Is a Donut Business Profitable? A Month of Real Numbers

A donut business can be profitable, but not because donuts are cheap to make, though they are: about 28 cents of dough, glaze, frying oil and a bag for a donut that sells for $2. It's profitable when enough donuts sell every morning to carry what a shop costs to open: bakers from 2 a.m., counter staff, rent and the fryer's gas, which are the same whether 300 donuts sell or 500. In the example below, a small shop selling 400 donuts and 120 coffees a day, six days a week, makes about $29,400 a month and keeps about $4,200 of it, 14% of sales, after paying everyone who works there. At 300 donuts a day it breaks even; at 500 it keeps about $8,500. Below is the month line by line, what moves the profit and what barely does, and a free calculator.

The short version

• A donut costs about 28 cents to make and sells for about $2; the ingredients are not the problem.
• Staff, rent and the other fixed costs are three-quarters of the costs, and they don't shrink on a slow day.
• So profit is a volume question: every extra donut sold adds about $1.63.
• The example shop breaks even at about 300 donuts a day, and keeps $4,200 a month at 400.
• Coffee matters: 120 cups a day bring in about $6,600 a month after their costs.
• Throwing out unsold donuts costs less than not having enough to sell.
• TaroStack costs every recipe and batch and records what's thrown out, by reason. More below.

A month at a small donut shop

Prairie Ring Donuts, a made-up donut shop in Omaha, Nebraska, I use in these examples, is open six days a week, 26 days a month. Two bakers start at 2 a.m., two people work the counter from 6 until 1, and the shop sells 400 donuts and 120 coffees a day:

That's 14.4% of sales, and it's on top of wages for everyone, the owner included if the owner is one of the bakers. Ingredients for donuts and coffee together are 17% of sales; staff alone are 40%, and staff and rent and the other fixed costs are three-quarters of what the shop spends. The $2.00 is an average across singles, dozens and specialty donuts. How a recipe's cost is worked out is in how to price baked goods.

What moves the profit, and what barely does

Volume moves everything. Each donut sold adds about $1.63: $2.00, less the 3% card fee and the ingredients for it and the 10% that doesn't sell. A hundred more a day is $4,243 more a month, with the same bakers and the same rent.

Waste, by contrast, barely moves the profit. Making 40 extra donuts a day that don't sell costs about $291 a month, because a donut is cheap. Running out at 10 a.m. costs every sale after it. So it pays to make a little more than you expect to sell, and the useful number to watch is not how much was thrown out, but which donuts were, and on which days. A waste log template records it in a minute at close.

The break-even

With the same coffee sales, the shop needs about 300 donuts a day to cover its costs: 301, in the calculator. Below it, every day loses money; above it, each donut adds $1.63. How the break-even point is worked out for any food business is in break-even point for a food business.

Before opening, the equipment, the build-out and the first months' working cash are the big numbers. This example pays for its equipment through a loan, about $1,100 a month, which is why it sits in the fixed costs.

Get the calculator

Download the donut shop profit calculator. Type your own shop into the shaded cells: donuts and coffees a day and their prices, what each costs you, how many extra donuts you make, card fees, days open, staff hours and wages, payroll taxes, and each fixed cost. It works out the month's sales, costs and profit, the profit as a share of sales, and the donuts a day to break even. It's an ordinary Excel file with no macros, and it works in Google Sheets, LibreOffice and Numbers.

Where this stops working

The calculator uses one average donut. A real shop makes a dozen kinds, each from its own dough, glaze or filling, and the cost of each moves with flour, sugar, oil and butter prices. Which donuts sell out by 9 and which are still in the case at close is in the bakers' heads, and the wholesale dozens for two cafés are on a sticky note by the fryer.

How TaroStack does it

TaroStack keeps the recipes, the batches and what happens to them.

Every donut costed. Each donut is a recipe, dough, glaze and toppings, with versions, and units convert: flour bought by the 50-pound bag, used by the gram. Recording the night's batches takes the ingredients off stock at what you paid, so the cost of each kind follows the price of butter.

What's thrown out, by reason. Unsold donuts go off as adjustments with their reason, reported by reason and item, so the kind that's always left at close shows up. The reorder list works in days of cover, so the oil and flour are there before the weekend.

And the wholesale dozens. Café orders are sales orders for their day, and margins are reported by product and by customer, so you can see whether the cafés pay their way.

Recipes, batches and margins by product and customer are on every plan, from $49 a month. The first 30 days are free, with no credit card. If you'd like a hand setting up, ask, and we'll do it with you.

Questions people also ask

What is the profit margin of a donut shop?

In the example, 14.4% of sales after every cost, staff included: about $4,200 a month on $29,400 of sales. Each donut sold leaves much more, about $1.63 of its $2.00, but the shop's staff and rent come out of that.

How many donuts does a shop need to sell to break even?

In the example, about 300 a day, six days a week, alongside 120 coffees. Your number depends on your rent, staff hours and prices; the calculator works it out.

How much does a donut cost to make?

In the example, about 28 cents for dough, glaze, frying oil and a bag. Staff time isn't in that figure; in a shop it's paid by the hour, whatever the number of donuts.

Is it better to make too many donuts or too few?

A few too many. In the example, 40 extra donuts a day cost about $291 a month; running out early loses every sale after it, at about $1.63 each.