Made-to-order donuts have made Duck Donuts a fast-growing franchise.
By Kat Zeman
It’s not only about the donut. It’s about the experience. Unlike other pastry shops, Duck Donuts brings a unique concept to the table: a custom donut.
“We make our donuts before your eyes from scratch,” founder and CEO Russ DiGilio says. “You watch as the batter is mixed in front of you and then dropped into the fryer. We never case our donuts, meaning you won’t find them sitting on a shelf. They are always fresh. This is what makes us unique in the donut trade.”
These warm, fresh and made-to-order donuts can be customized with a variety of toppings. “Our vanilla cake donut, crispy on the outside and fluffy on the inside, is consistently the same,” DiGilio says. “What changes are the coating, topping and drizzle combinations customers can choose from.”
For example, once the vanilla cake donut pops out of the fryer, it can be coated with icing and then topped with peanuts or crushed Oreos, then drizzled with hot fudge, melted marshmallows, salted caramel and raspberry or blackberry. “You can get really creative,” he says. “The options are endless.”
The idea that originated on a beach in Duck, N.C., has grown into a multimillion-dollar business. The company is opening new stores and launching an online ordering program. It also introduced a new store design this year.
Founded in 2006, Duck Donuts started as a solution to a family vacation dilemma. “We were reminiscing about the donuts that we used to eat as kids,” DiGilio says. “They were those hole-in-the-wall places on the beach that would sell fresh donuts. When we couldn’t find one, we decided to start our own.”
DiGilio opened his first store in Duck, a beach town in the Outer Banks of North Carolina. “After awhile, it developed a type of cult following,” he says. “The made-to-order concept just took off.”
By 2011, Duck Donuts had expanded to four Outer Banks locations. As business boomed, DiGilio was repeatedly approached about franchise opportunities by Duck Donuts fans. The first franchise opened in Williamsburg, Virginia, in 2013. Today, Duck Donuts has close to 60 open franchise locations and more than 130 contracts in 23 states in the works.
By the end of the year, the company expects to have roughly 90 stores open. In January, it opened its first locations in Houston and San Antonio. This summer, it will open its first store in California. “This expansion gives us a national presence,” DiGilio says. “We’ll be operating from East to West Coast and we’re very proud of that.”
Although he expects to open about 40 locations per year, he claims that growth is not a top priority for the company. “Our growth is all organic,” he says. “Other than on our website or our donut boxes, we do not advertise or seek franchise leads. Our primary focus is working with the franchises who have invested in our concept and help them be successful.”
The beach theme for which Duck Donuts is known will not change. But visitors will see a new and improved version. “Our new store design introduces more vibrant colors and accentuates the beach theme,” DiGilio says. “We have also improved the customer experience by turning our topping table to face the customer. Moving forward, new locations will feature the redesign and we’re working with our existing owners if and when there is a need to make any renovations.”
In addition, Duck Donuts is in the early stages of developing a customer loyalty program.
Last year, Duck Donuts brought in roughly $32 million in sales revenue from 44 stores. Although his business is booming, DiGilio is selective when choosing franchisees. “We want someone with business experience,” he adds. “They also have to want to connect with their local community. We don’t want our stores to be viewed as just another franchise. We expect our franchisees to be a part of their community.”
Investors wishing to open a Duck Donuts franchise must have at least $150,000 in liquid assets and a net worth of $500,000. The company charges a franchise fee of $30,000 per location with discounts for multi-unit options. It also collects an ongoing royalty fee of 5 percent of gross sales.
The initial investment ranges between $300,000 and $450,000 depending on location and includes the costs of construction, equipment, signage, initial advertising and the franchise fee. An average store is between 1,200 and 1,500 square feet.
Duck Donuts franchisees are encouraged to participate in fundraising activities through the company’s Quack Gives Back initiative. On a national level, the company has partnered with Gabe’s Chemo Duck Program, a nonprofit organization that provides education, comfort and hope through stuffed ducks, medical play and therapeutic tools.
Duck Donuts raised more than $75,000 in September for the company’s inaugural Gabe’s Chemo Duck Program campaign. More than 2,000 Chemo Duck programs were provided to children undergoing cancer treatment.