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How to Start a Candy Store

Overview

How to Start a Candy Store

Candy stores are a haven for anyone with a sweet tooth. Packed with all sorts of sweets, these stores are the perfect place for stocking up on snacks, buying gifts, and just enjoying some time out with the family. If you love candy or have a talent for candy making, then a candy store might sound like an ideal business venture. Opening a store of your own can be rewarding, but it’s also challenging since there’s plenty of competition in the industry. If you have an idea for a store that’s unique and that fills an unmet need in your area, then this business venture could be a success.

Business Overview

Candy stores offer a variety of tasty sweets, and stores may specialize in certain types of candies, too. Bulk candy stores are ideal for families with kids or customers stocking up for a big party. Penny candy shops offer wide selections of different types of candy. Some sweet shops specialize in gourmet candies, while others may even make their own candies in-house.

These stores offer customers convenience, and they can attract shoppers who are looking for gift ideas or getting ready for the holidays. Some stores also offer online purchases and ship their products. It’s common for candy stores to expand into other areas, too, like offering small gifts, candy bouquets, other snacks, and ice cream.

The candy industry can be competitive, so before opening a store, do some research into competing candy shops in the area. Visit the stores and see what they offer, but also pay attention to what they don’t offer. There might be an opportunity to offer candy deliveries, candy bouquets, specialty candies, and other product categories that aren’t currently available in the area. Be sure to not only focus on specialty candy stores as big-box stores and online retailers are carrying many of the same items, making it harder for specialty stores to compete.

If you plan to make your own candies, test the market first by making candies from home without investing in a storefront. This is the perfect opportunity to develop and refine your recipes and offerings, find out what’s most popular, and build up a customer base that will support you when you do decide to open your store.

Industry Summary

According to Candy Industry Magazine, the candy industry is thriving. From March 2018 to March 2019, chocolate candy saw $14.1 billion in sales, while non-chocolate candy sales brought in $7.4 billion. Gum sales increased by 2% for a total of $3.1 billion, while breath fresheners declined by 3.8% for sales of $776 million. Reports from Packaged Facts forecast that chocolate candy sales will experience 2.8% growth through 2022, while non-chocolate candy is predicted to grow by 3.7%.

Statista reports that Mars, Inc. is the leading confectionery company worldwide., with the United States holding a 30.2% market share of the confectionery giant. Hershey’s holds a 43.3% share of the United States chocolate market, and M&M’s sales alone totaled $668.7 million in the United States. When it comes to gum sales in the United States, Wrigley’s Extra leads the sugarless gum category in sales. Sales of Wrigley’s Double Mint topped $99.5 million in 2018.

According to the US Census Bureau, the average American consumes 22 pounds of candy each year.

Industry Trends

Many trends are driving the candy sales industry. According to Market Research, while candy sales are dominated by chocolate sweet, non-chocolate candy companies are shifting their focus to drive sales. These companies are increasingly designing products that are fun and more flavorful to catch consumers’ interests and encourage them to buy these sweets.

Candy may not be the healthiest food, but candy makers are working to appeal to the growing demand for health and wellness products. Manufacturers have started to eliminate GMOs, high fructose corn syrup, and artificial additives. Instead, manufacturers are replacing these products with natural and organic ingredients and adding more nutritious foods like fruits, nuts, and seeds. We’ll likely also see an increase in dark chocolate products since dark chocolate is recognized for its health benefits.

Consumers are increasingly aware of the importance of using their spending power to support the environment, and the candy industry will also feel those effects. Manufacturers and retailers need to adopt a focus on sustainability to continue to appeal to eco-conscious consumers. Many companies have already started to make these changes. Mars has committed to investing $1 billion to support eco-friendly practices like solar energy and renewable food sourcing. Hershey has developed a Cocoa for Good program that helps to develop sustainable cocoa production practices. Mondelez also has a cocoa sustainability program called Cocoa Life. Candy retailers can also embrace this trend by using recyclable bags, implementing energy-saving practices within the store, and highlighting the sustainable actions of the manufacturers whose products the store sells.

Target Market

Candy stores market to a wide variety of consumers. Some stores develop a family-friendly brand that appeals to both kids and adults. Other stores may specialize in gourmet candies and market primarily to an adult audience.

Checklist for Starting a Candy Store

Starting a candy store 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: Write a Business Plan

After coming up with the idea, the next step in starting your business should be to write a business plan.  Not only will lenders or investors require you to have a business plan, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.

Related: How to write a business plan

Step 2: Form a Business Entity

A business entity (also referred to as a business structure) refers to how a business is legally organized to operate. There are four primary business structures to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.

When deciding on which business entity is best for a candy store, it normally comes down to the sole proprietorship and Limited Liability Company.

A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay.
 
The corporation can be a good choice to minimize liability risk because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.

That leaves the sole proprietorship and LLC.

The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is that the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.

Related: Guide to forming your LLC
 

Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.


Some popular LLC formation services include:


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Step 3: Choose a Business Name

A business name will be needed for your candy store. Registration of the name will vary depending on the business entity, availability, trademarks, and more.

Related: How to choose a name for your candy store

Step 4: Select your Location

Rent costs will depend on the size and location of the store and what amenities are available. A candy store that makes its own candy will need access to a large kitchen area, potentially driving up rent costs. Stores located in high-traffic retail locations typically bring higher rent costs, but they can also generate valuable walk-in traffic.

Related: Choosing a business location

Step 5: Apply for Business Licenses and Permits

A candy store owner will need to obtain certain business licenses and permits. These permits and licenses can vary based on the state and town where the business is located.
According to Profitable Venture, candy stores must also obtain local health department permits, which cost about $25. Stores that resell candy may need to obtain a resale certificate, though different states have different requirements. If the store makes its own candy, it will be subject to additional food licensing and permitting requirements. These requirements vary from state to state.

There are also some other general local, state, and federal business registrations a candy store may need which include a business license, sales tax permit, Employer Identification Number, and Occupancy Permit.

Related: Common business licenses, permits, and registrations by state

Step 6: Find Financing

Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a candy store is another.  To get a loan, the borrower(s) will need to have good credit and be able to invest 15-25% of their money towards the total start-up costs.

Related: Finding the money to start a business

Step 7: Open a Business Bank Account

Keeping your small business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
 
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.

Step 8: Get your Marketing Plan in Place

Marketing is an ongoing expense for a candy store. Common marketing techniques include social media marketing, online advertising, print advertising, and radio advertising. Some sweet shops will also utilize an online store to sell on the internet. Some stores may establish a loyalty rewards program to encourage returning customers.

Related: Low-cost ideas to market a new business

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Step 9: Get Business Insurance

There are several types of insurance to consider when starting a candy store. A few of these include:
– General liability insurance offers protection against expenses that a business might face if a customer is ever injured while on the property or made sick by eating candy that the store sold.
– Commercial property insurance can cover expenses and losses that could result if the building or inventory is damaged or destroyed in an event like a fire.
– Worker’s compensation insurance covers expenses like medical bills and legal fees that could result if an employee were hurt while on the job.

The cost to insure a candy store will vary depending on factors like the business’ size, location, the number of employees on staff, and the value of its inventory and equipment. To get the most accurate idea of what to budget for insurance, request quotes from multiple providers. When evaluating the quotes, compare not only the premiums but also the plan exclusions, coverage limitations, and deductibles compare.

Related: Common types of insurance a business may need

Step 10: Hire Employees

Most candy stores need at least a few employees. According to PayScale, a candy store manager earns an average salary of $14 per hour, while cashiers earn an average of $10 per hour. Simply Hired reports that confectioners earn approximately $82,682 per year.

When a store owner hires employees, the store’s budget needs to cover not only salary costs but also other related expenses. These expenses include workman’s comp insurance, unemployment insurance, payroll taxes, and any benefits.

Related: Hiring your first employee

Step 11: Set up an Accounting System

Most candy stores need at least a few employees. According to PayScale, a candy store manager earns an average salary of $14 per hour, while cashiers earn an average of $10 per hour. Simply Hired reports that confectioners earn approximately $82,682 per year.

When a store owner hires employees, the store’s budget needs to cover not only salary costs but also other related expenses. These expenses include workman’s comp insurance, unemployment insurance, payroll taxes, and any benefits.

Related: Hiring your first employee

Step 11: Set up an Accounting System

Setting up an accounting system for your candy shop is critical to the long-term success of your business.

Staying on top of taxes not only keeps the business out of trouble with the government, but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.

Related: Setting up the accounting for your business

The thought of accounting can be intimidating for a lot of new entrepreneurs. There are a number of ways of handling bookkeeping, from DIY to hiring a bookkeeper. These include:

- Pen and paper - Low expense, but difficult to track.
- Spreadsheet - Low expense, but easy to make errors.
- Accounting software - Medium expense, but owner typically inputs expenses. Some great accounting software programs include Freshbooks or Wave Accounting.
- Hire a bookkeeper - Higher expense, though very affordable at $100-$200 per month in most cases. A dedicated bookkeeper will probably save money because, in addition to handling all of the bookkeeping (so you can focus on the business), they also provide personalized tax advice and ensure the business is in compliance.

Find bookkeepers in your local area or use a service like 800Accountant.

How much does it cost to start a candy store?

It’s possible to start a small candy store and then gradually expand that store as it’s profitable. Small stores cost $20,000 to $50,000, while a larger store can cost as much as $75,000 to start up.

Some common startup costs for a candy store include:
– Candy making equipment
– Inventory
– Supplies, like shopping bags, candy scoops, and ingredients
– Shelving and displays
– Signage
– Working capital to fund the first three to six months of utilities, payroll, rent, etc.

How much can a candy store owner make?

A store’s profits will vary depending on factors like the store’s size, profit margins, location, and how many years it’s been in business. Store owners can maximize profits through market research, careful product selection, and creative marketing.

Many candy stores offer both candy and ice cream. This popular pairing can help expand your customer base and profits, but be sure to perform a cost analysis to make sure that expanding into ice cream is worth the cost. Ice cream freezers, supplies, and inventory will drive up your operating costs, but it can also be a wise investment if carefully implemented.

What skills are needed to run a candy store?

A candy store owner doesn’t need a business degree, but certain skills and experiences can increase the chances of that business becoming a success.

Knowledge of candy trends. A store owner will need knowledge of the types of candies that are most popular and that sell best. The foresight to predict upcoming trends, especially when it comes to holidays, can also ensure that a store is stocked with the candies that consumers will be looking for.

Design skills. An eye for aesthetics and design will help a store owner create attractive and eye-catching displays.

Customer service skills. Great customer service skills and a strong rapport with both kids and adults can help a store owner create positive customer experiences that encourage customers to return.

Candy-making talents. Some stores make the candy that they sell. If a store owner adopts this model, then previous candy-making experience is a must.

Creativity. From making new and exciting candies to coming up with the perfect arrangements, creativity is helpful in this industry.

Are there grants to start a candy store?

It’s extremely rare to find a grant to start a candy store. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.

Legitimate federal grants can be found at Grants.gov, and you can check on your state’s economic development office to see if they have any grants available.

What is the NAICS code for a candy store?

The NAICS code for a candy store is 445292.

The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.

Related: What is a NAICS code?

Resources:
American Sugar Alliance
National Confectioners Association

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