Start a gelato business by following these 9 steps:
You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your gelato business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
STEP 1: Plan your Business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How long it will take you to break even?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a gelato business?
Besides rent and employee salaries, owners will need to register their business and obtain all permits from both the state and local government. A health inspector will need to visit before approving the business, too. The total for these fees vary widely based on where you are and how much profit you expect to make, so the range can be anywhere from a several hundred dollars to up to $8,000 or more. Typically, you can expect to pay less if you're in a less desirable area.
Owners will need commercial insurance for things like workers' compensation and liability protection. Average annual commercial insurance costs for food-service small businesses are around $3,000, but each business is judged individually. Initial supplies are the gelato-making equipment (freezers, mixers, etc.), disposable plasticware, cash register and a display case. An attractive display case will cost between $5,000 to $7,000, and a 6-quart mixer will run you about $5,000. A basic cash register will only cost a few hundred, but you may want to invest in better technology which will put you closer to $1,000. Owners will need a computer to keep track of finances and schedules as well as tables and chairs. A nice table/chair set may be around $250.
Total you can expect to spend between $15,000 to $25,000 in start up costs.
What are the ongoing expenses for a gelato business?
Typically, an owner will have the following ongoing expenses:
- Equipment maintenance
- Employee salaries
- Ordering expenses
- Permit renewals
Who is the target market?
Owners need to attract a crowd who is willing to pay for a premium experience when they want a fast but delicious dessert. The ideal customer would be someone who lives near the store who will consistently look to your business as their go-to for quality treats. You may also want to attract those who primarily want a coffee shop, but with a bit of a twist.
How does a gelato business make money?
A gelato bar serves Italian-style ice cream to paying clients in a variety of forms (e.g., in shakes, cones, cups, etc.) Gelato bars may also offer other products, such as specialty coffee.
As owner, you will need to account for location costs (rent, inflation, etc.), employee salaries, and the cost of ingredients. They will then have to determine a price for each individual menu item that will cover these costs and allow for a profit. It is not recommended that a gelato bar try for a budget angle due to the cost and effort to make the products.
How much can you charge customers?
One general rule of thumb (which differs for each owner depending on where they operate) is to charge 3 to 4 times the cost of the raw ingredients. So if one scoop of gelato costs $.75, then the appropriate cost for a customer to pay might be around $3. The same can be said for specialty coffee drinks as well. A well-maintained shop with fancy amenities can allow you to charge even more.
How much profit can a gelato business make?
It's difficult to estimate as it really does depend on location and price points. In general, you can expect about a third of the budget to go towards raw ingredients and a third to go to employees. The rest will typically go toward equipment and rent costs.
How can you make your business more profitable?
One easy way is to upsell your customers to larger portion sizes, specialty flavors, extra espresso shots, etc. However, you can also expand into offering better coffee or more coffee options, as well as cakes, pastries, and other treats. Get more people hooked by opening up local stands at major events.
What will you name your business?
Choosing the right name is very important. Read our detailed guide on how to name your business. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your gelato business is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
Form Your LLC
Read our Guide to Form Your Own LLC
Check out the Top Business Formation Services from our friends at StartupSavant.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Recommended: Find the right bank for you, read our review of the Top 5 Banks for Your Small Business
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
State & Local Business Licensing Requirements
A gelato bar will need licensing from a local health department, which will vary from town to town. This is because ice cream parlors sell food; all establishments serving food are required to pass a health inspection.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
Furthermore, any business which sells food prepared on site may be randomly inspected by the local health department on a regular basis. These inspections will check for compliance with local health laws, typically related to prevention of food contamination.
- Tips for faring well on a health inspections can be found here.
In order to play music in a business setting, permission must be acquired from the composer or license holder. Typically, it is possible to obtain a “blanket” license allowing a businesses to play music owned by a large catalog of artists and recording studios. Such licenses can be obtained from Performance Rights Organizations, such as ASCAP or BMI.
Certificate of Occupancy
Businesses operating out of a physical location typically require a Certificate of Occupancy (CO). A CO confirms that all building codes, zoning laws and government regulations have been met.
- If you plan to lease a location:
- It is generally the landlord’s responsibility to obtain a CO.
- Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a gelato bar
- After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
- If you plan to purchase or build a location:
- You will be responsible for obtaining a valid CO from a local government authority.
- Review all building codes and zoning requirements for your business’ location to ensure your gelato bar will be in compliance and able to obtain a CO.
STEP 7: Get Business Insurance
Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.
There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.
Learn more about General Liability Insurance.
Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
How to promote & market a gelato business
The best way to promote your business is through word of mouth. To get people to the first batch of people coming in though, you'll likely have to do a Grand Opening, complete with free scoops and lots of advanced party planning. The more attention you can attract at the beginning, the more likely it is that excitement will continue long after you've cut the ribbon. You'll want to monitor the Yelp page carefully. The gelato bar website should be easy to navigate and have excellent content. Advertise to customers about company values too. For example, those willing to pay a few bucks more for a single scoop expect their ingredients to be sourced locally, sustainably, and responsibly.
How to keep customers coming back
The best way to retain customers is to deliver the best possible product and service at all times. The more attention put into every touchpoint between the business and the customer (including in-person, over the phone, and online), the more likely it is that customers will continue to spread the word about the gelato bar. Collect feedback about every aspect of the business from measures like surveys, reviews or conversations, and then adjust the business as need be.
STEP 9: Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Start A Gelato Business In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Is this Business Right For You?
Gelato started getting more attention in the late 1990s and really started to pick up steam in the early 2000s. It falls under the $14.3 billion a year ice cream industry, and recently experienced an uptick in sales. There is a distinct market trend showing customers want to pay more for premium ice cream treats like gelato.
What happens during a typical day at a gelato business?
Owners must hire the right staff, advertise their business, and find the best location to attract hungry crowds. A typical day may have the following to-do list:
- Order supplies
- Create a budget
- Perform hands-on customer service
- Schedule employee shifts
- Commission work for the company website
- Respond to customer concerns on feedback sites like Yelp
- Ensure all food and beverages are being made responsibly and up to company standards
Ordering must anticipate higher volumes of customers without wasting too much product. To a certain extent, an owner may be able to distance themselves from the actual production of the gelato, but it helps to have a full understanding of all sides of the business.
What are some skills and experiences that will help you build a successful gelato business?
Owners should have a lot experience in the food service industry, including customer service, production, and management. They should have a good understanding of what it takes to give customers a consistent experience no matter when they walk through the door. A formal education such as an MBA or culinary school will certainly help, but the real value lies in having a thorough understanding of how each employee works together to form a cohesive team that can produce and serve superior tasting gelato.
What is the growth potential for a gelato business?
From 2013 to 2014, the amount of people purchasing gelato increased by 247%, and has achieved modest gains since then. The amount of gelato purchased in stores and from neighborhood businesses is predicted to remain strong, however the overall trends do not necessarily point to growth spikes as high as were seen a few years ago.
The most successful shops are rooted in innovative flavors (e.g., toast and jam, olive oil) and standard dessert menu items (e.g., cakes, pies, specialty sundaes.) Gelato bars are most likely to do well in large cities where residents are always looking for a little novelty. As long as the business can change with the times, there should be plenty of room for growth.
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Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
What are some insider tips for jump starting a gelato business?
Start with a variety of flavors, and over time you can weed out ones that aren’t popular. Most people can read through up to 25 flavor names before they start to feel overwhelmed. Offer samples as though your business depends on it — because it does. Your job is to get customers hooked on a certain taste they can't find anywhere else. You may also want to shell out more money for employees who really know their way around customer service. New businesses will need to make a stellar first impression, and it will be hard to find employees willing to go the extra mile if you're only paying minimum wage.
How and when to build a team
Building a team is all about defining the core qualities of employees. Your employees should be able to work under extreme pressure, and they always be looking for ways to make customers happy. Even the most demanding and picky person can be won over by genuinely good customer service. The best time to build your team is right at the beginning, so you can form a core group of people who want to see through what they started.