Table of Content

    Do you want to start donut shop business?

    Are you planning on starting a donut shop? This is an excellent idea as donut is a common snack that is widely consumed across the entire world. Donuts are the most common snacks and people love them for their great taste. As a result, the donut shop industry is a thriving industry with great potential of good returns. According to statistics, the donut shop industry in U.S. commands an annual revenue of $15 billion. The level of investment group for business plan varies according to the size and infrastructure, but you can be sure to quickly and fully recover your initial startup capital.

    Executive Summary

    2.1 The Business

    The donut shop will be registered under the name Tasty Donut Shop, and will be located in Chinatown, Chicago- Illinois. The donut shop will be owned by John Donald who is an experienced pastry chef.

    2.2 Management Team

    John Donald who is the owner of the donut shop is an experienced Pastry Chef who was worked in the food service industry for more than twenty years. Before opening a donut shop, John has worked for numerous top-rated hospitality brands across the United States.

    2.3 Customer Focus

    Tasty Donut Shop intends to set up in a busy strategic location and offer customers various types of donuts and pastries. Customers will be drawn from various social, religious and cultural backgrounds.

    2.4 Business Target

    Tasty Donut Shop intends to offer unique and mouthwatering donuts which are appealing to customers looking for a donut shop that satisfies their taste buds.

    Donut Shop Business Plan - 3 Years Profit Forecast

    Franchise Business Plan
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    Company Summary

    3.1 Company Owner

    John Donald is an experienced and award winning pastry chef who has had an incredibly successful career. John has worked in major international hotels and popular US chain of restaurants throughout his career.

    3.2 Aim of Starting the Business

    After having attained major career achievements, John considered starting a mini donut business as he has always wanted to extend his skills into entrepreneurship. With his immense experience, he knew he would adequately address market needs.

    3.3 How the Business will be Started

    As an experienced pastry chef, Donald understands the technical aspects associated with starting a donut shop business. For the financial roadmap, he has engaged the services of finance experts to come up with a detailed financial plan. The following is a financial analysis for Tasty Donut Shop.

    Donut Shop Business Plan - Startup cost

    Start-up Expenses  
    Legal $5,000
    Consultants $3,000
    Insurance $14,000
    Rent $20,000
    Research and Development $10,000
    Expensed Equipment $12,000
    Signs $4,000
    TOTAL START-UP EXPENSES $68,000
    Start-up Assets $0
    Cash Required $120,000
    Start-up Inventory $30,000
    Other Current Assets $15,000
    Long-term Assets $8,000
    TOTAL ASSETS $22,000
    Total Requirements $20,000
    START-UP FUNDING $0
    START-UP FUNDING $100,000
    Start-up Expenses to Fund $30,000
    Start-up Assets to Fund $24,000
    TOTAL FUNDING REQUIRED $0
    Assets $20,000
    Non-cash Assets from Start-up $12,000
    Cash Requirements from Start-up $0
    Additional Cash Raised $50,000
    Cash Balance on Starting Date $20,000
    TOTAL ASSETS $0
    Liabilities and Capital $0
    Liabilities $0
    Current Borrowing $0
    Long-term Liabilities $0
    Accounts Payable (Outstanding Bills) $0
    Other Current Liabilities (interest-free) $0
    TOTAL LIABILITIES $0
    Capital $0
    Planned Investment $0
    Investor 1 $10,000
    Investor 2 $15,000
    Other $0
    Additional Investment Requirement $0
    TOTAL PLANNED INVESTMENT $110,000
    Loss at Start-up (Start-up Expenses) $50,000
    TOTAL CAPITAL $40,000
    TOTAL CAPITAL AND LIABILITIES $30,000
    Total Funding $220,000

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    Services for Customers

    Tasty Donut Shop is keen to uniquely approach the market and provide tasty snacks that will charm various types of customers. As part of how to start a donut business, the donut shop will offer the following services.

    • Sell different types of tasty donuts and pastries made from a rich menu selection
    • Offer different types of soft drinks such as soda, bottled water, milkshake and smoothies
    • Offer freshly brewed coffee and teas
    • Sell assorted snacks i.e. burgers and sandwiches as well as other mouthwatering desserts.

    Marketing Analysis of Donut Shop Business

    For Tasty Donut shop to succeed in the market, a comprehensive market analysis was done to identify what areas of the donut shop business plan need to be focused on to reach out to potential customers. In this business plan, the donut business has come up with a strategy it intends to use to work towards achieving its goals.

    Note

    Considering the increasing number of people eating donuts, there’s definitely a vibrant market waiting to be tapped.

    5.1 Market Segmentation

    Everyone loves donuts and for this reason, customer demographics are vast. The donut shop intends to come up with a sustainable marketing plan that will help the business to attract more customers. Chinatown is a popular Chicago neighborhood famous for its unique architecture and a lively dining culture. Being an area with a large population and high pedestrian traffic, this donut coffee shop business plan intends to reach out to the following customers.

    Donut Shop Business Plan - Market Segmentation

    5.1.1 Adults

    Immigration Business Plan

    According to sources, U.S. adults are the highest consumers of donuts and other snacks. Anyone above the age of 18 years is a potential customer. The middle class and upper class working population are greatly attracted to donuts, and hardly a day passes without eating their favorite donuts. For Tasty Donut Shop, this is a lucrative customer segment because working adults have an income and therefore, command a higher purchasing power. The business intends to rely on its creativity and uniqueness in its range of products to offer the best quality donuts and snacks. This will give Tasty Donut Shop a competitive advantage over other donut shops in the vicinity.

    5.1.2 Children

    Children are major consumers of donuts and constitute a major market segment that Tasty Donut Shop intends to focus on. In this donut shop business plan sample, the business intends to introduce a menu with special kids donuts to attract children to the facility. In addition, the business will regularly be adorned with kids themes and special offers to entice children who cannot resist the allure of delicious donuts.

    5.1.3 Students

    With a high number of schools and educational institutions within the vicinity, Tasty Donut has a great chance of benefitting from high student populations to improve revenue margins. Special offers targeting students will go a long way in building long lasting relationships with students.

    5.1.4 Corporates

    Corporates require donuts for various purposes such as office staff parties, product launches and corporate gifts. Chicago is a top business and financial hub with many corporate establishments. Tasty Donut Shop is expected to leverage on the vibrant corporate environment to sell corporate donuts.

    Market Analysis
    Potential Customers Growth YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 CAGR
    Adults 35% 30,000 34,000 38,000 42,000 46,000 10.00%
    Students 30% 25,000 29,000 33,000 37,000 41,000 12.00%
    Corporates 20% 20,000 24,000 28,000 32,000 36,000 9.00%
    Children 15% 15,000 19,000 23,000 27,000 31,000 8.00%
    Total 100% 90,000 106000             122,000 138,000 154,000 15.00%
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    5.2 Business Target

    Tasty Donut Shop is setting up shop in a strategic location with a many restaurants, coffee shops and snack bars. Chinatown is an area frequented by many people and high pedestrian traffic. Therefore, the strategic location of the donut shop will be of great help in driving more revenue. This start up donut business plan aims to provide direction on how the business will attain its goals.

    Initial startup capital has already been set aside and there is hope the donut shop will generate sufficient revenue and profits to recover the initial capital. According to this donut store business plan, Tasty Donut Shop projects 15-20% annual growth in sales for the first three years.

    5.3 Product Pricing

    Donut pricing has been determined after doing a survey to find out what competitors are charging. The business will rely on a competitive pricing structure that offers customers value for their money.

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    Strategy

    When planning on starting a donut business, it’s wise to come up with a sound business development strategy. John Donald has worked closely with experts to come up with an effective marketing strategy that will propel business growth. The following is a sales strategy for Tasty Donut Shop.

    6.1 Competitive Analysis

    Tasty Donut Shop is relying on a creative and unique market entry approach to ensure clients get the best quality and tasty snacks. There are many donut shops in Chinatown, Chicago and the business expects tough competition.

    6.2 Sales Strategy

    For Tasty Donut Shop to realize its set targets, the following strategy has been proposed for how to open a donut shop business and market the new business effectively.

    • Create awareness about the donut shop by distributing introductory letters and brochures to targeted customer groups
    • Place advertisements in local media channels such as community newspapers, radio and television
    • Incorporate digital social media advertising platforms such as Facebook, Twitter and Instagram
    • Design a simple but search engine friendly website to establish a strong online presence
    • Organize roadshows especially in areas where customers are targeted to promote the new business
    • Offer exciting introductory offers and discounts on various types of snacks to attract new customers to the donut shop
    • Become a member of local food business local associations to expand the business network and scout for new markets
    • List the donut shop on local business directories
    • Have a much publicized official welcoming party to advertise the business

    6.3 Sales Forecast

    Tasty Donut Shop has put in place a business sales strategy to help the business attain its financial goals. Below is a sales forecast for the donut shop.

    Donut Shop Business Plan - Unit Sales

    Sales Forecast      
    Unit Sales Year 1 Year 2 Year 3
    Tasty Donuts and pastries 320,000 340,000 360,000
    Soft drinks and smoothies 220,000 240,000 260,000
    Coffee and Teas 120,000 140,000 160,000
    Assorted Snacks 90,000 110,000 120,000
    TOTAL UNIT SALES 750,000 830,000 900,000
    Unit Prices Year 1 Year 2 Year 3
    Tasty Donuts and pastries $220.00 $240.00 $260.00
    Soft drinks and smoothies $120.00 $140.00 $160.00
    Coffee and Teas $90.00 $110.00 $130.00
    Assorted Snacks $60.00 $80.00 $1,000.00
    Sales
    Tasty Donuts and pastries $210,000 $230,000 $260,000
    Soft drinks and smoothies $180,000 $200,000 $220,000
    Coffee and Teas $150,000 $170,000 $190,000
    Assorted Snacks $100,000 $120,000 $140,000
    TOTAL SALES
    Direct Unit Costs Year 1 Year 2 Year 3
    Tasty Donuts and pastries $3.00 $4.00 $5.00
    Soft drinks and smoothies $2.50 $3.50 $4.50
    Coffee and Teas $2.00 $3.00 $4.00
    Assorted Snacks $1.50 $2.50 $3.50
    Direct Cost of Sales
    Tasty Donuts and pastries $150,000 $180,000 $210,000
    Soft drinks and smoothies $130,000 $160,000 $190,000
    Coffee and Teas $100,000 $130,000 $160,000
    Assorted Snacks $80,000 $110,000 $130,000
    Subtotal Direct Cost of Sales $460,000 $580,000 $690,000

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    Personnel Plan

    Tasty Donut Shop is engaged in providing top-notch products in order to fully meet customer expectations. When planning how to start a donut shop business, a good personnel plan is paramount to effectively handle business operations.

    7.1 Personnel Plan

    The donut shop is owned by John Donald who will be the Shop Manager for the business. The business has plans to hire the following members of staff to work in various departments.

    • Manager
    • Assistant Manager
    • Two Pastry Chefs
    • One Admin and Customer Care Executive
    • One Marketing Executive
    • One Cashier
    • One Cleaner

    Successful applicants will be thoroughly trained to familiarize themselves with business procedures.

    7.2 Average Staff Salaries

    Tasty Donut Shop intends to pay the following average annual salaries for its staff in the first three years since opening.

     Personnel Plan      
    Year 1 Year 2 Year 3
    Manager $80,000 $85,000 $90,000
    Cashier $32,000 $36,000 $40,000
    Administrator $33,000 $37,000 $41,000
    1 Sales and Marketing Executive $36,000 $40,000 $45,000
    1 Customer Care Executive $25,000 $30,000 $35,000
    2 Pastry Chefs $80,000 $85,000 $90,000
    Cleaner $20,000 $25,000 $30,000
    Assitant Manager $42,000 $46,000 $50,000
    Total Salaries $348,000 $384,000 $421,000

    Financial Plan

    Tasty Donut Shop has come up with a financial plan that will guide the business to prosperity. John Donald has rollout out how to start a donut shop using his personal savings and funds contributed from two investors. Additionally, a loan will be borrowed to cater for the budget deficit.

    Below is key financial data for Tasty Donut Shop.

    8.1 Important Assumptions

    Financial forecast for Tasty Donut Shop will be based on the following assumptions.

     General Assumptions      
    Year 1 Year 2 Year 3
    Plan Month 1 2 3
    Current Interest Rate 12.00% 14.00% 16.00%
    Long-term Interest Rate 4.00% 4.00% 4.00%
    Tax Rate 10.00% 12.00% 14.00%
    Other 0 0 0

    8.2 Brake-even Analysis

    Tasty Donut Shop Brake-even Analysis is shown in the graph below.

    Donut Shop Business Plan - Brake-even Analysis

     Brake-Even Analysis  
    Monthly Units Break-even 2500
    Monthly Revenue Break-even $290,000
    Assumptions:
    Average Per-Unit Revenue $140.00
    Average Per-Unit Variable Cost $1.00
    Estimated Monthly Fixed Cost $320,000

    8.3 Projected Profit and Loss

    Profit and Loss Information for Tasty Donut Shop computed on an annual and monthly basis is shown below.

     Pro Forma Profit And Loss      
    Year 1 Year 2 Year 3
    Sales $300,000 $340,000 $380,000
    Direct Cost of Sales $40,000 $60,000 $80,000
    Other $0 $0 $0
    TOTAL COST OF SALES $340,000 $400,000 $460,000
    Gross Margin $410,000 $430,000 $460,000
    Gross Margin % 70.00% 74.00% 80.00%
    Expenses
    Payroll $210,000 $230,000 $250,000
    Sales and Marketing and Other Expenses $6,000 $8,000 $10,000
    Depreciation $4,000 $6,000 $8,000
    Leased Equipment $0 $0 $0
    Utilities $4,000 $6,000 $8,000
    Insurance $2,000 $3,000 $4,000
    Rent $9,000 $11,000 $13,000
    Payroll Taxes $34,000 $38,000 $40,000
    Other $0 $0 $0
    Total Operating Expenses $250,000 $270,000 $290,000
    Profit Before Interest and Taxes $40,000 $60,000 $80,000
    EBITDA $25,000 $30,000 $35,000
    Interest Expense $0 $0 $0
    Taxes Incurred $15,000 $20,000 $25,000
    Net Profit $80,000 $100,000 $120,000
    Net Profit/Sales 35.00% 45.00% 60.00%

    8.3.1 Monthly Profit

    Donut Shop Business Plan - PROFIT MONTHLY

    8.3.2 Yearly Profit

    Donut Shop Business Plan - PROFIT YEARLY

    8.3.3 Monthly Gross Margin

    Donut Shop Business Plan - GROSS MARGIN MONTHLY

    8.3.4 Yearly Gross Margin

    Profit and Loss Analysis for Tasty Donut Shop is shown below.

    Donut Shop Business Plan - GROSS MARGIN YEARLY

    8.4 Projected Cash Flow

    Below is a summary of pro forma cash flow, subtotal cash received, subtotal cash spent on operations, subtotal cash from operations and subtotal cash spent.

    Donut Shop Business Plan - Projected Cash Flow

     Pro Forma Cash Flow      
    Cash Received Year 1 Year 2 Year 3
    Cash from Operations
    Cash Sales $100,000 $120,000 $140,000
    Cash from Receivables $20,000 $23,000 $26,000
    SUBTOTAL CASH FROM OPERATIONS $130,000 $153,000 $166,000
    Additional Cash Received
    Sales Tax, VAT, HST/GST Received $0 $0 $0
    New Current Borrowing $0 $0 $0
    New Other Liabilities (interest-free) $0 $0 $0
    New Long-term Liabilities $0 $0 $0
    Sales of Other Current Assets $0 $0 $0
    Sales of Long-term Assets $0 $0 $0
    New Investment Received $0 $0 $0
    SUBTOTAL CASH RECEIVED $130,000 $153,000 $166,000
    Expenditures Year 1 Year 2 Year 3
    Expenditures from Operations
    Cash Spending $25,000 $29,000 $31,000
    Bill Payments $20,000 $25,000 $30,000
    SUBTOTAL SPENT ON OPERATIONS $45,000 $54,000 $61,000
    Additional Cash Spent
    Sales Tax, VAT, HST/GST Paid Out $0 $0 $0
    Principal Repayment of Current Borrowing $0 $0 $0
    Other Liabilities Principal Repayment $0 $0 $0
    Long-term Liabilities Principal Repayment $0 $0 $0
    Purchase Other Current Assets $0 $0 $0
    Purchase Long-term Assets $0 $0 $0
    Dividends $0 $0 $0
    SUBTOTAL CASH SPENT $45,000 $54,000 $61,000
    Net Cash Flow $20,000 $22,000 $24,000
    Cash Balance $33,000 $36,000 $39,000

    8.5 Projected Balance Sheet

    Below is a Projected Balance Sheet for Tasty Donut Shop that indicates assets, capital, liabilities, long term assets and current liabilities.

     Pro Forma Balance Sheet      
    Assets Year 1 Year 2 Year 3
    Current Assets
    Cash $310,000 $330,000 $350,000
    Accounts Receivable $13,000 $11,000 $16,000
    Inventory $4,000 $6,000 $8,000
    Other Current Assets $5,000 $4,000 $3,000
    TOTAL CURRENT ASSETS $332,000 $351,000 $377,000
    Long-term Assets
    Long-term Assets $9,000 $11,000 $14,000
    Accumulated Depreciation $8,000 $10,000 $12,000
    TOTAL LONG-TERM ASSETS $4,000 $4,000 $4,000
    TOTAL ASSETS $500,000 $520,000 $530,000
    Liabilities and Capital Year 1 Year 2 Year 3
    Current Liabilities
    Accounts Payable $20,000 $22,000 $24,000
    Current Borrowing $0 $0 $0
    Other Current Liabilities $0 $0 $0
    SUBTOTAL CURRENT LIABILITIES $25,000 $28,000 $30,000
    Long-term Liabilities $0 $0 $0
    TOTAL LIABILITIES $22,000 $24,000 $26,000
    Paid-in Capital $15,000 $15,000 $15,000
    Retained Earnings $18,000 $30,000 $35,000
    Earnings $80,000 $110,000 $140,000
    TOTAL CAPITAL $300,000 $330,000 $360,000
    TOTAL LIABILITIES AND CAPITAL $330,000 $360,000 $390,000
    Net Worth $420,000 $440,000 $460,000

    8.6 Business Ratios

    Tasty Donut Shop Business Net Worth, Ratio Analysis and Business Ratios are shown below.

     Ratio Analysis        
    Year 1 Year 2 Year 3 INDUSTRY PROFILE
    Sales Growth 10.00% 20.00% 45.00% 6.00%
    Percent of Total Assets
    Accounts Receivable 7.00% 4.00% 5.00% 12.00%
    Inventory 3,2% 5.3 7.00% 15.00%
    Other Current Assets 1.69% 3.30% 4.00% 33.00%
    Total Current Assets 80.00% 120.40% 130.00% 44.00%
    Long-term Assets -5.00% -15.00% -20.00% 30.20%
    TOTAL ASSETS 100.00% 100.00% 100.00% 100.00%
    Current Liabilities 6.00% 5.00% 2.30% 20.00%
    Long-term Liabilities 0.00% 0.00% 0.00% 15.00%
    Total Liabilities 4.70% 2.00% 2.50% 39.00%
    NET WORTH 70.00% 60.00% 100.00% 40.00%
    Percent of Sales
    Sales 100.00% 100.00% 100.00% 100.00%
    Gross Margin 50.00% 68.00% 55.00% 1.00%
    Selling, General & Administrative Expenses 67.00% 70.00% 57.00% 55.00%
    Advertising Expenses 2.40% 3.00% 1.59% 23.00%
    Profit Before Interest and Taxes 20.00% 24.00% 27.00% 3.00%
    Main Ratios
    Current 12 16 20 4.2
    Quick 30 33 39 3
    Total Debt to Total Assets 4.10% 3.00% 2.70% 45.00%
    Pre-tax Return on Net Worth 100.00% 110.00% 120.00% 5.00%
    Pre-tax Return on Assets 55.30% 60.20% 62.00% 7.00%
    Additional Ratios Year 1 Year 2 Year 3
    Net Profit Margin 17.00% 20.40% 23.23% N.A.
    Return on Equity 60.00% 67.00% 73.00% N.A.
    Activity Ratios
    Accounts Receivable Turnover 5 5 4 N.A.
    Collection Days 95 100 105 N.A.
    Inventory Turnover 18 22 27 N.A.
    Accounts Payable Turnover 10 16 22 N.A.
    Payment Days 25 25 25 N.A.
    Total Asset Turnover 4.4 3.4 2.4 N.A.
    Debt Ratios
    Debt to Net Worth 0 -0.08 -0.04 N.A.
    Current Liab. to Liab. 0 0 0 N.A.
    Liquidity Ratios
    Net Working Capital $350,000 $380,000 $410,000 N.A.
    Interest Coverage 0 0 0 N.A.
    Additional Ratios
    Assets to Sales 2.45 3.48 4.32 N.A.
    Current Debt/Total Assets 8% 5% 2% N.A.
    Acid Test 25 28 31 N.A.
    Sales/Net Worth 3.4 3 1.6 N.A.
    Dividend Payout 0 0 0 N.A.

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