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Opening a Donut Shop Costs $43,700 to $89,200

Are you looking to open your own donut shop? As part of your business plan, make sure to consider the total startup and operating cost to open and run a donut shop.

We’ve identified that it costs anywhere from $43,700 – $89,200 to open a casual 1,500 sq. ft. donut shop plus $34,200 – $41,400 in operating costs per month to run the business the first few months.

Want to know more? In this article we’ll go through all the different costs you will need to incur to open your own donut shop. Read on!

For more information on donut shops, make sure to check our guides below:
How to Open a Donut Shop in 10 Steps
How To Build a Financial Model For a Donut Shop
How to Write a Business Plan for a Donut Shop: Complete Guide

Startup Costs to Open a Donut Shop

Most donut shops cost anywhere from $50,000 – $150,000 to open. Purchasing a donut shop franchise instead would cost around $250,000.

As you can notice, startup costs vary significantly according to factors like the donut shop size, its location, the number of staff, quality of equipment, etc. 

So, we have given you a clear overview of all the essential costs you can expect to open a 1,500 sq. ft. donut shop below. There are 2 types of costs: startup costs and operating costs. Note that these costs are for illustrative purposes and depend on several factors which might not fully apply to you. 

Startup costAmount
Lease security deposit (or loan down payment)$11,000 (rent) – $40,000 (buy)
Building improvements$10,000
Equipments$15,000 – $30,000
License, Permits & Certifications$1,500
Marketing$5,200 – $6,000
POS System$1,000 – $1,700
Total$43,700 – $89,200

Donut Shop Financial Model

Download an expert-built 5-year Excel financial model for your business plan

Donut Shop Financial Model

Download an expert-built 5-year Excel financial model for your business plan

Lease security deposit (or loan dowpayment)

An important startup cost to open a donut shop is the lease security deposit for the space you rent (or the loan down payment). 

If you want to lease a property, you must decide to stay there for a couple of years and pay a security deposit (refundable). The cost will vary depending on the location and the size of the donut shop. For instance, you would spend around $30 per square foot for retail and commercial space in a city like Chicago. 

Thus, assuming you lease a 1,500-square-feet location, you should expect to pay around $3,750 per month. With that calculation, if you are required to provide a security deposit worth three months of rent, you must set aside $11,250. 

If you want to buy a commercial place instead of leasing a place, you will have to provide a down payment for the loan for at least 10%. Thus, assuming the commercial space costs $400,000, you would have to spend $40,000 upfront payment with a 10% deposit.

If you want to rent an existing donut shop rather than starting one from scratch, you can expect to reduce your startup costs.

Indeed, renting an existing donut retail space may save you costs related to the renovations, the shop’s design, machines, and equipment. Yet, in both situations, you may have to take up a loan.

Donut shop renovation cost

Your donut shop requires furniture and a bit of interior design to make customers feel welcomed and relaxed. If you’re leasing or purchasing an existing donut shop, you need to buy certain kitchen items and startup inventory equipment to get started with your shop.

To improve the ambiance of your donut business, you’ll also need signage, lighting, and a music system. Assuming the commercial space is already good quality, the design furniture would cost around $10,000.

Donut shop equipment cost

Once your donut shop space is ready, you must grab the right equipment and initial inventory to start. Some of the common equipment which you need to have for your donut shop will be:

  • Deep Fryers
  • Microwaves and ovens
  • Freezers and Refrigerators
  • Freezers & Refrigerators
  • Food Prep Equipment (knives, cutting boards, mixers, blenders, storage containers)
  • Serviceware (Table service essentials, utensils, paper boats)

The cooking and kitchenware can usually cost between $15,000 and $30,000

If you’re purchasing or renting an existing donut shop, you’ll find many of the essentials already present in the space. You’ll need to add some more equipment, and some existing equipment may also need renovation. As the startup equipment & inventory takes up a huge chunk of your total cost, you can buy used equipment and spend on its maintenance. 

License, Permits & Certifications 

To legally operate your donut shop, you’ll need some paperwork and fees, namely licenses, health and safety compliance permits. This documentation and expenses are usually around $1,000 but depending on your state. They might be much more or less, so do your research. 

Besides the food preparation certification, you also need the following licenses & permits to run your donut shop: 

  • Business Operation License
  • Employer Identification Number
  • Retail Seller Permit
  • Certificate Of Occupancy 
  • Food Service License

A small business license will cost you around $100. However, the price again depends on the state of operation of your donut shop. 

An EIN (Employer Identification Number) is issued free of cost by the IRS, which you can apply online

The Retail Seller permit varies from one state to another. It is either free in some states or costs less than $50 in other states. 

The cost of obtaining a certificate of occupancy depends on the size of your donut shop, type of cinstrction,square footage, and other factors. The cost also varies depending on states and locations, but the estimated cost will be $250. 

The Food Service License is issued by the Department of Health of every state, depending on the size of your donut shop and its location. The cost of the license ranges between $100 to $1,000. 

Donut shop marketing cost

Marketing will cost you a huge chunk of running a donut business. The amount you’ve to spend depends largely on whether you hire an agency or handle everything yourself. 

The cost of website design and development will range anywhere between $200 and $1,000.

Then, you should set aside money for advertising (social media, billboards, etc.). On average, expect to spend around $5,000 on marketing ads. Thus, the total cost you would pay for marketing & website will vary anywhere between $5,200 – $6,000. 

POS System 

A Point-of-Sale System (POS) facilitates payment methods and keeps track of your inventory and orders. The cost of a POS can go up to $1,700 for the hardware. The cost for the software will range from $0 to $300. For instance, Square Register offers software, hardware, and payments for just $799. 

These prices will vary depending on the type of POS system you’re opting for and the total scale of the operation of your business. 

Donut Shop Operating Costs

Apart from the on-time startup costs to open your donut shop, you should focus on the operating costs you would have to incur each month to keep the donut shop running. 

Donut shop operating costs typically include the rent, raw materials, and staff costs. Here’s a brief overview of the operating costs, which you can expect for a typical 1,500 sq. ft. donut shop with 4 full-time employees (1 pastry chefs + 1 pastry assistants + 2 clerks).

Operating costAmount (per month)
Raw materials$12,000
Salaries$15,000 – $20,000
Marketing$1,200 – $2,400
Insurance, software & other$1,000 – $2,000
Total$34,200 – $41,400

Donut Shop Financial Model

Download an expert-built 5-year Excel financial model for your business plan

Donut Shop Financial Model

Download an expert-built 5-year Excel financial model for your business plan

Donut shop raw materials cost

Raw materials, along with staff costs, are the largest cost for donut shops. You can expect to pay around 30% of your sales in raw materials (i.e. food items and supplies).

Let’s say:

  • Your team delivers 300 orders per day (donuts, muffins, drinks, etc.); and
  • An average order value of $5

The total monthly revenue of your mini donut shop would be around $40,000 (if we assume 6 days a week). Hence, you would spend anywhere around $12,000 on raw materials.

Donut shop rent & bills cost

If you have leased your donut shop, you need to pay the monthly rent. The amount which you need to pay as monthly rent varies depending on factors like the size of the space, location, lease or purchase, and so on. 

Using the same Chicago example earlier ($30 per square foot per year), you should expect to pay around $3,750 per month rent for a 1,500-square-foot space. 

Apart from rent, you also have to pay for other utilities & bills like electricity, gas, water and internet service which would cost somewhere around $1,000 – $2,000. Hence, the total rent and bills which you will end up paying would be around $4,750 – $5,750 per month. 

Donut shop staff cost

Apart from raw materials, staff costs are another biggest expense for donut shops. 

The average Donut Shop hourly pay ranges from $9.00 per hour for a Food Preparation Worker to $14.29 per hour for a clerk assistant.

So assuming you hire 4 employees with yourself as the manager, you should expect to spend around $15,000 – 20,000 per month on salaries (including taxes and benefits).

Donut shop marketing cost

Marketing is essential to promote your donut shop and build trust with customers. This can either be online (social media, paid ads) and/or offline marketing (billboards, flyers, etc.). 

Generally, marketing costs tend to be more expensive in the first few months of your business. As you launch your donut shop, you need to invest a sizable expenditure before you start expecting organic growth (word-of-mouth). 

You should expect to spend around 3-6% of your monthly sales on marketing. Taking the $40,000 gross revenue donut shop example above, you should expect to spend around $1,200 – $2,400 in marketing per month. 

Insurance, software & others 

Your donut shop falls under the food and beverage industry. Insureon states that the average insurance costs for the food and beverage industry are:

  • General liability insurance: Median monthly premium – $40
  • Workers’ compensation insurance: Median monthly premium – $115 
  • Business owners’ policy: Median monthly premium – $135
  • Commercial auto insurance: Median monthly premium – $165

If you consider buying all types of insurance, you will be paying $455 monthly. 

The monthly costs of your POS software will vary depending on the software you opt for. While some software has no monthly fees, the fee for other paid software is around $250.