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Thinking about starting a gelato shop in your town? You’ll want to tune into this week’s interview and take notes from Evan Waldt. Waldt helped start and operate an independent gelato shop in Florida. The shop was later sold so he could head up the Slices Concession West, a company that specializes in ice cream equipment and education. As the Managing Member of Slices Concession West, Evan is someone with a wealth of experience in both the operations of a gelato shop and the equipment required to run this type of business.
The goal of our conversation with Waldt is to give you a foundation on how to start your own gelato shop. As you may already know this is a big topic and we won’t be able to get to every aspect of opening a storefront inside a 30-minute episode. That being said this podcast will give you solid starting point for the rest of your research and specific tips to set yourself up for success.
How to Open a Gelato Shop
You have the vision of creating a one-of-a-kind gelato shop, but where do you begin? Like all businesses, it all starts with due diligence to make sure you’re starting the right gelato shop in the right area of town that will allow you to be profitable. Even the best retail concepts don’t work if you’re not in the right location.
A great place to start is to find the right location for your gelato business. When it comes to gelato, you want to be in a location with plenty of foot traffic. That means you’ll want to start identifying areas and building a list of places that people congregate regularly within your city. Popular options to start any frozen desert business includes shopping malls, nearby or on college campuses, strip malls, local attractions, or tourist areas with lots of little small shops that people like to walk and browse. You need to deeply understand your market and the options that are available.
During the podcast, Waldt shares a key tip you can take to ensure a prospective location has sufficient traffic.
One of Waldt’s partners sat in front of a prospective storefront for two days to record the number of people that passed by. After two days, his partner was able correctly access they had a quality location to open up shop.
This is an invaluable tip that you can apply to your business in the research phase. Don’t take a leasing representatives word on the amount of foot traffic you should expect at any location. These estimates will always be optimistic at best.
Remember… Your savings and business future is going to be tied to the location you select. You owe it to do everything in your control to make this work. We also recommend documenting traffic in different days of the week and time of the day. It’s normal for a location to be busier on weekends than weekdays, but it’s something you’ll want to be aware of and build into your business plan estimates.
A gelato shop inside a Whole Foods. Photo Credit: Pinterest
Characteristics of a Profitable Storefront
Here are some of the four key qualities you should look for when on your search to find the right gelato shop. As Waldt noted in the podcast interview, “You can have amazing product. Amazing service. But if your location doesn’t work it’s an uphill battle from the beginning.”
Foot traffic… The importance of this one was covered previously.
Voltage requirements… A lot of folks think you can just plug in a gelato machine anywhere and get to work. This isn’t always the case. Commercial grade gelato machines require more electricity to operate. The specific requirement is 3-phase power. Inside a regular household you’ll usually find 220v power outlets. This is not a sufficient voltage for many machines. Of course you’ll want to refer to your users manual for specific guidelines on what your machines need.
If you’re not sure what any of this means, we recommend hiring an electrician to review your space. An experienced electrician will be able to enter your property and identify what you’ll need and what the cost to install 3-phase power in under and hour.
Sun… You may not think that sun would be a factor in determining your location, but it is. Direct sunlight will have major implications to the quality of gelato when it’s stored inside a glass dipping cabinet. This direct sunlight can create sweating, defrosting or a type of freezer burn like gelato. Bottom line, this is something you’ll need to consider when opening a location. Sunlight into your store can be welcoming and is a great thing. Just make sure the rays won’t be directly on your product.
Different cities have different styles… This goes back to your research and due diligence. You’ll want to identify the types of flavors and deserts that are already profitable and working in your city. Usually, you don’t want to reinvent the wheel here. Offer flavors that people already want and are in demand. Mint, chocolate, vanilla, and pistachio are traditional flavors that are recommended. Here’s a list of even more gelato flavors to consider.
Understand your market before opening a gelato or ice cream shop.
Figuring out What Works in Your Market
As artisan gelato makers, you may be inclined to produce really interesting and outside the box flavors. Avocado and watermelon basil flavors immediately come to mind when considering more creative options. While these adventurous flavors can work in some markets, they won’t work in others. Sometimes people just want a plain old high-quality chocolate or vanilla flavor. And if that’s what your market wants, as a business owner it’s important to serve that demand. Your customers may return a second or third time to try some of the more unique options.
To find out if you have a product that people want and are willing to pay for, basic market research and testing is recommended. The easiest place to start is with your friends and family. Give your friends and family some free samples and ask what they think or what flavors the enjoyed the most. While feedback from your mom or cousin will probably be positive, it’s a simple way to get feedback on what flavors are most desirable to a mass audience.
After your family members have sample the product, it’s time to test your ideas in front of a less biased audience. This can be accomplished in a few different creative ways. You could offer to give free samples at your church or a fundraising event. Anyone that tries your frozen desert could be asked to provide feedback on an anonymous response card. This is an effective and low-cost way to get legitimate feedback about your flavors and style. Make sure that any responses are truly anonymous so that you can get people’s true opinions.
While asking for honest feedback from strangers can be open you up to criticism that can sting don’t let that hold you back. A much worse feeling would be to invest hundreds of thousands of dollars into a business idea that’s unlikely to work. Get feedback early on when it’s easier to change-up your offerings.
How much will it cost to start a gelato shop? What are the expenses?
Batch Freezer – This is the most expensive piece of equipment you’ll purchase for a gelato business. A batch freezer allows you to produce large quantities of frozen deserts like ice cream, frozen custard, and gelato too. This is the piece of equipment that actually makes the gelato and that you will dispense into a pan, bucket, or other container.
New batch freezers cost between $22,000 – $35,000 depending on the model. If you want to reduce your initial investment purchasing a high-quality preowned batch freezer from Slices Concession will cost about $8,000 – $15,000 on average. You can learn more about batch freezers and see a list of recommended batch freezer models here.
Blast Freezer – This piece of equipment will cost around $15,000 brand new. After you dispense product from the batch freezer as described above, you’ll immediately place the product into a blast freezer. A blast freezer allows you to cool your frozen deserts as quickly as possible and prevent’s crystallization of product. The quicker you’re able to get your gelato or ice cream into a blast freezer the less of this crystallization will appear on the product. Crystallization is not good because it will result in a gritty feeling final product that’s not ideal to serve.
Blast freezers are sometimes referred to as “shock freezers” because of how quickly they bring down the temperature of product. Depending on the model you choose, blast freezes can get as cold as -49 degrees Fahrenheit.
Dipping Cabinet – Finally, you’ll place your gelato into a dipping cabinet when it’s ready to serve and display to customers. This is the clear style glass dipping cabinet that allows customers to view the gelato. We eat with our eyes first! Take care when you install these because after they’re installed, they can be very difficult to move.
Glass dipping cabinet.
Wages – One major business decision you will need to make is whether or not to hire a full-time store manager early on. Hiring a manager will require between $4,000 – $6,000 typically. That’s a lot of gelato sales to be able to recoup this line item.
If you plan to own and operate the store initially this will significantly reduce the amount of revenue you need to bring in during the early days. When you’re just starting out this can be a good option to help you learn the business. Keep in mind that there’s an opportunity cost to self managing, however. You’ll have less time to market your business and develop relationships if you’re working in the shop for 60 hours a week.
Leasing a Space – According to a survey from RestaurantOwner.com, you should expect to pay $3,000 on the low end and $8,750 on the high end. Of course, you’ll need to contact property managers in your specific area to get rates for areas that you’re considering.
Capital Reserves – There’s a perception new businesses become profitable immediately upon opening their doors. Sadly, this is not how things typically work. You’ll want to plan for a few months of breaking even or even losing money when starting this type of business. Ideally, you’ll have 6 months of cash reserves before opening up shop. This will provide a buffer for those lean early months before local customers have discovered your business.
There will of course be other variable costs that will depend on your goals that need to be factored into a business plan. Some common variable expenses include cooking equipment, soda machines, a cash register, lighting and dining room furniture.
How much revenue will a gelato shop make annually?
Everyone’s market, product, marketing expertise, and work ethic will determine this number. With that being said we did ask Waldt during the interview how much you could expect to make annually as a gelato shop owner. For one location $400,000 in annual gross sales would be a realistic goal to aim for. Of that $400,000 in revenue, you could expect roughly $100,000 in profit per year. This is assumes you are owning and managing the store yourself and not hiring out a store manager. This is also a year three or four goal for business, not year one.
Keep in mind that your sales and revenue will vary, but we wanted to get you a estimate for expectation business planning purposes.
Determine Your Frozen Desert Sales. Photo Credit: DailyMail.co.uk
Local Marketing Tips for Gelato Shops
After you open the doors to your artisan gelato shop, you’ll need to get the word out about your new business within the community. You will accomplish this by developing a marketing strategy. Admittedly the marketing aspect of operating a gelato shop can be a difficult aspect of operating a successful business to grasp. There are so many marketing / advertising options out there that it can become overwhelming.
In our interview, Waldt shares some specific strategies that have worked well for other ice cream business and frozen desert shops. Many of these require a small amount of advertising investment so these are ideal for owners on a budget. Here are some of the strategies outlined during the conversation:
Coupons – One battle tested way to attract new customers is to offer them a coupon or discount. Within a one mile radius of your store front, deliver as many coupons to people doorsteps as possible. Visiting residential areas and apartment buildings are recommended when using this approach. You can save a lot of money by delivering these coupons yourself instead of using the post office.
Partnerships – Find creative ways to partner with other business. One unique way would be to include to partner with a local coffee shops to create a coffee flavored gelato. This type of event would help you build a relationship with another small business owner and allow you to tap into their existing customer base. This kind of creative activity costs almost nothing aside from your time and a small amount of free product.
Fundraising / Charitable Groups – Schools, churches and non-profits are always looking for new ways to raise money for their cause. By splitting a portion of the revenue you make at some of these organizations events is another way to get your foot in the door, generate sales, and raise awareness for your business.
Leverage Employee Skills – Odds are you’ll be hiring lower wage and younger employees for your shop. Take advantage of this when you can. If you happen to hire a college student they may have a better understanding on how to manage social media profiles on Instagram or Facebook. During slow periods, delegate social media posting and participation to your employees that have interest in that area. Your employees may thank you for the opportunity!
We hope this post has given you the knowledge needed to help you open a thriving gelato business. If you have any specific questions about starting or owning this type of business, feel free to ask in the comments section below. We will do our best to get you a helpful answer.
