Yahoo Finance 25 Most Profitable Food Business Ideas
In this article, we will look at the 25 most profitable food business ideas. You can skip our detailed analysis of the food industry and head over directly to the 7 Most Profitable Food Business Ideas.
The United States food service industry is segmented by service type, outlet, and location. The service type segmentation includes cafes, cloud kitchens, quick service restaurants, and full service restaurants. Outlet segmentation divides restaurants into chained and independent outlets. Location segmentation divides restaurants by leisure, lodging, retail, standalone, and travel.
Furthermore, according to Mordor Intelligence, recent market trends in the industry revolve around new product offerings and accessibility.
For example, there is an influx of international cuisines such as Korean barbecue. New offerings also take the form of reintroducing old classics. In addition, accessibility trends in the industry are revolving around simplifying the purchase experience through digitization. McDonald's Corp (NYSE:MCD), for example, is building a strong digital platform to simplify access and decrease service time. It's strategy revolves around amplifying contactless channels such as drive-through, and delivery through mobile phone applications.
The food service market in the United States is projected to grow at a cumulative average growth rate (CAGR) of 10.03% during the forecast period 2023-2028, as noted by Fortune Business Insights. The market was valued at $834.61 Billion in 2022 and projected to grow to $1.7 trillion by 2028. According to Fortune Business Insights, one of the driving factors of this upward trend in the fast food market growth is the shortage of time to cook meals at home and the growth of fast food chains. The organization also notes that the young population is the major consumer of fast food in the United States, as it is spending more on food outside the home.
However, despite a healthy projected growth rate, the quick-service food industry is still grappling with the economic challenges posed by inflation, and macroeconomic uncertainties. This is corroborated by the fact that in the last quarter of 2022, traffic in quick-service restaurants, in general, was comparatively low. The Q4, 2022 traffic was down by 4.2% compared to the same period in 2021.
Meanwhile, the average price was up by 16.2% in Q4, 2022, compared to Q4, 2021. However, the net sales of quick-service restaurants in quarter 4 of 2022 increased by 6.1% compared to the previous year’s last quarter. Since there is a decrease in traffic, the positive growth rate of sales is fueled by an increase in average check size because of increasing prices. If the traffic continues to fall, the revenue growth rate could decrease.
Major players in the industry, such as McDonald's Corp (NYSE:MCD) and Starbucks Corporation (NASDAQ:SBUX), are also adversely affected by the current economic landscape.
McDonald's Corp (NYSE:MCD) recently reported that people are cutting back on its fries, one of the world's most-sold fast food, and one of the greatest contributors to McDonald's Corp (NYSE:MCD)’s revenues. The increase in prices of McDonald's Corp (NYSE:MCD) products and the general rising inflation have made people more conscious of their spending. Customers are responding to economic challenges by ordering more and more value meals and cutting back on fries.
The uncertainty of macroeconomic conditions is also affecting the public sentiments on major stocks in the market. One such is Starbucks Corporation (NASDAQ:SBUX), which is one of the largest coffee house companies in the United States. The London Company, an investment management company, made the following comments about Starbucks Corporation (NASDAQ:SBUX) in their Q2, 2023 investor letter:
“Starbucks Corporation (NASDAQ:SBUX) – Sentiment on SBUX turned more negative in this uncertain macro environment with the impending return of student loan payments in the U.S. SBUX reported very strong results for the Jan-March quarter, but exercised caution by not raising guidance. SBUX is beginning to realize tailwinds from the re-opening of the Chinese economy, adding a buffer to growth and margins for the remainder of the year.”
Our list of the 25 profitable food business ideas does not contain a fine dining restaurant. This is because while a good fine dining restaurant generates substantial revenue, it has low profit margins, which vary from 2% to 6%. We believe that a profitable business should at least have a 9% profit margin, which is what we used as a filter in our list. This article focuses on profitable food business ideas that are either innovative or less capital-intensive to start.
Photo by Laust Kehlet on Unsplash
Methodology
We defined profitable businesses with a net margin of at least 9%. Then we looked for profitable food business ideas on public forums such as Quora and Reddit, four (1,2,3,4) authority sources, and one of our own sources: 20 Most Profitable Food Businesses in the World. Then, we used trusted sites like Step by Step Business and Fin Model Lab, among others, to determine the average net margin of each business. We also updated the net margins of our previous list of the most profitable food businesses according to our recent research. As tie-breakers, we used their ranking on our sources.
25 - Food Truck
Profit Margin - 9%
A food truck business gives a higher return on your investment, compared to a brick-and-mortar restaurant. The cost of starting a food truck depends on several factors, including whether you decide to buy or rent a truck. The initial startup cost ranges from $28000 to $115,000. A food truck business naturally also gives you greater mobility in terms of location and events you want to cover.
24 - Donut Shop
Profit Margin - 10%
Donuts are one of the most popular baked goods in the United States. You can choose to franchise some of the popular donut shops, such as Dunkin Donuts, or set up your own. The Dunikin Donut franchise fee ranges from $40,000 to $90,000, and you must have at least $125,000 in liquid capital. If you do not have the budget to set up a physical restaurant, you can sell your donuts online by establishing a delivery-only restaurant.
23 - Bar
Profit Margin - 10%
While not amongst the most innovative ideas for food business, setting up a Bar is less capital-intensive than setting up a fine dining restaurant. The startup costs vary from $110,000 to $850,000, depending on whether you rent or buy your location. You can also set up themed bars and later expand into dining services. However, setting up a pub or bar will require obtaining an alcohol license.
22 - Juice Bars
Profit Margin - 10%
Like a Donut shop, you have the choice to either set up your juice bar or buy a franchise of some of the well-known brands. The good news here is that franchise fees of most popular juice bar brands are comparatively lower. Booster Juice, for example, charges a franchise fee of 30,000 dollars.
21 - Gourmet Candy
Profit Margin - 10%
You can run an online gourmet candy shop and sell from your home, which will result in a greater margin. Alternatively, you can set up a candy shop that delivers an average profit margin of 10%. You can expect to spend anywhere between $6,500 to $21,000 to start a candy business. The cost would include candy-making equipment and ingredients. You can also search for local vendors and rebrand their products with your brand name.
20 - Baby Food
Profit Margin - 14%
The Baby food market is growing, and you can tap into it without setting up a physical store. However, you might need to rent a professional kitchen and purchase supplies. Baby foods are easy to make, but you need to be careful with the ingredients. You might also require certain state permits and licenses before you start selling baby food.
19 - Ready Made Meals
Profit Margin - 15%
The US meal prep industry has been growing by an impressive 19% annually since 2017. A meal prep business is one of the most profitable food business ideas from home, in which case you can get started for as low as $1000. However, if you decide to go a more large-scale route, you can expect to spend anywhere between $13,000 to $22,000. The startup cost includes the price of kitchen equipment and kitchen supplies.
18 - Food Gift Basket
Profit Margin - 20%
The costs of starting a food gift basket business can vary dramatically, depending on whether you are opening a brick-and-mortar storefront or selling online only. If you go the latter route, you can expect to start with a few thousand dollars. This business caters to the global personalized gifts market, which is worth $30.3 billion and is projected to reach $47.6 Billion by 2030, achieving a CAGR of 5.8%. You have the choice of outsourcing food items to vendors and focusing on the gifting aspect or making the food in-house. The 20% profit margin is for a brick-and-mortar store, and if you sell only online, you can command a greater profit margin.
17 - Pet Food Business
Profit Margin - 20%
The US pet food market was valued at $42.3 Billion in 2022 and is expected to grow at a CAGR of 3.9% till 2028, achieving a valuation of $53.8 Billion. On average, you can expect to spend $13,000 to start this business. The pet food business requires obtaining licenses depending on where you start and conduct your operations. In addition, you would need to submit your registration, licensing, and notification information to the FDA.
16 - Home Made Jam And Jellies
Profit Margin - 20%
Jams and jellies are some of the best homemade food business ideas. On average, a Jam production business costs $33,000 to start, per Starter Story. However, a home-based jam and jellies business can get started with only a few hundred dollars in investment. The advantage of this business is that you have the option to sell directly to the customer, or the local grocery store.
15 - Ice Cream Shop
Profit Margin - 25%
It is one of the most profitable food business ideas in 2023. The global ice cream market is projected to grow at a CAGR of 5.2% during the forecast period of 2022 to 2029. It was valued at $71.52 billion in 2021 and is expected to reach $104.96 billion by 2029, as noted by Fortune Business Insights. The startup cost of an ice cream shop can range from $25,500 to $192,000 depending on the property and equipment. The startup cost includes rent, security deposit, freezers, marketing expenses, equipment, and marketing costs.
14 - Cookie Business
Profit Margin - 30%
The cookie market is expected to increase by $22.4 billion by 2027, achieving a projected CAGR of 5.81% according to Technavio. If you want to get into the baked goods business, it can provide an easy foot in the door. According to the Step-by-Step Business, you can get started with as low as $4,550, making it one of the best food business ideas with small capital. The distribution channels you can use to sell your product are hypermarkets, convenience stores, and online retailers. Alternatively, you can sell your cookies directly to the customer through a website.
13 - Restaraunt Consultation Business
Profit Margin - 30%
If you have worked in a restaurant in a managerial capacity, you are a good fit for a restaurant consultation business. Alternatively, you can look for restaurant consultation courses, get certified, and start your business. Your greatest challenge at the start of the business would be to find clients and create credibility.
12 - Selling Speciality Cheese
Profit Margin - 30%
Consumers of specialty cheese are willing to pay a premium for special types of cheese that are not available easily in the market. The market was valued at $140.5 billion in 2022 and is expected to grow with a CAGR of 4.8% during the forecast period of 2023-2030, according to Market Research Future. As a specialty cheese shop, your greatest challenge would be to locate vendors that provide high-quality specialty cheese.
11 - Personal Chef Business
Profit Margin - 30%
The personal chef services market is expected to expand at a CAGR of 4.2% til 2033. It is expected to be worth $13 billion this year and reach a market valuation of $19.65 billion by 2033. If you want to start small and run a home-based personal chef business, you can start with as low as $2,000, where the majority of the investment will be utilized in building a website and marketing your services. For a home-based business, the profit margin will be much higher than 30%. If, however, you plan on renting a commercial kitchen, you can expect to spend around $5000.
10 - Gourmet Popcorn
Profit Margin - 30%
Gourment popcorn is one of the most profitable business ideas. Like the cookies and jam business, you can opt to sell your gourmet popcorn directly to the customer by selling online or setting up your store, or you can utilize retail channels such as convenience stores and supermarkets. On average, you can spend around $19,000 to start a popcorn business, based on data from Starter Story.
9 - Selling Hot Sauces
Profit Margin - 30%
The sauces market is projected to exhibit a CAGR of 5.41% during the forecast period of 2023 to 2027, increasing by $28.7 billion. On average, you can expect to spend around $7000 on your hot sauce business, but you can get started with as low as $3600.
8 - Cake Business
Profit Margin - 40%
Our 8th most profitable food business idea is the cake business. The global cake market is expected to grow at a CAGR of 3.59% from 2023 to 2030, reaching a market valuation of $61.27 billion by the end of this period, per Verified Market Research. This business has a steady revenue potential since cakes are bought all year round and have become a staple for celebrations. You can start a cake business from as low as $2000, which includes the cost of building a website, buying equipment, and running marketing campaigns.
Click to continue reading and see the 7 Most Profitable Food Business Ideas.
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Disclosure: none. 25 Most Profitable Food Business Ideas is originally published on Insider Monkey.