top 6 reasons why donut shops go out of business
Typically it’s not a singular reason but multiple factors that contribute to the why donut shop businesses go out of business. There are many contributing aspects to building a successful business and below we address the 6 primary factors to include a case study that contributed to why a donut shop business went out of business.
1) Donut Shop Business Owners Not Professionally Trained In The Art Of Donut Making
2) Not monetizing the business
3) Selecting the Wrong Donut Shop Business Location
4) Not adhering to business hours
5) Not meeting community wants and needs
Case study #1
Most entrepreneurs who enter the donut business are not professionally trained in the art of donut making
To please repeat customers It is critical to offer a professionally made traditional, unique, gourmet, and fun line of donuts. Taking an all of the above approaches to please repeat customers.
If you plan on entering the donut shop business with donut premixes well then your donut business is predetermined for failure. Customers expect to experience unique donut varieties, flavors and specialty doughnuts more than ever these days. Moreover, It is critical to have a donut line 2nd to none to separate your donut business from the competition. In the above example, we have banana split yeast donuts for the kiddos and lemon meringue cake donuts for the adults complemented with specialty raised glazed donuts that are absolutely stunning in the display case.
Most entrepreneurs who enter the business do not know how to monetize the business
It is important to upsell and cross-sell related donuts with coffee and coffee drinks. Why offer only a mocha donut when you can offer a mocha latte as a special and combined both products together and rebrand the related products as a mocha delight.
Offering theme-based donuts and specialty donuts is a wonderful way to monetize the donut shop business. Considering a donut shop is essentially a bakery it only makes sense to offer donut s that match a community event or festival. In the below example, if you know there is a sporting event or motorcycle rally on the weekend why not offer theme-based donuts? Theme-based donuts can also be made to represent fanatics watching football games, soccer games, and baseball games.
In the above example we are utilizing edible inks and edible round fondant to promote a national football team. You are only limited to your imagination when creating theme based donuts i.e. Christmas doughnuts, happy birthday doughnuts, Valentine’s Day and office party cakes.
Other ways you can monetize the donut business:
Applied creativity is necessary in the donut business
- Offer Yeast Sweet Rolls and Pershing’s for the non-donut person or somebody who simply just wanting a good baked product
- Breakfast Sausage sandwiches will bring in a whole other clientele
- Ice Cream Donut Sandwiches
- Coffee and Espresso Drinks peanut butter and jelly
- Offer Donut Birthday Cakes for order
- Donut wholesale
- Establish a Grub Hub And Door Dash Sale Accounts
- Offer donut memorabilia promoting your donut shop
- Start building your email list through customer appreciation cards
Selecting the Wrong Donut Shop Business Location
Prior to selecting a location for a donut shop business it is critical to reflect back to the donut business model you initially intended to implement. Should the plan of action is to open multiple satellite locations and/or implement donut wholesale and/or implement a mobile donut concession truck? It only makes sense to have chosen a location that can accommodate an appropriate size kitchen in order to produce enough donut s to implement the donut business model.
Moreover, it’s important to have the ability to expand donut production operations such as initially installing an oversized exhaust whereby you can expand equipment as needed to match donut production needs.
Please note that one of the reasons donut shop businesses go out of business is that the business owner did not expand operations based on the donut business model. So essentially what I’m saying is “Stick to the plan”.
Another factor that contributes to the closure of donut shop businesses is a lack of due diligence in reference to site selection. A primary consideration to take into account when choosing a location is vehicle traffic counts. Vehicle traffic counts to give you the ability to assess customer capture rates based on industrial standards for donut shops and bakeries. Also is important to take into account visibility. End cap locations offer high visibility and will increase customer capture rates. Of course, a standalone and/or a location with a drive-through will maximize visibility and increase customer capture rates above 1% of overall vehicle traffic counts.
Not Open During Regular Business Hours
Not maintaining regular business hours is a primary reason donut shop businesses closed their doors. It is very difficult to gain a customer’s loyalty when the customer cannot rely on your set business hours. For some reason if you have an equipment breakdown and you cannot make the donuts and/or products-keep the doors open and offer the customer’s coffee and/or a related product rather than just closing and locking the door.
There is nothing more frustrating than when you take time out of your day to pick up your favorite donut or have a special outing with your family at the local donut shop only to arrive at the closed sign on the door.
Not Meeting Community Wants And Needs
I once had a client that was about to purchase an existing successful donut business. The client decided to build his own shop from the ground up because he/we were confident that by offering a drive-through service window and offering a premium gourmet donut line to include donut wholesale would define his business as a local donut authority. I wholeheartedly agreed because there was a lack of quality donut s available to the community. A year later the shop was open and the business was wildly successful offering donut , coffee, and breakfast sandwich lines. Our business model was to offer all fast-served food items because commuters were in a hurry going to work and could easily grab their favorite breakfast sandwich and coffee and donuts.
The issue was when he turned over his business to his silent partner and she decided to offer gourmet breakfast, lunch and dinner. This immediately extended the time customers had to wait in line at the drive-through to receive their coffee and donuts. This did not meet community needs for fast-serve food items.
Also the new owner implemented donut premixes in order to prepare basic cake and yeast donut s and canceled the donut wholesale accounts originally acquired by the previous owner. And this action did not meet community wants. This was a mistake because the customer base was already accustomed to gourmet specialty donut s.
Although the business continued to thrive the overall business could have been much more successful if they had focused on community wants and needs because there were already many established restaurants offering a wide variety of lunches and dinners. Then the unthinkable – Covid crippled the restaurant industry. If the new owner had stuck with the original business model of the donut drive-through offering fast-serve food items and continued the business model of providing donut wholesale to convenience stores, grocery stores, hotels, motels the business would be open today. The business in question did not meet community wants and needs and ultimately closed its doors for business.
The moral of the story here is. If the community has a specific want, then provide it to them. If the community has a specific need, then offer the service but do not try and reinvent the wheel.
I had another client with a phenomenal vision of creating a non-GMO donut line offering healthier donuts. He contacted me late into the developmental process as he had already secured a location with an exhaust hood in place. The business buckled and closed within 3 months.
Let's take a closer look at why a donut shops go out of business
A. The location was previously a donut shop business that was run into the ground with bad management and the business offered Safeway-style donuts prepared with donut premixes. That said it is very difficult to reacquire the existing customer base that had been lost due to bad management and less-than-desirable donuts.
B. Secondly, the location chosen offered limited site visibility. I believe this is self-explanatory.
C. No extensive marketing plan in place outside of social media. It is critical to promote a new donut shop business via personalized postcards delivered within a 5-mile radius of the new business to invite people within the community to visit and experience the local donut shop products and services.
D. The owner did not monetize the donut business.
And lastly, there had not been a foot traffic count conducted to determine industrial standard customer capture rates. This is critical to determining whether or not a site is feasible for a specific business based on industrial standards for a donut shop/bakery
I highlighted the above issues to the owner however he was already obligated because the lease was signed and contractual contracts were in place for the contractors to complete their scope of work. If he had hired a professional donut business consultant the above issues would have been addressed ahead of time and I am confident the said business would be open for business today.