To track the phenomenal growth rate of cake donut sales in America, one must go back in time to the beginnings of this trend in 2013. For exmaple, four years ago, Duck Donuts opened its first franchise store in Williamsburg, Va., and Hurts Donut Co. opened its first store in Springfield, Mo. Duck Donuts sells cake donuts exclusively, and Hurts Donut focuses primarily on cake donuts, which account for roughly 70% of sales.
Since that time, Duck Donuts has grown to more than 50 locations, with another 130 under contract, in 22 states. Hurts Donut, now a $23 million company, is up to 15 stores, with nine pending, in nine states. The two businesses lend credibility to the claim that cake donuts rank among the hottest selling sweet goods at retail bakeries in America.
|Tim Clegg, co-founder of Hurts Donut|
“Today’s reality is much bigger than our original dream," said Tim Clegg, who founded Hurts Donut with his wife, Kas. "We work nonstop tirelessly seven days a week. We’ve got our hands full. There’s no sitting still in our lives.”
Meanwhile, Russ DiGilio, founder of Duck Donuts, transformed a his desire to enjoy a fresh, warm donut while on vacation with his family into one of the most successful donut franchises in the country. Everything is made to order, and customers choose their icing, topping and drizzle.
|Russ DiGilio, founder of Duck Donuts|
“Customers like having the opportunity to customize, and Duck Donuts is able to provide customers with a product that exactly meets their sweet desires,” Mr. DiGilio said.
And, because Duck Donuts makes only cake donuts, there is no time-consuming process involved in letting the dough rise, which is necessary in the production of yeast-raised donuts.
The proprietary donut mix comes ready to use at store level, and batter is dropped one ring at a time into a Donut Robot Mark V from Belshaw Adamatic. The all-electric donut machine has the capacity to make 56 dozen standard-size donuts per hour, according to Belshaw Adamatic.
“We can make fresh donuts in just a few minutes,” saidLou DeFratti, general manager at Duck Donuts in Kissimmee, Fla., the company’s first franchise store in the state. “This machine is very efficient.”
Customers receive a custom-made fresh donut in less than 5 minutes. Top sellers include Mr. DiGilio’s favorite: vanilla frosting with powdered sugar and shredded coconut icing with raspberry drizzle.
Duck Donuts also sells four kinds of breakfast sandwich donuts.
“I wish I’d have thought of that,” said one veteran bakery owner when asked to comment on the made-to-order model employed by Duck Donuts.
Meanwhile at Hurts Donut, co-owner Tim Clegg recalled the early trials and errors of offering any unusual topping they could imagine, including potato chips, Cheetos and all types of sugar cereals.
“At first, it didn’t matter what we put on a donut," he said. "It sold."
Top sellers now include maple bacon bars, cotton candy donuts and any assorted toppings ranging from breakfast cereal to Nutella swirled into the shape of an emoji. Hurts Donut recently unveiled a “gluten free-ish” donut, which comes with a disclaimer.
“For someone who’s chosen a gluten-free lifestyle, it’s an option,” Mr. Clegg said.
On the equipment front, Hurts Donut uses fryers from Belshaw Adamatic at all stores.
“We opened our original store with just one fryer and a makeup table," he said. "Fifteen stores later, we use all Belshaw Adamatic equipment. We really like it.”
And instead of heading off to the grocery store to get inspiration for wild donut toppings, as they did initially, the donut stores now order 20-lb boxes of candy and other bulk sweets from their distributor. Mr. Clegg credits Dawn Foods for helping them transition to a profitable business model with a solid handle on food costs and operational efficiency.
“Dawn helped us with training and product sourcing,” he said. “They are an outstanding company to work with. It’s a great partnership.”
Hurts’ concept is a 24-hour bakery that specializes in handmade donuts topped with quirky ingredients. In addition, the bakery offers delivery in its Emergency Donut Vehicle “ambulance.” For Halloween 2017, Hurts introduced the Creepy Clown delivery man, a unique promotion that went viral on social media.
“I gave an interview this morning to 'The Today Show',” Mr. Clegg said.
|||READ MORE: Franchising opportunities|||
At Duck Donuts, Mr. DiGilio did not expect to expand beyond his home state of North Carolina until word about the bakery's custom donuts started to spread.
“We were constantly approached by customers asking us to franchise and bring the brand back to their hometown,” he said. “We decided to give it a try. Our current focus is on the success of our franchisees.”
Duck Donuts' initial franchise fee is $30,000 with discounts for purchasing multi-unit options. The estimated cost of opening a Duck Donuts franchise store will range between $300,000 and $450,000, depending on the location and size of the space. This includes the costs of construction, equipment, signage, initial advertising and the franchise fee. Duck Donuts requires a minimum of $150,000 in liquid funds (cash, savings, mutual funds, stocks, etc.) and a minimum of $500,000 in total net worth to financially support opening a new Duck Donuts franchise.
At Hurts Donut, franchising operates a bit differently. In late October, Mr. Clegg said the bakery had five stores in construction and an additional four sold and waiting on real estate approval. There are two company stores, both in Springfield. Mr. Clegg and his wife own the original store outright.
“I had $7.36 in my bank account the day we opened our first store,” Mr. Clegg said. “Every day is a pinch-me moment.”
The pair opened the very first Springfield store at 5 a.m. on a November Monday morning with no clue what to expect.
“We had $2,000 in sales the first day,” Mr. Clegg said. “Then every day it was 10% higher, then another 10% higher.”
Hurts Donut surpassed its original goal by two years when the company opened a second store within nine months. Other store openings soon followed.
“The Tulsa franchise set our record with $1 million in sales in 88 days," Mr. Clegg said. "There are a lot of great success stories. We’re really proud.”
Scott Bussard, chief financial officer, handles many of the lease negotiations. A longtime friend, Mr. Bussard was brought in as a partner, bringing restaurant operations and franchising experience.
Hurts pushes for the best possible lease deals ($20-40 per square foot, depending on the market).
“We view everything as an asking price, and it’s a lot easier conversation now that we have brand recognition,” Mr. Clegg said. As for potential franchisees, “they obviously have to be financially able. They’re either able to secure a loan or not. The all-in costs to open a franchise store is $300,000 to $600,000.”
Mr. Clegg grew up in Springfield. His wife is from Wichita, Kas., where they met.
“My wife is a donut connoisseur, and we always went to donut shops," he said. "The experience aspect intrigued me. I’m an ideas guy. I carry a notebook everywhere.”
And for those who have yet to catch on to the joke in the company name Mr. Clegg said his grandfather used to tell him that as a kid, starting with a playful punch: “Hurts. Don’t it.”
“It’s an opportunity to keep that joke alive,” Mr. Clegg said. “We Google-searched a lot of company names, and when we found out Hurts Donut wasn’t taken, we were excited.”