of Cakes® Funnel Cake Company, Inc.
  • Pamela Signature™ Cookie Company, Inc.
  • Glen Humphery™ Funnel Cake Company, Inc.
  • OK Bakeries© Funnel Cake Company, Inc.
  • Cleo Bakery® Funnel Cake Company, LLC
  • The Favorites™ Funnel Cake Company, Inc.
  • Sharon Hills© Funnel Cake Company, Inc.
  • Denzel Kingston® Funnel Cake Company, LLC
  • Glover Sean© Funnel Cake Company, Inc.
  • Yummy Cracks® Funnel Cake Company, Inc.
  • Teddy Bear™ Funnel Cake Company, Inc.
  • Reach Out™ Funnel Cake Company, LLC.
  • Brown Masters© Funnel Cake Company, LLC
  1. Register Your Business

a. What Type of Business Structure is Best for Funnel Cake Business?

When it comes to starting a funnel cake business, you have several options when it comes to the business structure, 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 Funnel Cake Business?
  • General Business License
  • Health and Safety Permit
  • Food and Drinks Handlers’ License
  • Zonal Permits
  • Signage Permit
  • Operational State Facility Inspections

Please note that there are two types of permits you need to make and sell funnel cakes in the United States, Permit A, and Permit B. Permit A is for those who will sell their baked goods directly to consumers, while Permit B is for those who will sell through local restaurants or grocery stores.

d. What Type of Certification is Needed to Open a Funnel Cake Business?

You don’t need any certifications to open a funnel cake business.

e. What Documents are Needed to Open a Funnel Cake 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 funnel cake 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 Funnel Cake Business?

The cost required to open a funnel cake business may vary significantly. For example, you can start a homemade funnel cake business with less than $2,000 and at the same time, you can start a standard funnel cake bakery business or funnel cake café with a robust distribution network and over a dozen full-time employees with over $200,000.

b. What are the Costs Involved in Starting a Funnel Cake Business?
  • 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 – $75,000.
  • Other start-up expenses include stationery ($500), 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
  • Carts – $20,000
  • Website: $600
  • Opening party: $3,000
  • Miscellaneous: $2,000
c. What Factors Determine the Cost of Opening a Funnel Cake Business?
  • The size of the funnel cake business
  • The choice of location
  • The required licenses and permits
  • The type of facility
  • The type of related products produced
  • The cost for branding, promotion, and marketing of the funnel cake business
  • The cost for furnishing and equipping the funnel cake business
  • 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 funnel cake business
d. Do You Need to Build a Facility? If YES, How Much Will It Cost?

No, it is not compulsory to build a new facility for your funnel cake business, 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 Funnel Cake 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?
  • Chief Executive Officer – $55,000 Per Year
  • Bakery Manager – $45,000 Per Year
  • Accountant – $35,630,000 Per Year
  • Bakers – $27,100 Per Year
  • Salespersons – $26,000 Per Year
g. How Do You Get Funding to Start a Funnel Cake 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

The Favorites™ Funnel Cake Company, Inc. is a neighborhood funnel cake business that will be located in a fast-growing community in New Haven, Connecticut. We have been able to secure a two-year lease agreement for a vacant facility within the city’s largest shopping mall. We are fortunate to secure a facility with an option of renewal for 5 years a rate that is favorable to us.

b. Products and Service
  • Different types and flavors of funnel cakes
  • Beverages and water.
c. Mission Statement

Our mission is to establish a standard funnel cake bakery brand that will favorably compete with leaders in the industry. We want to build a business that will be listed amongst the top 20 funnel cake brands in the United States of America.

Vision Statement

Our vision is to build a funnel cake business with franchises all across the United States of America and Canada.

d. Goals and Objectives

The goals and objectives of a funnel cake business are to produce different flavors and types of funnel cakes for consumers and retailers.

e. Organizational Structure
  • Chief Executive Officer (Owner)
  • Bakery Manager
  • Accountant
  • Bakers
  • Salespersons

Marketing Plan

a. SWOT Analysis
  • Ideal location for a funnel cake business
  • Highly experienced and qualified employees and management
  • Access to finance from business partners
  • Access to ingredients and supplies.
  • A reliable, clean, healthy, and efficient method of preparing funnel cakes.
  • Financial constraints may restrict the publicity and branding of the business
  • A new business that will be competing with well-established funnel cake businesses and franchises in the city.
  • Inability to retain our highly experienced and qualified employees longer than we want during the teething stage of the business.
  • A rise in the number of funnel cake lovers within our market space
  • Online market, new services, new technology, and of course the opening of new markets.
  • The arrival of a new funnel cake business within our market space
  • Steady wage expenses
  • 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 Funnel Cake Businesses Make Money?

Funnel cake businesses make money by selling the following products;

  • Different types and flavors of funnel cakes
  • Beverages and water
  • Franchise and recipes
c. Payment Options
  • Payment with cash
  • Payment via credit cards
  • Payment via online bank transfer
  • Payment via mobile money transfer
d. Sales & Advertising Strategies
  • Introduce your funnel cake business by sending introductory letters alongside your brochure to schools, event, and party planners, households, and other key stakeholders throughout the city where your funnel cake 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 funnel cake business 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?

Well, you should plan to charge between $2 and $6.50 per pack of funnel cake, or between $8 and $15 per dozen if you choose to sell your funnel cake in bulk. When setting your pricing, you should consider the cost of both the ingredients and baking equipment, as well as your time, and complexity of the funnel cake. But please note that a single homemade funnel cake tends to sell for about $3 to 4.

b. How Much Profit Do Funnel Cake Business Owners Make a Year?

It depends, but an available report shows that on average, a small to medium-sized funnel cake business can earn anywhere from $60,000 to over $100,000 in a year in personal income.

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

The exact amount anyone selling funnel cakes can make will vary based on the event and the level of experience. However, it’s simple math. A funnel cake can sell on average from $3.00 – $5.00. Yet, it costs less than $1.00 to make, so you will yield as much as $4.00 profit on each cake.

These sweets can generate a desirable $10,512 or more as yearly profit based on a preparation cost of $0.54 per serving – $0.27 for batter mix, $0.07 for powdered sugar, $0.06 for frying oil, and $0.14 for an 8 – inch paper plate. Hence, the value in funnel cakes extends beyond their 73 to 82 percent profit margin.

e. What is the Sales Forecast?

Below is the sales forecast for a funnel cake business. 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: $120,000
  • Second Fiscal Year: $240,000
  • Third Fiscal Year: $360,000
  1. Set Up your Shop 

a. How Do You Choose a Perfect Location for Funnel Cake Business?
  • The demography of the location especially as it relates to people that eat funnel cakes regularly
  • The demand for funnel cakes in the location
  • The purchasing power of the residents of the location
  • Accessibility of the location
  • The number of funnel cakes bakery businesses, and retail outlets that sell funnel cakes 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 Funnel Cake Business?
  • Miami, Florida
  • Houston, Texas
  • New York City, New York
  • Oklahoma City, Oklahoma
  • Chagrin Falls, Ohio
  • Kaysville, Utah
  • Cedar Rapids, Iowa
  • Las Vegas, Nevada
  • Los Angeles, California
  • Dallas, Texas
c. What Equipment is Needed to Operate a Funnel Cake Business?
  • Funnel Cake Fryer
  • Cake Molds
  • Funnels
  • Funnel Cake Pitcher
  • Fat Skimmer
  • Spatula
  • Sifter for powdered sugar
  • Sugaring Pan and jug for measuring water
  • Olive oil cans.
  • Heat-resistant gloves
  • Funnel cake delivery bag
  • Computers and receipt issuing machines
  • Point of Sale Machines (POS Machines).
  1. Hire Employees

When it comes to hiring employees for a standard funnel cake business, you should make plans to hire a competent chief executive officer (you can occupy this position), bakery manager, account clerk, bakers, and salespersons.

  1. Launch the Business Proper

In recent times, no funnel cake business 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 funnel cake business, you will be able to officially inform people in your city that your funnel cake business is open for business.

a. What Makes a Funnel Cake Business Successful?
  • Choose a good location and shop facility to launch the business
  • Make sure you produce different flavors and types of funnel cakes (give your customers options)
  • Throw a party before officially opening the business
  • Be deliberate with your marketing sales approach
  • Encourage the use of word of mouth marketing to promote your funnel cake business
  • Leverage on all available online and offline platforms to promote your funnel cake business
b. What Happens During a Typical Day at a Funnel Cake Business?
  • The production facility and shop are open for the day’s work
  • Supplies and ingredients are ordered
  • Bakers go to work to start baking funnel cakes
  • 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 Funnel Cake 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 bakery
  • Experience in managing people
  • Experience in business administration
  • Experience in baking different types of funnel cakes.