The donut business is booming, and continues to grow year after year. According to a March 2018 report by IBIS World, the donut industry brings in about 16 billion (with a capital “B”) dollars each year, with large franchise chains like Dunkin’ Donuts, Krispy Kreme, Winchell’s and Tim Horton’s dominating the marketplace. It’s easy to see why; the margins on donut production and sales are off the charts, with ingredients costing just a few pennies on a product that can be sold for $2 or more.

Customer buying trends also show an increase in “small-scale luxury” purchases like donuts, and the industry trends toward creativity and gluten-free offerings continue to drive growth in the donut sector. Factor in coffee sales, another ridiculously high-margin item, and the donut business may start to make a lot of sense.

But how can smaller-scale food business entrepreneurs, who may not have hundreds of thousands of dollars laying around for franchise fees, buy into the extremely lucrative and ever-expanding donut biz? Here’s our complete guide to getting your donut operation, large or small, off and running:

Consider the location for starting your donut business.

Unlike outfitting a full-scale commercial kitchen, outfitting a retail store for donut-making requires much less space, though it does have its own equipment considerations (more on this later). For now, the biggest question is where you plan to put your donut business. Essentially, you’re starting a bakery with a smaller menu that doesn’t offer things like muffins, bagels, and similar goods.

You’ll need a few hundred square feet in retail space minimum to accommodate both the production area, and the sales area. Donuts sell best when they are artfully displayed, so plan on a large counter area for customers to see what you have available that day. A few tables for customers to sit and eat are nice, but not something you need to devote a lot of square footage to; most customers will take their orders to go.

Starting a donut shop? You have options.

Focus on one of two niches for your donut shop’s location: Do you want to be a charming/hipster donut shop, nestled in the heart of Main Street, where casual passers-by happen upon your shop and make an impulse buy? Or would a strip mall location make more sense, where customers short on time can pop in and grab a quick dozen while they’re running other errands? The type of shop you want to create will help dictate a lot of these decisions.

Donut shops are also a perfect fit for mobile concessionaires interested in jumping into the food truck game. With the right equipment, most of your initial donut production can be handled right on the truck, with expansion to a commissary kitchen a means for increasing the amount of product you create each day, as demand for your donuts grows. Staying mobile also allows you to bring the donuts to the people, where they need them the most; consider locations around large office complexes, public parks or waterfront locations, or near hospitals or universities. Remember that in a food truck or trailer, space is going to be at a premium, and this may have an impact on the variety and types of donuts you plan to create.

To franchise, or not to franchise.

One of the easiest ways to get started in the donut business, is by buying into a franchise such as Dunkin’ Donuts or Krispy Kreme. The franchise fees can be steep, often costing hundreds of thousands of dollars to get started. In exchange for paying this premium price, you’ll be working with an established brand who will handle much of your marketing for you, serving product shipped from a central supplier that you finish cooking in-house. Some franchises even help with real estate and construction questions and requirements.

Related Reading: 101 Famously Funny Donut Shop Slogans and Taglines 

Many franchise opportunities offer a balance between the benefits of the support of the franchise system with the pride and freedom of independent ownership. If you have a background in entrepreneurship, baking or pastry (and you’re looking for limitless freedom in terms of the type and variety of products you sell), striking out with an independent venture may be more appropriate for your particular dreams and desires.

Donut Shop Equipment List  

Different types of donuts require different kinds of equipment, and the kind of donuts you plan to sell will dictate a lot of these purchases and decisions. If you plan to sell strictly cake-style donuts, your initial equipment needs will be much simpler (and less expensive): a shallow fryer, a glazing table, and a batter dispenser are practically all you need to get rolling.

If you plan to sell “fancy” donuts (or what we in the business refer to as “raised yeast donuts”), you’ll need a little bit more: a shallow fryer, a glazing table, donut fryer, a large mixer, work surfaces for rolling out and cutting dough, rolling racks for storing donuts while in production, and a proofing box for letting the dough rise before frying. Of course, no matter what kind of donuts you make, you’ll also need refrigeration for your topping and filling ingredients, a hood or ventilation system over your fryers, and plenty of space for dry ingredient storage.

Your equipment purchases will also be dictated in part by the volume you think you’ll need to produce. If you plan to make a few dozen donuts each morning and call it a day, you’ll need smaller-scale countertop or freestanding floor fryers. If you’re going to be running your donut business full-bore, with round the clock production, a donut frying “robot” that can produce hundreds of donuts per hour may make the most sense.

Here’s a quick checklist of your initial equipment needs, with pricing from Webstaurantstore. Remember, you don’t need to purchase all of your equipment new; scouring local classified ads or Craigslist can help you unearth secondhand treasures at a huge savings. This is by no means an exhaustive list, but it may help you start to ballpark some figures:

  • 150 lb Donut Floor Fryer: $8,500
  • Rolling Donut Cooling Rack: $250
  • Commercial Work Tables: $250/each
  • Exhaust Hood System: $3,000 and up
  • Donut Proofing Box: $800
  • Donut Glazing Table: $1,000 and up
  • 54″ Two-Door Refrigerator: $2,000
  • 54″ Two-Door Freezer: $2,000
  • Donut Robot Mark II: $8,500
  • Cash Register / POS System: $1,000 – $2,000

If these figures seem intimidating, it’s because they are. If you don’t have a ton of startup capital to get your business off the ground, search for used restaurant equipment supply companies in your area, or opportunities for leasing or lease-to-own restaurant equipment.

Trays of Fresh Donuts.

Brainstorm creative ways to make money during your off-hours.

It makes sense that a donut shop would do a booming business first thing in the morning, but have you considered what 3 p.m. looks like in your fledgling donut shop? A business that only draws customers for a few hours per day doesn’t have much hope of hanging in for the long haul. Think of some ways for your business to continue earning during these slow periods. Special pricing on coffee in the afternoons can be a draw, depending on your location. Or look at Federal Donuts, a small chain based in NYC: Combining their fresh, creative donuts with a perfect piece of fried chicken drives massive sales numbers not just in the morning, but all day long.

You’ll also want to consider ways you can make money selling donuts, that may fall outside the normal scope of your daily donut shop business. Many donut shops supplement their core business by offering catering services for corporate functions or events, catering for weddings (donut wedding cake, anyone?), hosting or catering kid’s birthday parties, or hosting special meet-and-greets where customers can fry and decorate their own donuts.

Write a donut shop business plan.

Writing business plans is hard; that’s why so many entrepreneurs skip this step, and then run out of money three months into the launch of their new business. Assembling a business plan will help you methodically shape the vision for your donut shop into a concrete business, and working through the steps of composing a business plan will help you identify any potential issues with your idea before it starts to take shape. Business plans are also a critical component of selling other people on the merits of your idea, whether it’s a loan officer, an investor, or a sympathetic (and well-heeled) friend that may help with your initial funding needs.

Related Reading: 163 “How in One” Donut Shop Name Ideas 

Start by writing your “executive summary,” which is a brief description of your concept, complete with mission statement. Next, you’ll write a description of your business, which will detail all of the areas in which your donut shop will be a success. Include a section for market research, which is where you analyze the marketplace in the community where you plan to open. You’ll want to consider competing donut shops already in business where you are, overall outlooks for the donut industry in general, as well as any strengths and weaknesses you can identify with your unique concept. This is also a good spot to include some general demographic data for your community, including population, household incomes, and ages of your potential customers.

Next, you’ll write a section on your marketing plan and projected sales. This is where you’ll outline your plan for marketing your donut shop, keep customers coming back, as well as where and how you’ll be selling your donuts. Finally, you’ll want a section for financial projections, which includes any details you can dig up on competing donut shops, your projected sales and cash flow, as well as any expenses you will incur from month-to-month.

Cost to Open a Donut Shop

You’ll need $100,000 – $150,000 on average to open a donut shop. Obviously, the square footage or size of the retail space you plan to open will also determine total startup cost. This includes purchasing equipment, leasing a retail space, setting up and paying for business licenses and permits.

How Much Will You Make Per Year with a Donut Shop?

The donut industry is valued at more than $16 billion dollars per year. According to 32 donut shop owners in the United States, I surveyed in the for this piece you can expect to make $125,000 – $250,000 in gross revenue per location. Keep in mind this is gross sales, not net profit.

Funding is a crucial step to opening a donut shop and it’s easier for some than others to get a low-interest loan. If you’ve got a solid nest egg saved up that you’re willing to gamble on your donut shop idea, this section isn’t for you. But what about those of us that need to raise the money needed (thanks to your carefully constructed business plan, you should have a ballpark figure in mind) to get started?

The first and most obvious place to start is with a business loan or a personal loan. Present the loan officer with your business plan, and be prepared to answer questions about every aspect of your proposed concept. Approach trusted friends and family members with your idea, as well as the total amount of money you need to raise, and see if they’ll pitch in, perhaps in exchange for a small amount of equity in the company. Seek out private small business startup investors in your area, and present your donut shop idea to them. You can even fund your new venture by maxing out your credit cards (it’s not recommended, but it happens more often than you might think), although remember that the interest rate and hit to your credit score will be considerable.

Lastly, consider crowdfunding your concept. Crowdfunding can be a great way to raise the capital to launch your new idea. Donuts are crowdfunding gold, because everyone craves them and they photograph beautifully. Begin with a short, professionally produced pitch video. Look directly into the camera, and speak from the heart; successful crowdfunding campaigns depend not just solely on the merits of your business idea, but on your ability to connect with potential contributors.

Plan a tiered system of rewards for contributors (making sure that you don’t promise too much; remember, if your crowdfunding campaign is a success, you’ll want to be