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How To Start An Ice Cream Shop in 2023

How To Start An Ice Cream Shop in 2023

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How To Start An Ice Cream Shop in 2023

How To Start An Ice Cream Shop

Whether you have a sweet tooth or have been making ice cream since you were a kid, starting an ice cream shop of your own can be a dream come true. And while there’s certainly the opportunity to have some fun when you own this type of business, you’ll also put plenty of hard work into starting an ice cream shop.

Whether it’s hot summer afternoons or simple after-dinner indulgences, ice cream is a year-round favorite that spans all demographics. However, like any business endeavor, launching an ice cream shop involves careful planning, market understanding, and a flair for creativity. But, before you jump into this venture, though, take a few minutes to check out step-by-step advice to help you navigate the frosty landscapes of the ice cream industry and understand just what’s involved in starting a shop of your own.

Business Overview

Ice cream shops offer customers convenience and the chance to indulge in frozen treats. Many stores sell soft serve or traditional ice cream and custard, gelato, sorbet, frozen yogurt, and organic ice cream in a cup or freshly made waffle cone. Some also offer milkshakes and smoothies. Most ice cream shops offer many different toppings and a wide variety of flavors, giving customers more choices and access to premium products that they wouldn’t have in their freezer at home.

There are different ice cream parlor business models available. The traditional model, where servers scoop ice creams and prepare sundaes, remains popular. But there’s also an increase in the “self-serve” model where customers prepare their own sundaes and then pay according to the sundae’s weight.

There’s plenty of competition in the ice cream shop industry, so start planning ways to differentiate your shop from others early on. Work to identify an unmet need in the community and build your shop to fit it. Maybe you’ll decide to offer premium ice creams that aren’t available locally, maybe you will feature local ingredients, or maybe you’ll focus on also offering alternative non-dairy products for people with food allergies. Build your shop so that it’s different than others, from the décor to the experience to the products. This can help to build your customer base. Even investing in an ice cream cart can help get the business out in the community to increase sales and build awareness.

Industry Summary

The ice cream shop industry, classified under NAICS code 722515 (Snack and Nonalcoholic Beverage Bars), consists of establishments primarily engaged in preparing and serving ice cream, frozen desserts, and other snack items for immediate consumption. Ice cream shops are popular destinations where customers can indulge in a variety of frozen treats and enjoy a casual dining experience.

According to a report by Mordor Intelligence, the ice cream market is projected to increase by 2.45% over the next five years (2023-2028) with rising demand for premium ice cream driving a majority of the industry’s growth. Ice cream store industry statistics from IBISWorld estimate the 19,590 ice cream stores in the US will generate $5.5 billion in revenue during 2023.

There are many trends to be aware of, and according to Food Truck Empire, one of those major trends in the ice cream industry is an increased demand for non-dairy ice creams, like those made with oat, almond, or banana bases. Lactose-free and low-fat desserts are also becoming highly popular.

Ice cream retailers can take advantage of the demand for ice cream flavors and toppings that reflect the local community. This is particularly important in tourist locations where tourists wish to experience the flavors of the area. Developing unique ice cream flavors with locally inspired names can add a special touch to a customer’s visit to an ice cream store. Ice cream shops making their own ice cream also have an advantage in this area since they can make unique flavors. However, any shop can make a specialty sundae or shake that’s inspired by the local culture.

Steps To Start An Ice Cream Shop

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Starting an ice cream shop can be an incredibly rewarding experience, but it’s important to make sure you’re prepared for the challenges ahead. Use this checklist to help get your business off on the right foot.

Step 1: Conduct Market Research

Researching the market is a vital first step in setting up your ice cream shop.

At the core, you will want to identify your target market and understand the demographics of the customers you want to attract. Are you aiming to cater to families, teenagers, or perhaps health-conscious customers who prefer vegan or low-fat options? Your product line should be aligned with the preferences of your target market. Are there enough of the customers you want to target in your area to support your ice cream shop?

Once your customer base has been identified, it’s time to research your competitors. Visit other ice cream shops in your potential area. Understand their business models, pricing, and offerings. Pay attention to what works well for them and areas where they might be falling short. You can also look at their customer reviews online to glean insights about their strengths and weaknesses.

Armed with this information, you can start to make informed decisions about your business, what products to offer, how to price, market, and more.

Step 2: Write a Business Plan

After looking at the market and having the data to support the need for an ice cream shop in your community, the next step in starting your business should be to write a business plan. A business plan is not only necessary if outside funding is needed, but it also helps you define and articulate your vision and assess the financial feasibility of the shop. It allows you to outline your goals, target market, and unique selling proposition.

Some important things to keep in mind when writing an ice cream shop business plan include:

Demonstrate industry knowledge: Show your understanding of the ice cream industry with the work you did earlier by researching market. This knowledge will instill confidence in lenders or investors that you have a solid foundation for success.

Create a realistic financial forecast: Develop a detailed financial forecast that includes projected revenue, expenses, and cash flow. This will help you determine the amount of funding required and convince potential funders of the profitability of your ice cream shop.

Highlight unique selling points: Clearly articulate the unique aspects of your ice cream shop that will set it apart from competitors. This could be a specialty flavor, innovative product offerings, sustainable practices, or a unique customer experience. Emphasize how these factors will attract and retain customers.

Related: How to write a business plan

Step 3: Search for a Location

Now that you are lining out your business idea, it’s time to start researching where you want to be located.

Start by considering the demographics of your target market – your location should be easily accessible and highly visible to them. High foot traffic areas, especially those near other complementary locations such as restaurants, parks, or schools, are usually desirable for ice cream shops.

You should also look for a location that has enough space to house the appliances, a serving area, and possibly a seating area for customers. Additionally, you will want to make sure you aren’t locating too close to a competitor.

In this stage, you are only researching available properties, verifying that a food service can be operated, and getting rough costs. While it is tempting to sign a contract to secure your property, you should wait until clearing the next step which is making sure you have the funding to start your business.

Step 4: Secure Funding

Now that you are well on your way, the concept should be worked through and the business plan completed. With this, it’s time to make an appointment and talk with a lender.

Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start an ice cream shop is another. Funding to start an ice cream business can be difficult due to the often high cost of building renovations, furniture, and equipment. In order to get a small business loan, the borrower(s) will need to have good credit and be able to personally invest 15-25% towards the total start-up costs.

In your business plan, you should have calculated the total funding required to start and operate your ice cream shop. Equipment and furniture costs can run quite high, but another option would be to look at leasing and save on upfront costs.

When approaching potential funders, be ready to provide detailed documentation, such as financial statements, business plans, market research, and legal compliance. Anticipate and address any concerns or questions they may have during the due diligence process.

Related: Finding the money to start a business

Step 5: Secure the Location & Source Equipment

Now that funding is in place, it’s time to secure your location. At this stage, it’s important to begin optimizing the flow of customers and staff within the shop by designing a functional and efficient layout. You can use free online floor plan creators like Floorplanner or SmartDraw to create a virtual floor plan for your shop.

In the shop design, consider the different areas of the shop, including the customer ordering area, production area, and storage space. Also, ensure that equipment placement allows for easy access, maintenance, and efficient workflow.

Spend time creating an inviting and visually appealing display area for showcasing ice cream flavors and products since this is where customers will focus their attention.

Last, take into account the safety and accessibility requirements, including compliance with health and safety regulations and ADA guidelines.

Step 6: Register for Business Licenses and Permits

Registering and setting up your ice cream shop legally is an essential part of starting your business. While the specific regulations and requirements can vary by state, here is a general guideline to get you started:

Form a business structure: The first thing you’ll need to decide is what legal structure is best for your business. This could be a sole proprietorship, a partnership, a limited liability company (LLC), or a corporation. Each of these structures has different implications for liability, taxes, and administrative complexity. Many small business owners opt for an LLC because it provides personal liability protection and has fewer administrative requirements than a corporation.

Related: Comparison of business structures

Register your business name: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state.

Related: Tips for naming an ice cream shop

During this time, it’s also a good idea to check if the name you want is available as a web domain, even if you’re not ready to set up a website yet.

Related: Finding a domain name for your business

Obtain business licenses and permits: Depending on your location and the nature of your business, you may need certain general business licenses or permits to operate. This could include a business license, Seller’s Permit and Employer Identification Number (EIN).

In addition, ice cream shops will usually need food licensing (typically from the local health department). Along with licensing, there will be different regulations and regular inspections.

Related: State guides for business licensing

Step 7: Source Suppliers

Things are coming together quite nicely (hopefully), and now we are looking at the suppliers you will use for the ingredients and other items like dishes, utensils, lids, straws, etc.

Choosing the right ingredient suppliers for your ice cream shop is a critical aspect of your business that directly impacts your product quality and consistency, customer satisfaction, and overall profit margins. When choosing a supplier, a few things to keep in mind:

Quality: Always prioritize quality over cost. High-quality ingredients result in a superior product that customers can taste, which in turn builds your reputation and customer loyalty. Request samples from potential suppliers to assess the quality yourself.

Reliability: Your supplier must be able to deliver consistently and on time. Unreliable suppliers can lead to inventory issues and potential interruptions in your business, which can negatively affect your customer service.

Sustainability: Consider sourcing from suppliers who prioritize sustainability. This could mean using organic ingredients or those with a lower carbon footprint. This not only can be a selling point for your customers but is also a responsible business practice.

Locally sourced ingredients: Local suppliers can often provide fresh ingredients and also allow you to support other local businesses. Customers often appreciate and support businesses that use locally sourced ingredients.

Pricing: While quality is key, the cost is an important consideration. Make sure that the prices allow you to maintain a healthy profit margin. Be sure to understand the supplier’s pricing structure and whether they offer discounts for larger orders.

Terms and conditions: Before committing, make sure you understand their terms and conditions. Can you order as needed, or are there minimum orders? What are their payment terms? Do they offer returns or credits for unsatisfactory products?

Relationship: A good supplier is a partner that wants to see your business succeed. Look for suppliers who are supporting you during the research phase, as they tend to be the best to work with over the long term.

Diversity of products: Depending on your ice cream shop’s concept, you may want a supplier who offers a wide range of products – different types of dairy, unique flavors, or specialty items like vegan or lactose-free options.

Remember, it’s also a good idea to have backup suppliers in case your primary one has issues.

Step 8: Finalize the Menu and Set Pricing

When it comes to setting pricing for an ice cream shop, there are several items to consider:

Understand your customer: The price of your ice cream gives your customers information about how you see your product and what type of target market you expect to buy your offerings. Some customers will select a brand of ice cream because of its low price while others will be drawn to a higher-priced product because of their perception that cost correlates with quality.

Analyze your competition: An ice cream pricing strategy should take into account the prices that your competition is charging. This does not mean that the neighborhood ice cream truck should charge more because the upscale ice cream shop has a more expensive product. Rather, the ice cream truck catering to a cost-conscious clientele should adjust its prices relative to other businesses targeting the same market while the artisan ice cream shop might even raise its prices to signal that its owners believe their product to be worth more than the competition.

Understand your costs: When pricing your ice cream, it’s critical that you first identify all of your costs and consequently mark up your ice cream so you can factor in a profit. The actual cost of your ice cream may include things like the actual cost to make the product and operating costs to run your business.

When setting up a menu for an ice cream shop, there are several things to consider. A few things to consider include:

Plan your menu: Planning your menu will help determine the layout of your store. For example, if you plan to offer 20 flavors of ice cream, you’ll need sufficient space for the dipping cabinets necessary to hold them all.

Reflect your shop’s personality: Your menu should reflect your ice cream shop’s personality or ties to the local area. Consider incorporating these words and phrases into your menu to be unique.

Design best practices: Whether printed, online, or on the wall of your shop, your menu is an important tool for communicating your shop’s identity, driving customer engagement, and maximizing profits. Unless you have a design background, hiring a graphic designer or working with a sign shop will result in the best outcome. For inspiration, you can look at Toast POS’s guide on how to make an ice cream shop menu from scratch in 10 steps or Pickcel’s list of 5 irresistible design ideas for your ice cream shop menu.

Step 9: Get your Marketing Plan in Place

Marketing an ice cream shop effectively requires a blend of creativity, understanding of your target market, and leveraging the right platforms to reach your customers.

Start with creating a strong brand that includes a unique selling proposition – what makes your shop different or better than the competition? This could be unique flavors, locally sourced ingredients, or a distinct ambiance.

Once you have a strong brand, amplify it through various channels. Traditional marketing strategies like engaging signage, local newspaper ads, or in some markets, distributing flyers can still be effective. However, digital marketing is increasingly crucial. A user-friendly website and active social media presence (Instagram, Facebook, Twitter) can help you engage with customers, showcase your products, and announce special promotions. Also, consider targeted local online ads through platforms like Google or Facebook.

Collaborating with local businesses, participating in community events, or sponsoring local sports teams or clubs can increase visibility within your community. Local food and ice cream competitions and festivals also offer a way for ice cream shops to connect with customers in the community.

Customer loyalty programs or promotional events like “flavor of the week” can incentivize repeat visits. Offering regular promotions and special offers will not only attract new customers but keep existing ones coming back.

Last, don’t underestimate the power of word-of-mouth marketing. While this won’t happen overnight, exceptional customer service and a top-quality product can turn your customers into advocates for your shop.

Related: Low-cost ideas to market a new business

Step 10: Hire & Train Employees

Hiring the right team is integral to the success of your ice cream shop. The employees not only help in the day-to-day operations but also serve as the face of your business, interacting with customers and contributing to the overall customer experience.

Common roles in an ice cream shop include ice cream scoopers or servers, a shop manager, and potentially a specialized ice cream maker if you’re making ice cream in-house. Ice cream scoopers and servers typically earn around minimum wage, but this can vary depending on state laws and cost of living.

Shop managers and specialized ice cream makers generally earn more due to their increased responsibilities and required skills.

When hiring for an ice cream shop, consider the following tips:

Look for customer service skills: Since your employees will be interacting with customers, they should have excellent customer service skills. This includes being friendly, patient, and able to handle customer complaints professionally. Personality is something that cannot be taught but it is what’s needed most for your staff to interact with your customers.

Reliability is key: Ice cream shops often have high turnover rates, so look for employees who are reliable and likely to stick around for a while. This could mean focusing on hiring individuals seeking more stable employment rather than temporary or seasonal workers.

Consider the physical demands: Scooping ice cream can be physically demanding and may require employees to stand for long periods. Make sure your potential hires are up for the task.

Create a training program: Have a training program in place so you aren’t always starting from scratch. It’s essential to train your staff in safe food handling practices like proper hand washing, cleaning procedures, and how to avoid cross-contamination, in addition to in-depth customer service training.

Related: Hiring your first employee

Step 11: Prepare to Launch

As we wrap up our steps, there will be several additional things to work on before having the grand opening. Everyone’s journey and needs will be different, but here are a few other items to consider:

Insurance: Obtaining the right insurance is crucial to protect your business. General liability insurance is a must, but you’ll also want to look into property insurance, workers’ compensation if you have employees, and potentially product liability insurance.

Related: What types of insurance does an ice cream shop need?

Bookkeeping: Good bookkeeping is essential for any business. You’ll want to keep track of all your expenses and revenues for tax purposes and to monitor your business’s financial health.

Related: Setting up the accounting for your business

Bank account: Opening a separate bank account for your business is important for keeping your personal and business finances separate, which is especially important for tax purposes. It also helps you monitor your business’s cash flow more accurately.

Accepting credit cards: Most customers expect to be able to pay with a credit card, so setting up a merchant account to accept credit cards is important. Shop around to find a provider with competitive rates.

Inventory management: For an ice cream shop, managing your inventory effectively is crucial. You’ll need to track your stock of ice cream and other items to prevent shortages or wastage. Inventory management software can be helpful for this.

Health regulations: Food businesses like ice cream shops need to comply with local health department regulations. Make sure you understand these rules and train your staff to follow them. Regular health inspections will be a part of your business, so always be prepared.

Starting an ice cream shop is a lot of work, but with careful planning, a focus on quality, and excellent customer service, it can also be a lot of fun and very rewarding. Best of luck in your sweet endeavor!

Greg’s Tip: Most ice cream shops are very seasonal, and demand typically goes down with the temperature. Many stores decide to close during the late fall and winter, but they still need to pay for expenses like rent and electricity during those times. Other stores remain open through the winter but see reduced business during that time.

Diversifying your shop’s offerings can help to increase sales even during the off-season. Many ice cream shops also sell ice cream cakes, while some diversify into hot beverages and other dessert foods. Some venture into catering or establish relationships with local grocery stores so that they can sell their shop-made ice cream quarts in the frozen foods section, bringing in steady income.

Whichever route you go, be sure to factor seasonality into your financial projections to make sure you have enough cash to pay the bills during the slower times of year.

Greg's Business Tip

Ice Cream Shop Startup FAQs

How much does it cost to start an ice cream shop?

The cost to start an ice cream shop can vary greatly depending on several factors, including the shop’s location, size, whether you’re buying an existing shop or starting from scratch, and the specific type of shop (e.g., a small walk-up stand versus a large sit-down parlor).

Even though these are all estimates, here’s a rough breakdown of the costs you might expect:

Lease or purchase of space: This can range from a few thousand dollars per year for a small kiosk or cart to several thousand dollars per month for a larger shop in a high-demand location.

Renovations and decor: If the space you lease or purchase isn’t already set up as an ice cream shop, you’ll likely need to invest in renovations. This can cost anywhere from $50,000 to well over $200,000.

Equipment: You’ll need freezers for storing the ice cream, dipping cabinets, ice cream dispensers, cash register or point-of-sale system, a sink, and other kitchen equipment if you’re making your own ice cream. Expect to spend around $20,000 to $50,000 for initial equipment costs.

Initial inventory: This will include the cost of the ice cream itself, plus cones, cups, spoons, napkins, toppings, and any other items you’ll sell. You might spend around $1,000 to $5,000 to stock up initially, depending on the size of your shop.

Licenses and permits: Depending on your location, these might include a business license, health department permit, and a sign permit. The costs can range from a few hundred to several thousand dollars.

Business insurance: You’ll need liability insurance at the very least, and likely other types of insurance as well. This might cost a few thousand dollars per year.

Marketing and advertising: The cost for this can vary widely depending on your strategy, but it’s important to budget for it. You might spend a few hundred to several thousand dollars on grand opening promotions and ongoing advertising.

Operating expenses: Don’t forget to factor in ongoing expenses such as utilities, salaries for employees, and regular restocking of your inventory. You’ll need enough capital to cover these expenses for at least a few months until your shop starts bringing in sufficient revenue.

Adding all of these elements together, a small, simple ice cream stand might cost around $50,000 to $100,000 to start, while a larger shop with seating and more extensive renovations might cost $200,000 to $300,000 or even more. These are very rough estimates, and your costs could be lower or higher depending on various factors. It’s always a good idea to create a detailed business plan with a thorough budget before getting started.

How much can an ice cream shop owner make?

The profitability of an ice cream shop can greatly vary based on factors like location, size, overhead costs, pricing strategy, and the specific business model.

One common formula to estimate profitability in the restaurant industry, including ice cream shops, is the prime cost formula. Prime cost includes the cost of goods sold (COGS – including ice cream, cones, toppings, etc.) and labor. For a profitable operation, the prime cost typically should not exceed 60-65% of sales revenue.

Let’s illustrate this with a simple example. We know from industry research earlier that there are an estimated 19,590 ice cream stores in the US that are expected to generate $5.5 billion in 2023. This means the average store makes $281,000 annually. For the purpose of this example where we are estimating the profits of a new ice cream shop, let’s say our store will generate $200,000 in sales during its first year. According to industry sources, the cost of goods runs about 40%, which means you would spend $80,000 each year for inventory.

The remaining $120,000 would cover other operating expenses such as rent, utilities, insurance, marketing, maintenance, and any other overhead. Let’s say these costs add up to $80,000 per year.

That would leave you with a pre-tax profit of $40,000.

Please note that these are rough estimates, and actual results can vary significantly. A number of factors could affect this, such as fluctuations in the cost of ingredients, changes in labor costs, seasonal variations in sales for ice cream shops, and more. It’s important to have a detailed business plan and continuously monitor your financials to ensure profitability.

What skills are needed to run an ice cream shop?

Opening and running an ice cream shop doesn’t require a business degree, but certain skills and experiences can make the process smoother and more successful.

Food service experience. Experience in the food service industry, especially in an ice cream shop, will help a shop owner understand some of the challenges of serving ice cream.

Food service safety knowledge. A shop owner will need an understanding of safe food handling and storage procedures. This knowledge can also help an owner to acquire a food service license for the business.

Ice cream making experience. If an ice cream shop is going to make its own flavors, then experience in making ice cream and in coming up with new flavors will be important.

Customer service skills. A shop owner with strong customer service skills can help to maintain a great shop reputation and gain loyal, repeat customers.

Management skills. Ice cream shop owners need to hire, train, and manage staff, so previous management experience is important. Additionally, ice cream doesn’t have a long shelf life to taste fresh. Managing inventory and running specials to get old inventory out the door is important in minimizing waste.

Ice Cream Alliance
International Association of Ice Cream Distributors and Vendors
National Ice Cream Retailers Association

How To Start An Ice Cream Shop in 2023

How To Start An Ice Cream Shop in 2023

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