At Slices Concession, we specialize in ice cream equipment. We also spend a lot of time helping new entrepreneurs open ice cream shops. We also spend our time taking apart and buying the equipment & machines from stores that went out of business. We couldn't help but ask ourselves...
Why Do Some Ice Cream Shops Fail?
Although many businesses are all happy smiles & customer service, you should never overlook the hard work going on behind the scenes when starting an ice cream business.
1. Bad Management
Bad management is usually the number one reason why ice cream shops fail. People fall into the trap of thinking that the business of ice cream is simple to run and that they can hire a minimum wage employee to run it. In reality, most stores require a skilled & experienced owner/operator or a very dedicated manager with years of experience to run the store.
Frozen dessert stores are like any other business. They need a good staff, adhere to government regulations, and consistently update your inventory. Underestimating the skills required to open an ice cream shop and run a business often leads to failure. Your store needs to be clean, streamlined, well-marketed, and adequately staffed. A strong management team is needed to implement and enforce these practices.
Customers like to come in and see owner-operators and enjoy the familiar faces. A successful manager or owner spends time welcoming customers & making sure they are well taken care of. Another important thing is making sure the store is clean & making sure employees are also taken care of.
2. Lack Of Capital
Like the saying goes "Money attracts Money", you can't drive down the road of success if you have no money for gas. Most people tend to open small ice cream shops or big fancy gelato stores with small budgets. When you're left with little money after opening a store you open yourself up to the risk of failing because if your store loses money for the first 6 months, how will you have the cash to keep it operating?
If you're trying to open an ice cream shop with a low budget, it might be best for you to save up more money first or change your business plan. There are many ways of doing this like choosing to lower your initial start up costs by financing your equipment or buying used instead of new equipment.
A myth that usually causes people to fail is believing that you will make money on your first day. This causes you to underestimate the amount of money you need, therefore possibly leaving you with no money after a couple of months. Every business, whether it's technology, ice cream, or marketing needs time & money to grow, and the lack of both can reduce your chances of surviving long enough to actually start generating profits.
3. Unrealistic Expectations
Unrealistic expectations will lead to disappointment every single time. People have especially big expectations from industries that sell products that have high profit margins. In the frozen dessert industry, your cost of good sold is 15-20% compared to the restaurant industry which is 30-35%.
People think: How could you not make money when your margins are that high? But they fail to realize that a frozen dessert store is just like any other business: it has fixed and variable costs which shouldn't be underestimated. You will run into trouble when you underestimate these costs.
Also remember that the average amount a customer spends per purchase in an ice cream store is a lot lower than an average customer spends at a restaurant. So even though profit margins are higher, you are selling less volume per customer plus your operating costs might be the same as a restaurant.
Wait, There's Still Hope!
This post wasn't written to dissuade you from owning your own frozen dessert store but rather to help you succeed! We encourage you to have high expectations, but we also want you to realize that your new business will take time to grow before you start to make a profit, but if you work hard you won't be disappointed.
If you need help with lowering your initial start up costs, feel free to Contact us for a free consultation.
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