23 data to include in the business plan of your ice cream shop

This article was written by our expert who is surveying the industry and constantly updating the business plan for an ice cream shop.

Our business plan for an ice cream shop will help you build a profitable project

Ever pondered what the ideal cost of goods sold (COGS) percentage should be to ensure your ice cream shop remains sweetly profitable?

Or how many scoops you need to sell per hour during a scorching summer afternoon to meet your revenue goals?

And do you know the optimal labor-to-sales ratio for a bustling ice cream parlor?

These aren’t just nice-to-know figures; they’re the metrics that can make or break your frozen treat business.

If you’re crafting a business plan, investors and lenders will scrutinize these numbers to gauge your strategy and potential for success.

In this article, we’ll explore 23 crucial data points every ice cream shop business plan needs to demonstrate you're prepared and poised to thrive.

Ice cream shops should aim to keep ingredient costs below 25% of revenue to maintain profitability

Ice cream shops should aim to keep ingredient costs below 25% of revenue to maintain profitability because it ensures a healthy balance between expenses and income.

By keeping ingredient costs low, shops can allocate more funds to other essential areas like staff wages and marketing efforts, which are crucial for business growth. Additionally, maintaining a lower cost percentage allows for a buffer against fluctuating ingredient prices, which can vary seasonally or due to supply chain issues.

However, this percentage can vary depending on the type of ice cream shop and its business model.

For instance, a shop that focuses on premium, artisanal flavors might have higher ingredient costs due to the use of high-quality ingredients, but they can offset this with higher pricing. Conversely, a shop that sells more standard flavors in bulk might achieve lower ingredient costs, allowing them to maintain profitability even with lower prices.

Staffing costs should ideally range between 15-25% of total sales due to lower labor intensity compared to full-service restaurants

In an ice cream shop, staffing costs should ideally range between 15-25% of total sales because the business model typically involves lower labor intensity compared to full-service restaurants.

Ice cream shops often require fewer staff members since the service is generally self-serve or counter-based, which reduces the need for a large team. Additionally, the preparation process for ice cream is usually simpler and quicker, further minimizing labor requirements.

However, this percentage can vary depending on factors such as location and customer volume.

For instance, a shop in a high-traffic tourist area might need more staff to handle increased demand, potentially raising staffing costs. Conversely, a shop in a quieter neighborhood might operate efficiently with fewer employees, keeping staffing costs on the lower end of the spectrum.

Seasonal fluctuations can lead to a 30-50% variance in sales, so budget accordingly for off-peak months

Ice cream shops often experience significant seasonal fluctuations in sales, with a potential 30-50% variance, which is why it's crucial to budget for off-peak months.

During the warmer months, people are more inclined to enjoy cold treats, leading to a surge in sales. Conversely, in colder months, the demand for ice cream typically drops, resulting in lower revenue.

This pattern can vary depending on the shop's location and target market.

For instance, an ice cream shop in a tourist-heavy area might see more consistent sales year-round due to a steady influx of visitors. On the other hand, a shop in a region with harsh winters might experience more pronounced dips in sales during those months.

The average turnover rate for ice cream shop staff is around 60%, necessitating a focus on efficient training programs

The average turnover rate for ice cream shop staff is around 60%, which means that these businesses need to focus on creating efficient training programs to keep operations running smoothly.

One reason for this high turnover is that many ice cream shop employees are seasonal workers, often students who only work during the summer months. Additionally, the job is typically seen as entry-level, leading to employees leaving for higher-paying opportunities as they gain experience.

Because of this, ice cream shops must ensure that their training programs are both quick and effective to minimize disruptions.

However, turnover rates can vary depending on factors such as location and management style. Shops in tourist-heavy areas might experience even higher turnover, while those with strong management and a positive work environment might see lower rates.

60% of ice cream shops fail within the first three years, often due to poor location choice and seasonality issues

Many ice cream shops struggle to survive beyond three years, with a significant 60% failure rate, primarily due to poor location choice and seasonality issues.

Choosing the right location is crucial because an ice cream shop needs to be in a high-traffic area to attract enough customers. If the shop is situated in a low-visibility area or a place with limited foot traffic, it can severely impact sales and lead to failure.

Seasonality also plays a major role, as ice cream sales tend to drop during colder months, making it challenging to maintain consistent revenue throughout the year.

However, the success rate can vary depending on specific factors such as the shop's ability to diversify its offerings, like adding hot beverages or pastries during winter. Additionally, shops that invest in strong marketing strategies and build a loyal customer base can better withstand these challenges and improve their chances of long-term success.

Shops should aim to reach a break-even point within 12 months to ensure long-term viability

Ice cream shops should aim to reach a break-even point within 12 months to ensure their long-term viability.

Achieving this milestone quickly helps cover initial startup costs and indicates that the business model is sustainable. It also provides a buffer against seasonal fluctuations in demand, which are common in the ice cream industry.

Failing to break even within a year might suggest that the shop is struggling to attract enough customers or manage its expenses effectively.

However, this timeline can vary depending on factors like location and market competition. For instance, a shop in a tourist-heavy area might break even faster due to higher foot traffic, while one in a less populated area might take longer.

Profit margins on toppings and add-ons can reach 70-80%, making them crucial for boosting average ticket size

In an ice cream shop, toppings and add-ons often have profit margins of 70-80%, making them essential for increasing the average ticket size.

This is because the base cost of these items is relatively low compared to the price customers are willing to pay for them. For example, a handful of sprinkles or a drizzle of chocolate sauce costs the shop only a few cents, but customers might pay an extra dollar or more for these enhancements.

By offering a variety of toppings, shops can encourage customers to personalize their orders, which not only enhances the customer experience but also increases the overall sale.

However, the profitability of these add-ons can vary depending on factors like location and customer demographics. In areas with higher disposable income, customers might be more willing to splurge on premium toppings, whereas in other locations, the focus might be on offering more affordable options to maintain volume sales.

Prime cost (ingredients and labor) should stay below 50% of revenue for optimal financial health

Keeping the prime cost, which includes ingredients and labor, below 50% of revenue is crucial for an ice cream shop's financial health because it ensures that the business can cover other expenses and still make a profit.

In an ice cream shop, ingredients like milk, cream, and flavorings, along with labor costs, are significant expenses that need to be managed carefully. If these costs exceed 50% of revenue, it can be challenging to cover other necessary expenses such as rent, utilities, and marketing, which are essential for the shop's operation and growth.

By maintaining a prime cost below 50%, the shop can allocate funds to improve the business, such as investing in better equipment or expanding product offerings.

However, this percentage can vary depending on specific circumstances, such as the shop's location or the target market. For instance, a shop in a high-rent area might need to keep prime costs even lower to maintain profitability, while a shop targeting a premium market might have higher ingredient costs but can charge more for their products, allowing for a slightly higher prime cost percentage.

Allocate 1-2% of revenue annually for equipment maintenance, especially for freezers and mixers

Allocating 1-2% of revenue annually for equipment maintenance is crucial for an ice cream shop because it ensures that essential machinery like freezers and mixers operate efficiently and reliably.

These machines are the backbone of the business, and any downtime can lead to significant revenue loss and customer dissatisfaction. Regular maintenance helps in preventing unexpected breakdowns and extends the lifespan of the equipment.

However, the exact percentage of revenue allocated can vary depending on factors such as the age of the equipment and the volume of business.

For instance, newer equipment might require less maintenance, allowing for a lower percentage allocation, while older machines might need more frequent attention. Additionally, shops with higher sales volumes might allocate a larger percentage to ensure their equipment can handle the increased demand without issues.

A successful ice cream shop should turn over inventory every 5-7 days to ensure freshness and minimize waste

A successful ice cream shop should turn over inventory every 5-7 days to ensure freshness and minimize waste.

Ice cream is a perishable product, and maintaining its quality is crucial for customer satisfaction. If inventory sits too long, it can lead to freezer burn and a decline in taste and texture.

By turning over inventory regularly, shops can also avoid the financial loss associated with unsold, expired products.

However, this turnover rate can vary depending on factors like location and season. For instance, a shop in a high-traffic tourist area might need to restock more frequently, while a shop in a quieter neighborhood might adjust its inventory turnover to every 7-10 days during off-peak seasons.

It's common for ice cream shops to lose 2-4% of revenue due to theft or inventory shrinkage

Ice cream shops often experience a 2-4% revenue loss due to theft or inventory shrinkage because of the nature of their business.

These shops typically handle a high volume of small, easily consumable items, making it easier for both employees and customers to engage in petty theft. Additionally, the perishable nature of ice cream means that inventory can be lost due to spoilage, which is sometimes inaccurately recorded as shrinkage.

Moreover, the fast-paced environment of an ice cream shop can lead to inaccurate inventory tracking, further contributing to shrinkage.

However, the extent of revenue loss can vary depending on factors such as the size of the shop and the effectiveness of its inventory management systems. Shops with more robust systems and employee training programs tend to experience lower rates of shrinkage, while smaller or less organized shops may see higher losses.

Rent should not exceed 8-12% of total revenue to avoid financial strain, especially in high-traffic areas

Rent should ideally be between 8-12% of total revenue for an ice cream shop to maintain financial health.

In high-traffic areas, rent can be a significant expense, so keeping it within this range helps ensure that the shop can cover other essential costs like ingredients and staffing. If rent exceeds this percentage, it can lead to financial strain, making it difficult to invest in marketing or equipment upgrades.

However, this percentage can vary depending on factors like location and competition.

For instance, in a tourist-heavy area, higher rent might be justified if the increased foot traffic leads to higher sales. Conversely, in a less busy area, keeping rent low is crucial to ensure that the shop remains profitable even with lower customer volume.

Upselling premium cones or additional scoops can increase average ticket size by 15-25%

Upselling premium cones or additional scoops can significantly boost the average ticket size in an ice cream shop by 15-25%.

When customers are offered a choice to upgrade to a premium cone or add an extra scoop, they often perceive it as a small indulgence, which makes them more likely to spend a bit more. This strategy works well because the incremental cost of these upgrades is relatively low for the shop, while the perceived value to the customer is high.

However, the effectiveness of upselling can vary depending on factors like customer demographics and the shop's location.

For instance, in a tourist-heavy area, customers might be more willing to splurge on premium options, whereas in a local neighborhood, regulars might be more price-sensitive. Additionally, the time of year can also play a role; during summer, when ice cream demand is high, customers might be more open to trying new flavors or combinations, further increasing the likelihood of successful upselling.

The average profit margin for an ice cream shop is 5-8%, with higher margins for artisanal or specialty shops

The average profit margin for an ice cream shop is typically between 5-8% due to various operational costs and market factors.

One of the main reasons for this range is the cost of ingredients, which can be significant, especially if the shop uses high-quality or organic products. Additionally, overhead costs such as rent, utilities, and labor can further eat into profits, making it challenging to achieve higher margins.

However, artisanal or specialty ice cream shops often enjoy higher profit margins because they can charge premium prices for unique flavors and handcrafted products.

These shops often attract a niche market willing to pay more for a distinctive experience and quality, allowing them to offset higher production costs. In contrast, a standard ice cream shop might rely on volume sales to maintain profitability, which can be more challenging in a competitive market.

Average check amount should grow by at least 2-4% year-over-year to offset rising costs

In an ice cream shop, the average check amount needs to grow by at least 2-4% year-over-year to keep up with rising operational costs.

These costs include things like ingredient prices, employee wages, and utilities, which tend to increase over time. If the average check amount doesn't grow, the shop might struggle to maintain its profit margins.

However, the exact percentage increase needed can vary depending on specific factors like location and customer base.

For instance, a shop in a high-cost urban area might need a higher increase compared to one in a rural setting. Additionally, if a shop introduces premium products or experiences a surge in demand, it might naturally see a higher average check amount without needing to adjust prices as much.

Ideally, an ice cream shop should maintain a current ratio (assets to liabilities) of 1.5:1

Ideally, an ice cream shop should maintain a current ratio of 1.5:1 because it indicates a healthy balance between its current assets and current liabilities.

This ratio suggests that the shop has enough resources to cover its short-term obligations while still having a cushion for unexpected expenses. A ratio of 1.5:1 is often seen as a sweet spot, providing a balance between liquidity and operational efficiency.

However, this ideal ratio can vary depending on specific circumstances such as seasonal fluctuations in sales.

For instance, during peak summer months, an ice cream shop might experience higher sales, allowing it to operate with a slightly lower ratio. Conversely, in the off-season, maintaining a higher ratio might be necessary to ensure the shop can meet its obligations despite reduced income.

Effective menu design can boost revenue by 8-12% by highlighting high-margin flavors and combinations

Effective menu design can significantly boost an ice cream shop's revenue by 8-12% by strategically highlighting high-margin flavors and combinations.

By using visual cues like bold fonts or colorful highlights, customers are naturally drawn to these profitable options. This subtle guidance encourages them to choose items that are more lucrative for the business, without feeling pressured or overwhelmed.

Additionally, a well-designed menu can simplify decision-making by clearly presenting popular combinations that customers might not have considered.

However, the effectiveness of this strategy can vary depending on factors like customer demographics and local preferences. For instance, a shop in a tourist area might benefit more from highlighting unique, exotic flavors, while a neighborhood shop might see better results by promoting family-friendly options.

A shop should have 0.3-0.5 square meters of preparation space per customer to ensure efficiency

In an ice cream shop, having between 0.3-0.5 square meters of preparation space per customer is crucial for maintaining efficiency.

This range ensures that staff have enough room to move around and prepare orders without bumping into each other, which can slow down service. Additionally, it allows for the proper organization of ingredients and equipment, which is essential for quick and accurate order fulfillment.

However, the specific space requirement can vary depending on factors like the shop's menu complexity and peak customer volume.

For instance, a shop offering a wide variety of toppings and customizations might need more space to accommodate the extra ingredients and tools. Conversely, a shop with a simpler menu might manage with less space, as the preparation process is more streamlined.

Health inspection scores can directly impact foot traffic and should stay above 95%

Health inspection scores are crucial for an ice cream shop because they directly influence customer perceptions of cleanliness and safety.

When scores are above 95%, it signals to customers that the shop maintains high standards, which can increase foot traffic and boost sales. Conversely, a score below this threshold might deter potential customers, as they may associate it with poor hygiene and potential health risks.

In the competitive world of food service, maintaining a high score is essential for building trust and a positive reputation.

However, the impact of these scores can vary depending on the shop's location and customer base. In areas with a high concentration of health-conscious consumers, even a slight dip in scores can significantly affect business, while in other areas, customers might be more forgiving if the shop has a strong local reputation or unique offerings.

Shops in tourist-heavy areas often allocate 2-4% of revenue for local partnerships and promotions

Shops in tourist-heavy areas, like ice cream parlors, often allocate 2-4% of their revenue for local partnerships and promotions to attract more customers and enhance their visibility.

In bustling tourist spots, competition is fierce, and standing out is crucial for success. By investing in local partnerships, such as collaborating with nearby attractions or events, ice cream shops can tap into a steady stream of tourists who are already in the area.

Promotions, like offering discounts or special flavors, can entice tourists to choose one shop over another, especially when they are looking for a quick treat.

However, the percentage of revenue allocated can vary depending on factors like the shop's size, location, and the seasonal influx of tourists. For instance, a shop in a prime location with high foot traffic might spend less on promotions because its visibility is already high, while a shop in a less obvious spot might need to invest more to draw attention. By strategically using a portion of their revenue for these efforts, ice cream shops can effectively increase their customer base and boost sales in a competitive market.

Digital marketing should take up about 2-4% of revenue, focusing on social media and local SEO

For an ice cream shop, allocating about 2-4% of revenue to digital marketing is a strategic move to effectively reach local customers and boost sales.

Focusing on social media allows the shop to engage with the community, share promotions, and showcase new flavors, which can drive foot traffic. Meanwhile, investing in local SEO ensures that the shop appears in search results when potential customers are looking for ice cream nearby, increasing visibility and attracting more visitors.

This percentage can vary depending on factors like the shop's location, competition, and target audience.

For instance, a shop in a highly competitive area might need to spend more to stand out, while one in a smaller town might achieve the same results with less. Additionally, if the shop targets a younger demographic, a stronger emphasis on social media might be necessary to capture their attention.

Seasonal flavor rotations can increase sales by up to 20% by attracting repeat customers

Seasonal flavor rotations can boost sales by up to 20% because they create excitement and encourage customers to return for new experiences.

By introducing limited-time flavors, an ice cream shop taps into the customer's fear of missing out, which can drive them to visit more frequently. Additionally, these seasonal offerings can attract new customers who are curious about the unique flavors, further increasing foot traffic.

Moreover, regular customers are likely to become repeat customers when they know that their favorite shop is constantly offering something new and exciting.

However, the impact of seasonal flavors can vary depending on factors like location and customer demographics. For instance, a shop in a tourist-heavy area might see a higher increase in sales due to the novelty factor, while a shop in a small town might rely more on local customer loyalty and word-of-mouth. Understanding these nuances allows ice cream shops to tailor their flavor rotations to maximize their appeal and effectiveness.

Establishing an ingredient cost variance below 4% month-to-month is a sign of strong management and control.

Establishing an ingredient cost variance below 4% month-to-month in an ice cream shop is a sign of strong management and control because it indicates that the business is effectively managing its resources and maintaining consistency in its operations.

In the context of an ice cream shop, ingredient costs can fluctuate due to factors like seasonal availability and supplier pricing changes. By keeping the variance below 4%, the shop demonstrates its ability to adapt to these changes without significantly impacting its cost structure.

This level of control suggests that the shop has implemented effective inventory management practices, such as accurate forecasting and efficient ordering processes.

However, the acceptable variance can vary depending on specific cases, such as the size of the shop or the variety of flavors offered. For instance, a shop with a wide range of flavors might experience slightly higher variances due to the complexity of managing diverse ingredients, while a smaller shop with a limited menu might maintain even tighter control over costs.