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 might sound like a dream career. 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. It’s best to discover some unmet needs in your community that your ice cream shop could fulfill, but there are also plenty of opportunities to start a unique shop that can attract customers. Before you jump into this venture, though, take a few minutes to understand just what’s involved in starting a shop of your own.
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, or maybe you 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 decor 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.
According to IBIS World, the ice cream shop industry recently underwent a period of growth, and the industry is predicted to continue to grow in the coming years. From 2014 to 2019, the industry experienced 1.8% annual growth, and the number of businesses increased to 14,040. The number of employees also grew to 124,191. In 2019 alone, the industry brought in $5 billion in revenue.
That growth is due to multiple factors. During the same time period, the per capita sugar and per capita dairy consumption also increased, meaning more people indulged in desserts, like ice cream, than during previous years. The years 2014 through 2019 also saw an increase in disposable income. More consumers had the extra money necessary to buy fresh ice cream at shops, whereas they’d be more likely to buy cheaper ice cream gallons at the store when money is tight.
Many trends are changing the ice cream shop industry. According to Food Truck Empire, one of those major trends 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.
Shops can also 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 that make their own ice cream have an advantage in this area since they can make their own unique flavors. However, any shop can make a specialty sundae or shake that’s inspired by the local culture.
Most ice cream shops market to adults who may or may not have children. The target market of an ice cream stand has available disposable income and wants to indulge in a special dessert or snack, usually during the summer months. Tourists are often a primary target market, but shops also rely on local customers to help sustain them, especially if they remain open into the fall.
Checklist for Starting an Ice Cream Shop
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: 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 a bank 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 an ice cream shop, 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
Finding the perfect name for a business can be challenging. Not only does the name have to resonate with your customers, but it also has to be available to use.
Step 4: Select your Location
While most ice cream shops could benefit from a high-traffic location, like malls, parks, schools, etc. but sometimes the cost of rent is more than is sustainable. Shops in high-traffic retail locations will have higher rent costs, but the value they offer in terms of walk-in traffic and building public awareness of the business can help to offset this higher rent cost.
Related: Choosing a business location
Step 5: Register for Business Licenses and Permits
Every location will be different, but at a minimum, an ice cream shop will need specific licensing to be a food business (typically from the local health department) in addition to certification in food safety and sanitation. Along with licensing, there will be different regulations and regular inspections.
In addition, there are general business registrations that may be needed, such as a business license, sales tax permit, Employer Identification Number, and Occupancy Permit.
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 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 and food-related 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.
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
A great shop location will help to generate walk-in traffic, but most shops also rely on marketing to help reach potential customers. Marketing techniques may include an active social media presence, print advertising, and online advertising. Local food and ice cream competitions and festivals also offer a way for ice cream shops to connect with potential customers.
Every business is going to need a logo. Make a professional logo in no time with the free Canvaa logo maker!
Step 9: Get Business Insurance
There are several types of insurance to consider when starting an ice cream shop. A few of these include:
– General liability insurance helps protect the shop if any customers are ever hurt while on the property, like by a slip or a fall. This policy usually covers expenses like legal fees and medical bills.
– Commercial property insurance protects the shop in case its building, equipment, and is ever damaged in an event like a fire.
– Worker’s compensation insurance helps to cover expenses like medical bills or lost wages if an employee is ever hurt while working.
The cost to insure an ice cream shop will depend on many factors, and the shop’s location, the value of the building, the value of its equipment, and the number of employees can all affect the price. Requesting quotes from multiple insurance providers is the best way to get an idea of insurance costs and to find the policies that may be best for a shop. When comparing the quotes, pay attention to variables in the policies like coverage limits and exclusions, premiums, and deductibles.
Step 10: Hire Employees
Any ice cream shop will need at least a few employees to keep up with demand during busy times. Indeed reports that ice cream shop servers earn an average of $8 per hour. According to PayScale, ice cream shop general managers earn an average of $12 per hour.
Employee payroll is just one expense that comes with hiring help. An ice cream shop may also need to budget for workman’s comp insurance, paid time off, and even health insurance contributions for full-time staff.
Related: Hiring your first employee
Step 11: Set up an Accounting System
Setting up an accounting system 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.
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 an ice cream shop?
It can cost $50,000 or more to start an ice cream shop, but exact pricing will depend on many variables, including the shop’s size and location. If a business owner can rent or lease an existing ice cream shop that has gone out of business, they can save on the major expense of purchasing some equipment and renovating the space.
Some common startup costs for an ice cream shop include:
– Equipment like freezers, refrigeration, and shake machines
– Inventory for ingredients and cones
– Supplies like cups and spoons and cleaning supplies
– Working capital to cover the first few months of labor, rent, insurance, etc.
How much can an ice cream shop owner make?
Ice cream shop profits will vary depending on the shop’s size, location, and the presence of local competitors. Shops that can fulfill unmet needs in a community or develop a unique model, like offering specialized flavors or dairy-free options, stand the greatest chance of becoming profitable businesses.
Most ice cream shops are very seasonal 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. There are alternative products that could be sold during the winter months like ice cream cakes for birthdays, coffees, etc.
Diversifying your shop’s offerings can help to increase sales even during the off-season. Many ice cream shops also sell candy, 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.
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.
Are there grants to start an ice cream shop?
It’s extremely rare to find a grant to start an ice cream shop. 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 an ice cream shop?
The NAICS code for an ice cream shop is 722515.
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?