Data provided here comes from our team of experts who have been working on business plan for an ice cream shop. Furthermore, an industry specialist has reviewed and approved the final article.
Is running an ice cream shop profitable, and what is the expected income range for ice cream parlor owners?Let's check together.
Revenue metrics of an ice cream shop
How does an ice cream shop makes money?
An ice cream shop makes money by selling ice cream.
What special ice cream creations are available in ice cream shops?
Ice cream shops around the world offer a delightful array of special and creative ice cream creations that cater to various tastes. These include gourmet sundaes with layers of rich ice cream, velvety sauces, whipped cream, and indulgent toppings like crushed cookies, candies, and fresh fruit.
Some shops offer customizable ice cream sandwiches where customers can choose their cookie and ice cream flavors for a unique treat.
Another popular option is rolled ice cream, where liquid ice cream base is poured onto a freezing surface, mixed with mix-ins like chocolate chips or fruit, and then skillfully scraped into rolls before being adorned with drizzles and sprinkles.
For those seeking a nostalgic twist, there are inventive milkshake combinations featuring unconventional ingredients such as brownies, marshmallows, or even whole slices of cake.
Vegan and dairy-free options are also becoming more common, with innovative flavors crafted from coconut, almond, or oat milk bases, often infused with natural additives like matcha, lavender, or spicy chili for a surprising kick. And if you're feeling adventurous, some shops might even offer exotic selections inspired by international cuisines, like cardamom-infused ice cream topped with rose petals or black sesame ice cream paired with red bean paste.
Whether you're a traditionalist or an adventurous foodie, ice cream shops have a wide range of special creations to tantalize your taste buds and make every visit a delectable adventure.
What about the prices?
An ice cream shop typically offers a variety of products at different price points.
Prices can vary based on the type and size of the treat. Basic items like single scoops of ice cream or sorbet generally range from $2 to $5, depending on factors like the region's cost of living.
Double scoops might be priced around $4 to $7.
Specialty sundaes, with additional toppings like whipped cream, nuts, and syrups, can fall in the range of $5 to $9.
For more elaborate creations like banana splits or waffle bowl sundaes, prices could range from $6 to $10 or more. Ice cream cones, depending on size and type (regular, waffle, or dipped), may be priced from $3 to $6. Novelty items such as ice cream bars or sandwiches can cost around $2 to $4.
| Item | Price Range ($) |
|---|---|
| Single Scoop | $2 - $5 |
| Double Scoop | $4 - $7 |
| Specialty Sundae | $5 - $9 |
| Banana Split | $6 - $10+ |
| Ice Cream Cone | $3 - $6 |
| Novelty Item | $2 - $4 |
What else can an ice cream shop sell?
In addition to offering a delicious assortment of ice cream treats, ice cream shops can also enhance their revenue by:
- Hosting special ice cream-making workshops or flavor creation classes
- Allowing local dessert experts to use their space for sweet events
- Assisting customers in creating delightful ice cream combinations
- Organizing enjoyable ice cream-themed challenges or taste-testing competitions
- Renting out space for private ice cream parties or filming sessions
- Teaming up with local confectioneries for exclusive dessert collaborations
- Offering online tutorials and virtual ice cream experiences for remote customers
Who are the customers of an ice cream shop?
Customers of an ice cream shop can range from individuals looking for a quick treat to large groups looking for a special occasion dessert.
Which segments?
We've made many business plans for projects like this. These are the groups of customers we usually see.
| Customer Segment | Description | Preferences | How to Find Them |
|---|---|---|---|
| Children | Young kids and their families | Colorful and fun flavors, novelty treats | Partner with schools, playgrounds, kid-centric events |
| Teenagers | Adolescents and high school students | Bold and unique flavors, Instagram-worthy desserts | Social media platforms, local schools, malls |
| Health Enthusiasts | Individuals focused on health and fitness | Fruit-based, low-fat, and sugar-free options | Fitness centers, health expos, wellness communities |
| Couples | Young and mature couples | Romantic flavors, shareable portions | Restaurants, local events, date night promotions |
| Tourists | Visitors and travelers | Local and exotic flavors, souvenirs | Tourist hotspots, hotels, travel websites |
How much they spend?
In our comprehensive analysis of the business model, we observe that customers tend to spend between $5 to $10 per visit at a standard ice cream shop. This expenditure includes purchases of different varieties of ice creams, specialty flavors, sundaes, or even additional toppings.
Considering the frequency of purchases, we note that an average customer might indulge in these sweet treats around 3 to 4 times a month during summer months, with a significant reduction to perhaps once or twice a month during colder seasons. This pattern adjusts depending on local climate, location, and cultural habits around dessert consumption.
Calculating the estimated lifetime value of a typical customer, we must consider both seasonal changes and the potential for year-round sales. A rough estimate could place a regular customer's annual expenditure from $60 (12x5) to $480 (4x10x12), assuming they visit all year round.
Given these variables, we can approximate that a loyal customer would contribute around $270 annually in revenue to an ice cream shop. This estimation accounts for more frequent visits during summer and occasional cravings during the less busy months.
(Disclaimer: the figures presented above are generalized averages and might not precisely reflect the specific circumstances of your individual business. Factors such as location, customer preferences, and seasonal changes can significantly impact these numbers.)
Which type(s) of customer(s) to target?
It's something to have in mind when you're writing the business plan for your ice cream shop.
The most profitable customers for an ice cream shop tend to be families with young children.
This is because children often have a strong affinity for ice cream, and parents are willing to treat their kids to frozen treats, creating repeat business opportunities.
To target and attract this demographic, consider offering family-friendly promotions, such as discounts on kids' portions or special family combo deals. Creating a fun and welcoming atmosphere with colorful decor and play areas can also draw families in.
To retain them, focus on providing excellent customer service and ensuring a consistent, high-quality product. Loyalty programs, like punch cards for free treats after a certain number of visits, can incentivize repeat visits.
Additionally, engaging with customers through social media and email marketing to share updates, special offers, and events can help maintain their loyalty and keep them coming back for more ice cream delights.
What is the average revenue of an ice cream shop?
The average monthly revenue for an ice cream shop can range widely, typically falling between $2,000 and $15,000. We will explain this by considering three different types of ice cream businesses.
You can also estimate your specific revenue by using different assumptions, with our financial plan for an ice cream shop.
Case 1: A quaint little shop in a small town
Average monthly revenue: $2,000
This type of ice cream shop is perhaps a cozy, family-owned business in a small town, offering a limited range of traditional flavors. It relies mostly on local regular customers, with capacity peaks during summer months.
These shops don't usually offer many additional products like specialty desserts, shakes, or expansive toppings. The focus is primarily on single-serve ice cream scoops, with few or no seating arrangements.
Assuming an average expenditure of $3 per customer and around 20 customers a day, the sales would lead to $1,800 a month. Considering some minor additional purchases, we round up to $2,000 monthly revenue.
Case 2: A trendy spot in a city's commercial district
Average monthly revenue: $10,000
This ice cream shop would be in a busy urban area or a popular commercial district, attracting both locals and tourists. The establishment provides a stylish interior and perhaps some outdoor seating, offering a wide range of flavors, including seasonal and gourmet options, and the capacity to serve a large number of customers.
Beyond just ice cream, these shops might also sell related products such as milkshakes, sundaes, or ice cream cakes, and merchandise like branded T-shirts or reusable bowls.
Given the prime location and broader customer base, let's assume an average expenditure of $5 per customer with around 70 customers per day. This calculation leads to a monthly revenue of approximately $10,500. Rounded down for other variables, we estimate a comfortable $10,000.
Case 3: A high-end, innovative ice cream boutique
Average monthly revenue: $15,000
This business represents an upscale, innovative ice cream boutique in an affluent neighborhood or high-traffic tourist area. It's not just about serving ice cream; it's about offering a unique experience. Here, customers find exotic flavors, perhaps made from organic ingredients, or using liquid nitrogen for instant freezing.
The shop interior might feature chic, modern decor, with a sophisticated ambience. In addition to ice cream, there could be a line of premium products like vegan options, imported chocolates, and a selection of coffee and pastries, encouraging customers to spend more time and money.
With the high-end offerings, the average spend per customer could easily be around $10. If the shop attracts about 50 customers on an average day, this leads to $15,000 in monthly revenue.
These scenarios demonstrate the potential variability in revenue among different ice cream shops based on numerous factors including location, customer base, product offerings, and overall customer experience.
The profitability metrics of an ice cream shop
What are the expenses of an ice cream shop?
Operating an ice cream shop entails expenses such as purchasing ice cream inventory, rent or lease payments for the shop, staff wages, and marketing.
| Category | Examples of Expenses | Average Monthly Cost (Range in $) | Tips to Reduce Expenses |
|---|---|---|---|
| Rent and Utilities | Shop rent, electricity, water, gas | $1,500 - $4,000 | Consider a smaller space, negotiate rent, use energy-efficient appliances |
| Inventory | Ice cream ingredients, cones, toppings, packaging | $2,000 - $5,000 | Source wholesale, optimize inventory management, reduce waste |
| Employee Wages | Salaries, benefits, overtime | $1,500 - $3,500 | Efficient scheduling, cross-train staff, consider part-time employees |
| Marketing and Advertising | Local advertising, social media promotions | $500 - $1,500 | Focus on target audience, collaborate with other local businesses |
| Equipment and Maintenance | Ice cream machines, freezers, maintenance | $300 - $800 | Regular maintenance to extend equipment life, consider used equipment |
| Insurance | Liability insurance, worker's compensation | $200 - $500 | Shop around for insurance quotes, bundle policies for discounts |
| Point of Sale System | Hardware, software, maintenance | $50 - $150 | Choose cost-effective POS solutions, opt for cloud-based systems |
| Supplies | Napkins, spoons, cleaning supplies | $100 - $300 | Buy in bulk, minimize waste, reuse whenever possible |
| Taxes and Licenses | Business licenses, sales tax | $100 - $300 | Understand tax deductions, pay on time to avoid penalties |
| Bank Fees | Transaction fees, credit card processing | $50 - $200 | Negotiate credit card processing rates, choose banks with low fees |
| Miscellaneous | Repairs, unforeseen expenses | $200 - $500 | Set aside a contingency fund for unexpected costs |
When is a an ice cream shop profitable?
The breakevenpoint
An ice cream shop becomes profitable when its total revenue exceeds its total fixed and variable costs.
In simpler terms, it starts making a profit when the money it earns from selling ice cream and other products becomes greater than the expenses it incurs for ingredients, rent, equipment, salaries, and other operating costs.
This means that the ice cream shop has reached a point where it covers all its expenses and starts generating income; we call this the breakeven point.
Consider an example of an ice cream shop where the monthly fixed costs typically amount to approximately $15,000.
A rough estimate for the breakeven point of an ice cream shop would then be around $15,000 (since it's the total fixed cost to cover), or selling between 3,000 to 5,000 units of ice cream, assuming the price per unit ranges from $3 to $5. This calculation takes into account not just the fixed costs, but also the variable costs associated with producing each unit of ice cream, such as ingredients and packaging.
It's important to understand that this indicator can vary widely depending on factors such as location, size, product pricing, operational costs, and competition. A larger, more centrally located ice cream shop would obviously have a higher breakeven point than a smaller shop that does not need as much revenue to cover their expenses.
Curious about the profitability of your ice cream shop? Try out our user-friendly financial plan crafted for ice cream businesses. Simply input your own assumptions, and it will help you calculate the amount you need to earn in order to run a profitable business.
Biggest threats to profitability
The biggest threats to profitability for an ice cream shop can include seasonal fluctuations in customer demand, as sales tend to drop during colder months, making it essential to manage costs during off-seasons.
Additionally, rising ingredient and supply chain costs can squeeze profit margins, so price adjustments and efficient sourcing become crucial.
Intense competition within the local market might also lead to price wars or the need for heavy marketing spending to stand out.
Moreover, unexpected events like equipment breakdowns or health inspections could result in temporary closures, impacting revenue.
Lastly, maintaining high-quality customer service and product consistency is vital to retaining loyal customers, as negative reviews or reputation issues can harm long-term profitability.
These threats are often included in the SWOT analysis for an ice cream shop.
What are the margins of an ice cream shop?
Gross margins and net margins are critical financial metrics used to assess the profitability of an ice cream shop.
The gross margin represents the difference between the revenue from selling ice cream and related products, and the direct costs associated with creating those items. These direct costs could include ingredients, packaging, and direct labor used in the production of ice cream.
Essentially, it's the profit remaining after deducting the costs directly linked to producing and selling the ice creams, like ingredients, containers, and staff salaries for those involved in production.
Net margin, conversely, includes all the expenses the business incurs, covering indirect costs such as administrative expenses, marketing, rent, and taxes. This metric offers a more comprehensive insight into the ice cream shop's profitability by encompassing both direct and indirect costs.
Gross margins
Ice cream shops generally have an average gross margin in the range of 50% to 70%.
For instance, if your ice cream shop generates $15,000 per month, your gross profit would be approximately 60% x $15,000 = $9,000.
Let's illustrate this with an example:
Consider an ice cream shop that sells 1,000 cups of ice cream in a month, with each cup priced at $5, making the total revenue $5,000. The costs incurred for ingredients, production, and packaging amount to $2,000.
So, the gross profit for the shop would be $5,000 - $2,000 = $3,000. Consequently, the gross margin for the ice cream shop would be $3,000 / $5,000 = 60%.
Net margins
Typically, the average net margin for ice cream shops ranges from 15% to 30%.
In simpler terms, if your ice cream shop brings in $15,000 per month, your net profit, considering an average of 20%, would be around $3,000.
Continuing with our example:
Our ice cream shop, which earned $5,000 in sales, incurs additional expenses. These indirect costs, including rent, utilities, marketing, insurance, and miscellaneous services, could total $1,500.
After accounting for both direct and indirect expenses, the net profit of the ice cream shop would be $5,000 - $2,000 (direct costs) - $1,500 (indirect costs) = $1,500.
Therefore, the net margin for the ice cream shop would be $1,500 / $5,000, equating to 30%.
As a business owner, it's crucial to recognize that the net margin (vs. gross margin) presents a more accurate view of how much money your ice cream shop is truly earning, as it accounts for all operational costs and expenses.
At the end, how much can you make as an ice cream shop owner?
Now you understand that the net margin is the indicator to look at to know whether your ice cream shop is profitable. Essentially, it tells you how much money remains after all expenses have been paid.
The amount you will make depends greatly on your execution of business strategies and management of both the operational side and the customer service experience.
Struggling ice cream shop owner
Makes $500 per month
If you start a small ice cream shop, making choices such as opting for lower-quality ingredients, having inconsistent operating hours, ignoring customer preferences, and not investing in marketing, your total revenue might stall at around $3,000.
Furthermore, poor management of expenses means your net margin might not exceed 15%. In financial terms, this equates to earning a scant $450 (15% of $3,000) per month. In the business world of ice cream shops, this is a scenario you want to avoid.
Average ice cream shop owner
Makes $4,000 per month
Now, let's consider you decide to run a standard ice cream shop. You use decent-quality ingredients and maintain regular hours. You pay attention to the most popular flavors and perhaps introduce a few signature items. You also invest in local advertising.
Your efforts are somewhat rewarded, and you see a total revenue of up to $20,000. Managing your expenses allows you to secure a net margin of about 20%.
As a result, your monthly earnings as an average shop owner would be around $4,000 (20% of $20,000).
Exceptional ice cream shop owner
Makes $25,000 per month
As a dedicated owner, you're committed to the ice cream business and go the extra mile. You invest in high-quality organic ingredients and offer a wide range of flavors, including options for those with dietary restrictions. Your shop has an inviting ambiance, excellent service, and perhaps a play area for kids or a small cafe corner for adults.
You engage in active social media marketing, community events, and perhaps even get your products featured in local restaurants. With your hard work, total revenue could soar to $80,000.
You also keep a close eye on expenses, negotiate with suppliers, and regularly analyze financial statements to ensure maximum profitability, achieving a net margin of around 30%.
In this ideal scenario, the successful ice cream shop owner's monthly earnings could reach an impressive $24,000 (30% of $80,000).
Dream big, and this could be your reality! If you aim to be at the pinnacle of the ice cream business world, it all starts with a comprehensive, well-thought-out business plan for your ice cream shop.