Is A Cookie Business A Good Idea?
“These chocolate chip cookies are amazing… you should sell them!” If I had a dollar for every time someone told me that, I probably wouldn’t need to sell them. With everyone raving about my cookies, you might excuse me for thinking that they would make a great business. But is it true? Am I destined to follow in the footsteps of Mrs. Fields?
More Than One Cookie In The Jar
As it turns out, I’m not alone. I think a large number of cottage food operations get started when family and friends tell them that they “need to sell so-and-so”. After studying the cottage food industry for a number of years, I’ve learned that custom cakes make some of the most lucrative CFOs. I always assumed that they also represented the largest percentage of CFOs, but I was wrong. When I recently analyzed over 150 of the businesses listed on this site, I was somewhat surprised by the numbers:
|Category||Includes||# of CFOs|
|Bread||breads, muffins, bagels, donuts, tortillas||71|
|Cake||cakes, cupcakes, cake pops||91|
|Candy||candies, chocolate, brittles, fudge, caramels||58|
|Condiments||sauces, syrups, honey, nut butters, ketchup, mustard, oils, vinegars||14|
|Dry Goods||mixes, seasonings, herbs, coffee, tea, pasta, cereal||26|
|Pastries||pies, tarts, cones, empanadas||20|
|Preserves||jams, jellies, fruit butters, pickles, fermented foods||52|
|Snacks||granola, health bars, nuts, seeds, dried fruit, crackers, pretzels, popcorn||44|
|Sweets||cookies, brownies, dessert bars||100|
From that data, we can see that about two-thirds of CFOs listed on this site sell items that fall under “sweets”, and as I recall, at least 98% of those sell cookies. It’s true that CFOs can list themselves in multiple categories, and a few fall into every category. However, about a third of those cookie businesses do not also sell cake, which tells me that a large percentage (about 20%) of CFOs have a focus on cookies. In fact, a number of CFOs have the word “cookie” in their name.
Heating Up The Oven
Here are some of the reasons I wanted to start a cookie business:
- People tell me they love them
- Store-bought cookies are terrible
- There is very little competition in the single-serving cookie space
- There are ice cream parlors and cupcakeries, but who specializes in cookies?
However, time and time again, I have seen cookie businesses falter. Many CFOs have told me that they “don’t do cookies anymore”. A number of them have said that their business only took off when they switched to cakes. So many of these stories rolled in that I started to wonder if my chocolate chip cookie business would be so great after all.
Why Cookie Businesses Fall Flat
At one point in time, it seemed like nothing could prevent my cookies from selling. Ultimately those who have “been-there-done-that” have knocked some sense into me, and I’ve learned some of the reasons why cookies aren’t awesome:
1. They are ticking time bombs
My cookies are soft, chewy, and delicious… for about a day or two. This isn’t a problem in my household, as they usually disappear quickly, but in business, poor shelf-life is a big problem.
2. They are labor and time-intensive
I take a lot of steps to make sure my cookies come out just right. Between mixing, rolling, baking, cooling, and packaging, I can make 3 dozen cookies in an hour. I could do even better by making multiple/larger batches, but if I do, I better be sure I’m selling them all, considering point #1. That many cookies per hour might seem reasonable, until you realize…
3. They don’t have a high perceived value
Sure, the chocolate chip cookies at your local grocery store could make good air hockey pucks, but you can get 3 dozen of them for five bucks! Like it or not, customer’s perceptions aren’t drastically higher than this. Here’s a challenge: the next time you think about telling someone they should sell their delicious cookie, imagine yourself standing in a farmers market tasting a sample — would you pay $2 for one? What about $20 for a dozen? Suddenly you start to recall that you can buy a dozen donuts for under $10.
All of these factors often lead to one thing: little to no profit. The farmers market closes and you still have 4 dozen cookies unsold? You’re eating those losses in more ways than one.
Sampling The Market
Let’s say you bring 240 cookies (20 dozen) to the market and sell them all over the course of 4 hours at an average price of $20/dozen. You’ve probably spent well over a dozen hours baking, packaging, transporting, setting up, and selling, and you’re walking away with $400 of revenue. Now you have to factor in expenses, like market fees, ingredients, samples, equipment, packaging, labels, taxes, licenses, insurance, etc. And let’s not forget about the value of your time!
I hope you can see that I’m being pretty generous with that hypothetical example — sometimes I notice CFOs selling basic cookies for $5/dozen. Remember, you would need to do 50 strong markets like this to even make $20,000 of revenue. This is why many cookie CFOs are more of a break-even hobby than a business.
When Cookie Businesses Can Rise
However, it’s not all doom and gloom for cookies! Although I’m pretty confident that my chocolate chip cookies are not going to be the next big thing, I have seen many cases where cookie businesses have been successful.
Custom Decorated Cookies
Personalized and custom decorated cookies, like custom cakes, have a much higher perceived value. They do take much longer to make, but they often sell for around $3 – $5 each. More importantly, you never sell just one (set a minimum order size), and you are guaranteed to sell every one that was ordered (deposits are important!). Best of all, custom cookies can have a special wow factor that leads to automatic word-of-mouth advertising for your business.
When I was in Southern California two years ago, I saw Sugar Beak Bakery sell a 2″ cookie for $4. And then another sold, and another, and another. They were not decorated or customized in any way, but they were definitely not ordinary: organic, vegan, gluten-free cookies, filled with antioxidants and vitamins. There may not be many other places in the United States that this kind of cookie could sell for $4, but this CFO was selling to a captive audience! If you have the market for it, this kind of cookie business can work.
Large Batch Orders
Instead of selling cookies at events, sell them for events. It’s possible to turn a nice profit when you’re selling a hundred cookies at a time. As long as you can make them in close proximity to the event, shelf-life isn’t an issue. This is probably one way that my chocolate chip cookie business could be worth my time, but it would demand much more marketing and customer development efforts, compared to bringing goods to a market.
The Last Bite
Could my chocolate chip cookie business be as successful as everyone’s led me to believe? I think the “correct” answer is: I can’t know until I try. Until I analyze the market, consider my costs, determine a fair price, and start selling to learn if enough people will pay it, I cannot know that my cookies would make a good business.
When I started that process, I ran into a major hiccup when I gave people a cookie and said, “If you tried this at our farmers market and you didn’t know me, would you buy it? What would you pay?” Usually I got a response like “I don’t know… maybe a dollar?” When people switched to a buying mindset, they realized that they’d probably only buy it for $2 if it were nearly the best cookie they’d ever eaten. Suddenly my “amazing” (and formerly free) cookies weren’t so amazing after all, and that realization can be hard to swallow.
I do love making and eating cookies, and will continue to do so, but the response to my chocolate fudge was a dozen times better. I’ll be focusing on that business idea instead.
Hi, great article. Thanks for sharing your experience. Do you have any advice on how to preserve the shelf life of the choc chip cookies?
It’s interesting that custom decorated cookies can have a higher value and wow factor for people. I’m thinking about ordering some cookies to be delivered to my girlfriend since I have been out of town for a week for my work. I’ll be sure to find cookies that are both original, and creative to send to her tonight.
I’m thinking of doing night delivery cookies primarily to college students. There are no other cookie stores in our area. Do you have any thoughts on this idea?
There are probably no other cookie stores for the reasons outlined above (i.e. it’s not a good sign). Also, college students can be VERY frugal, and one of the hardest groups to sell to. Things I would try: 1) Sell them each night for a couple weeks and see which night is most popular, then just focus on that one night per week, at first. 2) After your trial period, only accept pre-orders day-of so you can prepare the right amount in advance (you can make the dough well ahead of time and freeze it though). 3) See if you can leverage a campus-only communication system (website, phone system, FB page, etc) to target students. 4) Communicate via email leading up to each day you offer them (cookie day) to build anticipation.
Overall, I would guess that this business would be very difficult to run as much more than a hobby. You might be interest in Doughbies’ story: https://techcrunch.com/2018/07/23/cookie-startup-fails-to-rise/
I was wondering, what would you suggest for a stay at home mom to earn extra $$.
I was considering cookies because I too get comments to sell them. But time is valuable too and I would want to do something that is a good use of time and money.. what is a profitable food item to sell. And how does one sell in the cold months if the state only allows sales from farm markets and road side stands which is my understanding in Indiana.
I saw a pie documentary on PBS once that showed a mother making pies in her home in Indiana. She had put a table in her yard as a makeshift stand. She got orders on the phone and online and she would meet the customer at the table to sell the pie there.
It is harder in Indiana due to the venue restrictions. But it is still possible to do well at farmers markets alone. There is no blanket answer for what you should sell, as it depends on what people want in your area. You might consider going to the farmers market and simply asking people what they wish was at the market. Or talk to vendors, and see if they have ideas. You will probably find that people are very helpful, and making something that people in your area want is a key factor to success.
I appreciate this information so much! You make great points and have opened up my eyes as to why cookie businesses fall flat, again thanks!
Thank you so much for your insight and information.
Thank you for this article! Maybe I’ll switch to pies & tarts. :-)
Or better yet, try both and see what works best. :)
thanks for this information
Excellent article! Many of the items touched on here I have also had to work through.
I hv a MS degeee in Foods n Nut n was a reg dietitian..am thinking of writing a blog on Foodd n Holistic Nut ..and start making sugarfree desserts for diabetics ..and perhapssell on line..What do you think ?? I hv taught at the Univ and had a consulting business until I retired..i do love to bake but must be healthy..Thnks
Thanks for the article! I’m currently thinking of starting a CFO in the near future, and you gave me a lot of “food for thought”.
I am also considering a CFO soon. I am glad you talked about cakes, I know I can make a mean batch of cookies of a variety of kinds, but the money really isn’t there. Thanks for the insight and research.