Ask HN: Pre-selling for a Doughnut Start-Up

https://news.ycombinator.com/item?id=6088308

by alecbibat • 13 years ago

6 9 13 years ago

news.ycombinator.com

I'm interested in starting up a shop that sells home-made doughnuts and coffee. I want to pre-sell the concept to the community to quantify sales before we commit. Here are my thoughts:

1. Make the doughnuts at home and set up a website that takes delivery orders. (I'm worried about the legality of distributing a product made in an uninspected kitchen)

2. Make the doughnuts and sell them on campus. (I'm currently going to school here. We could donate profits to a student group.)

What are your thoughts? How can we pre-sell for food product?

jefflinwood• 13 years ago

Sell donuts from someone else's donut shop.

Just go to some random donut shop off campus, buy the donuts there for $7/dozen, and set up your web site or on-campus stand.

You don't have to say they are homemade, just see if people buy your donuts for whatever you plan to charge for them. If you break even, great, if you don't sell any, at least now you know.

alecbibat4• 13 years ago

I like this, but we also would want to take the pre-selling period as an opportunity to build the brand a bit.

And again, there are legal issues with food vending even if it's someone else's stuff.

mproud• 13 years ago

I may be the last person to offer advice based on experience (as I have none), but here’s whatever wisdom I can muster:

You should be careful about selling before you have a business license and such. Obviously this all depends on the country, state/province and city you live in. You should really research what is required to sell your product unless you wish to be shut down and/or pay fines and excess taxes. (A lawyer and/or accountant may be a very good idea here.)

Having someone else sell your goods may work, but you should still do your homework. You could get screwed over.

If you’re simply gauging interest, try to find ways to hawk your wares where you likely won’t be subject to regulations — like point #2 you suggest — and of course charity events like bake sales, church functions, or local fairs put on by small organizations, etc. If it’s starting to take off, consider talking with school administration about long term feasability (perhaps a poor chance, but it never hurts to try).

If you’re worried about putting down capital for a full shop, think small. What would it take to be a legally selling food truck? Even better may be finding a partner or two and splitting costs.

Or why do all the work yourself? Bakeries exist, so why not use their equipment and already established business connections? Apply or convince a bakery they need to hire you to bake and sell your doughnuts there.

alecbibat4• 13 years ago

Gauging interest is definitely the main goal for now, and it's seeming like the only way to do that without getting the full legal outfit first is selling for events like you mentioned.

Your last point is resourceful, but it also kind of goes against our market advantage of 'the only home-made doughnut location near campus'.

pyoung• 13 years ago

There was a 'bagel start up' in the SF area that got some press. They basically rented out a commercial kitchen and made NY style bagels, and then sold them to coffee shops and bakeries for re-sale. I believe that they closed up shop (although supposedly it wasn't for lack of profitability). Might be worth looking into their story.

dirktheman• 13 years ago

Selling food is hard, mind you! I used to run a catering business, and you have to deal with all kinds of food safetey regulations, hygiene codes, et al. Which is not a bad thing, because when someting's wrong with food, it can go bad pretty quick. Look at the school food incident in India. Unless you have a professional kitchen at home, you'd better rent licensed kitchen space somewhere. But then there's the matter of delivery and selling. How do you keep your doughnuts cool and your coffee warm?

Take the food truck example: it seems like a good idea since you see so many of them. But if you look on eBay you'll see a graveyard of food truck businesses that didn't make it. It's hard, it's complicated and it usually doesn't pay off running a food truck. I'm not saying it can't be done, but it's much, much more difficult than most people realize.

Second of all, legality. You can't just sell something for profit, at least where I live. Same goes for donating the profits to a student group, which would possibly make you a charity, but here you still need a license for that.

Lastly, there's the marketing point of view. What sets you apart from Dunkin Donuts or Krispy Kreme? They deliver too, in more than one way.

I'm not trying to discourage you, but I am giving you a warning. Selling food for profit is not an easy venture. Let me put it this way: if you cook up a web app and something goes wrong, you get angry users. If you cook up a bad batch of donuts, you get sick customers and massive liability suits.

If you go ahead with this: make sure you get all your bases covered. I was unpleasantly surprised how much time, money and bureaucracy it takes to run a food business. Some people are obviously doing okay, but to me it wasn't worth the risk/reward.

Good luck!

alecbibat4• 13 years ago

Thanks for the heads up!

From the marketing point of view I think we're pretty well set up. The closest major doughnut vendors are about a 45 minute drive away and the closest small doughnut shop is about 3 miles. We would be opening up a couple hundred feet from campus. (Although there are still grocers that sell doughnuts nearby.)

I think we could kill it, but then again I feel like I'm walking on especially thin ice with all the legal stuff; this is also an area I'm unfamiliar with and with a physical space to manage as well as employees, things could get messy.

Thanks for the advice, I'll make sure to do my research if I go through with it.

sharemywin• 13 years ago

Catering is a totally different business to a store. Retail is location, location, location.

Search google for: donut shop business plan, coffee shop business plan, catering business plan.

check out this link: http://www.ineedcoffee.com/07/coffeebusiness/

Also look at traffic counts to get a good feel for location.

Product market fit is tricky in food. MY family has been in pizza for years. My dad's won the columbus pizza bake off for both people's choice and judges in the same year. My brothers store has won the small competition for the same recipe. We have a great pizza recipe. I opened a store and in our first full year of business I did over 450k(Jan-Dec) opened in Sept. Still couldn't make a profit. Little caesers opened up and my sales went down about 15-20% for 2 years. And my brother's shop was the same way. Why because of their recipe no because it only takes a few people(that forgot how crappy their pizza is) that usually order to stop on the way for the kids because it's "hot n ready." Product market fit is a tricky bitch.

alecbibat4• 13 years ago

See, I THINK we would have a great product-market fit, and I KNOW the traffic is good for this particular location. I just want to see HOW good the fit and traffic are, namely if they're good enough to support a $3k/mo rent, employees, and a decent salary.

That's pretty awesome about your family's recipe, and a shame that a chain like that could decrease sales so much.

Ask HN: Pre-selling for a Doughnut Start-Up

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