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.

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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 Planning 
Helps the franchisee get business case approval from the franchisor

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 
Research and Development$10,000
Expensed Equipment$12,000
Start-up Assets$0
Cash Required$120,000
Start-up Inventory$30,000
Other Current Assets$15,000
Long-term Assets$8,000
Total Requirements$20,000
Start-up Expenses to Fund$30,000
Start-up Assets to Fund$24,000
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
Liabilities and Capital$0
Current Borrowing$0
Long-term Liabilities$0
Accounts Payable (Outstanding Bills)$0
Other Current Liabilities (interest-free)$0
Planned Investment$0
Investor 1$10,000
Investor 2$15,000
Additional Investment Requirement$0
Loss at Start-up (Start-up Expenses)$50,000
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.


    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 CustomersGrowthYEAR 1YEAR 2YEAR 3YEAR 4YEAR 5CAGR
    Children15%15,00019,00023,00027,000 31,000 8.00%
    Total100%90,000106000             122,000138,000154,00015.00%
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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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    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 SalesYear 1Year 2Year 3
    Tasty Donuts and pastries320,000340,000360,000
    Soft drinks and smoothies220,000240,000260,000
    Coffee and Teas120,000140,000160,000
    Assorted Snacks90,000110,000120,000
    TOTAL UNIT SALES750,000830,000900,000
    Unit PricesYear 1Year 2Year 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
    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
    Direct Unit CostsYear 1Year 2Year 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
    Any questions? Get in Touch!

      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 1Year 2Year 3
      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
      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 1Year 2Year 3
      Plan Month123
      Current Interest Rate12.00%14.00%16.00%
      Long-term Interest Rate4.00%4.00%4.00%
      Tax Rate10.00%12.00%14.00%

      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-even2500
      Monthly Revenue Break-even$290,000
      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 1Year 2Year 3
      Direct Cost of Sales$40,000$60,000$80,000
      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%
      Sales and Marketing and Other Expenses$6,000$8,000$10,000
      Leased Equipment$0$0$0
      Payroll Taxes$34,000$38,000$40,000
      Total Operating Expenses$250,000$270,000$290,000
      Profit Before Interest and Taxes$40,000$60,000$80,000
      Interest Expense$0$0$0
      Taxes Incurred$15,000$20,000$25,000
      Net Profit$80,000$100,000$120,000
      Net Profit/Sales35.00%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 ReceivedYear 1Year 2Year 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
      ExpendituresYear 1Year 2Year 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
      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   
      AssetsYear 1Year 2Year 3
      Current Assets   
      Accounts Receivable$13,000$11,000$16,000
      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 CapitalYear 1Year 2Year 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
      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 1Year 2Year 3INDUSTRY PROFILE
      Sales Growth10.00%20.00%45.00%6.00%
      Percent of Total Assets    
      Accounts Receivable7.00%4.00%5.00%12.00%
      Other Current Assets1.69%3.30%4.00%33.00%
      Total Current Assets80.00%120.40%130.00%44.00%
      Long-term Assets-5.00%-15.00%-20.00%30.20%
      TOTAL ASSETS100.00%100.00%100.00%100.00%
      Current Liabilities6.00%5.00%2.30%20.00%
      Long-term Liabilities0.00%0.00%0.00%15.00%
      Total Liabilities4.70%2.00%2.50%39.00%
      NET WORTH70.00%60.00%100.00%40.00%
      Percent of Sales    
      Gross Margin50.00%68.00%55.00%1.00%
      Selling, General & Administrative Expenses67.00%70.00%57.00%55.00%
      Advertising Expenses2.40%3.00%1.59%23.00%
      Profit Before Interest and Taxes20.00%24.00%27.00%3.00%
      Main Ratios    
      Total Debt to Total Assets4.10%3.00%2.70%45.00%
      Pre-tax Return on Net Worth100.00%110.00%120.00%5.00%
      Pre-tax Return on Assets55.30%60.20%62.00%7.00%
      Additional RatiosYear 1Year 2Year 3 
      Net Profit Margin17.00%20.40%23.23%N.A.
      Return on Equity60.00%67.00%73.00%N.A.
      Activity Ratios    
      Accounts Receivable Turnover554N.A.
      Collection Days95100105N.A.
      Inventory Turnover182227N.A.
      Accounts Payable Turnover101622N.A.
      Payment Days252525N.A.
      Total Asset Turnover4.43.42.4N.A.
      Debt Ratios    
      Debt to Net Worth0-0.08-0.04N.A.
      Current Liab. to Liab.000N.A.
      Liquidity Ratios    
      Net Working Capital$350,000$380,000$410,000N.A.
      Interest Coverage000N.A.
      Additional Ratios    
      Assets to Sales2.453.484.32N.A.
      Current Debt/Total Assets8%5%2%N.A.
      Acid Test252831N.A.
      Sales/Net Worth3.431.6N.A.
      Dividend Payout000N.A.

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