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 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

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

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

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
Total100%90,000106000             122,000138,000154,00015.00%

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.


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

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
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    
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.