If you want to invest in a donut franchise, there's no hole in your logic. Glazed, sprinkled, chocolate, or something far more fancy — donuts are loved by Americans, often paired with a steaming cup of coffee. It's an $8.4 billion industry whose sweet siren song induces people to partake in about 10 billion donuts annually.
Big, established names, including Dunkin Donuts, Krispy Kreme and Cinnabon, are being joined by new franchises — Le Mars Donuts and Duck Donuts — catering to the tastes of younger demographics or those with more gourmet tastes.
Just as the selection at a donut counter can overwhelm — adding bagels, muffins, ice cream, specialty coffees and more — so can the choice of donut franchise opportunities. Here's some food for thought so you are better prepared to make the right donut franchise choice.
Why Invest in a Donut Franchise?
Well, for one reason, it's a sweet business opportunity. Every morning people are looking for a sugar and caffeine boost to get their day going. But there's also a lot of afternoon and evening business catering to people's need for coffee and sweet treats. Businesspeople, students, teachers, stay-at-home parents, factory workers, police officers and more types of people than we can name here will line up for their coffee and donuts.
The margin or mark-up is high for donuts and even higher for coffee — so you have great potential for profit if you avoid locations over-saturated with donut shops and even donut trucks. Other benefits of donut businesses include:
- They can fit into many retail environments, including shopping centers.
- Quick service restaurants (QSRs) and fast food establishments are one of the most popular types of franchises for good reason.
- Some donut shops also serve as cafes, where people can gather to socialize or do business.
- When you invest in a donut franchise, you get support, which includes choosing locations, training for you and your staff, and marketing help as part of your franchise agreement.
- Also, when you invest in a donut franchise, you benefit from the brand's name recognition, automatically bringing you business.
- Your intention to invest in a well-known donut franchise may make it easier to get financing.
- While each donut franchise has its own set-up and structure, there's still room for creativity and the chance to leave your own mark on a business.
The Costs of Investing in Donut Food Franchises
The costs of investing in a donut franchise aren't cheap. They can range from a couple hundred thousand dollars to a couple million, considering franchise fees and start-up costs. And donut company franchisors might also want more than a lot of money in the bank. They often want you to have a proven track record in business, as well as previous franchise or food service experience. They also want to see that you have a true entrepreneurial spark and a willingness to run the business full-time.
Some of the estimated initial investment franchise costs for a Krispy Kreme operation, for example, ranging from a Box Shop to a Factory Store (including Fresh Stop and Tunnel Oven shops), include:
| Name of Fee | Low | High |
|---|---|---|
| Development fee (per Fresh Shop) | $12,500 | $25,000 |
| Initial franchise fee (per Fresh Shop) | $12,500 | $25,000 |
| Real Estate and Improvements | $8,000 | $75,000 |
| Construction costs | $15,000 | $1,600,000 |
| Equipment/signage/furniture/fixtures | $85,000 | $230,000 |
| Truck (per truck) | $0 | $50,000 |
| Equipment and displays for authorized off-premises sales (excluding truck costs) | $0 | $100,000 |
| Initial inventory | $5,000 | $50,000 |
| Production equipment | $0 | $380,000 |
| Grand opening marketing program | $20,000 | $45,000 |
| Training expenses | $15,000 | $50,000 |
| Security deposits and other prepaids | $2,500 | $20,000 |
| Additional funds (3 months) | $25,000 | $100,000 |
| ESTIMATED TOTAL | $200,500 | $2,750,000 |
How Much Can You Expect to Make in Donuts?
A lot of factors are at play in deciding how much a donut shop can make. Factors affecting your bottom line include the size of the shop, its location, the amount invested in marketing; the price paid for ingredients, the number of years in business, and so on.
Some estimates claim it is possible to make $50,000 in profits in the first year and $100,000 in years after that. It may even be possible in a few years to reach $1 million or more. The average donut shop owner's salary in the United States is $41,996, with the salary range usually falling between $37,024 and $48,971.
4 of the Best Donut Franchises
To start your search for a good donut franchise, here are four proven or upcoming players.
Dunkin'
Dunkin' is one of the best recognized donut franchises around. The trouble with this is that a lot of the country is reserved territory — you can only buy an existing franchise from an owner. So, you would be out of luck in New York or Massachusetts but may have the option to open a new franchise in parts of California or Texas. (The Dunkin' brands include Dunkin' donut stores and Baskin-Robbins.)
As for the startup costs, Dunkin' discloses the estimated initial investment for a new restaurant can range from $109,700 to $1,637,700, not including real estate. The process for applying for a Dunkin' donuts franchise includes the initial application package with proof of residence, proof, proof of assets and a credit check; a review of a business plan that you've developed; a financial review; approval; and then your donut store's grand opening.
Krispy Kreme
With its headquarters in Winston-Salem, NC, Krispy Kreme has been selling sweet treats, including its signature hot original glazed doughnut, since 1937. It has over 1,000 shops around the world, in formats that include:
- Factory Stores: Complete retail sales stores.
- Tunnel Oven Shops: These have an oven, receive already-prepped donuts, and finish them with icing and/or filling, and baking.
- Fresh Shops: They have no ovens but receive donuts ready for icing or filling.
- Box Shops: They receive ready-to-eat donuts from a Krispy Kreme Factory Store.
Job training, ongoing training and marketing support are part of the franchising package. Some in-house financing may be available, as well as from recommended third-party sources.
Cinnabon
Operating Cinnabon franchises is always marked by the sweet aroma of fresh-baked and iced cinnamon rolls. Franchise options include full bakeries, co-branded stores, kiosk bakeries and co-branded kiosk bakeries. Qualified candidates should:
- Have business acumen (restaurant experience preferred)
- Meet financial qualifications: $120,000-plus liquid capital; $300,000 minimum net worth
- Be people-oriented & connected to the community
Investment in a new full bakery can range from $232,700 to $475,700. The company will help franchisees with real estate selection, construction and design, training, supply chain distribution, digital marketing, including use of social media channels and much more.
Duck Donuts
First opened in Duck, NC, in 2007, Duck Donuts is known for its warm, fresh and made-to-order donuts. It has about 250 stores in 25 states and is looking for new franchisees who are quacked up to handle the business.
It requires an initial franchise fee of $40,000, with discounts for buying multi-unit options. The estimated cost of opening a Duck Donuts franchise store ranges between $351,164 to $541,448, depending on the location and size of the space, and includes the franchise costs of construction, equipment, signage, initial advertising and the franchise fee.
Applicants are required to have 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 support launching a new Duck Donuts franchise.
What to Look for in Donut Food Franchises
When looking to buy a new donut franchise, there are a lot of questions you need to ask yourself. First, do you, as a franchise owner, connect strongly with the brand and products you'll offer so you can be passionate or at least interested in the business that will consume your life?
What will be all your costs to purchase your franchise, for startup and ongoing expenses? What will you get for your franchise fees? Will the franchise offer you training, webinars and ongoing support for you and your employees, so you run the business better? Will you get help with marketing and advertising, including national and local advertising campaigns, and using digital and social media channels, as well as mobile apps? How much freedom do you have to make your own creative imprint on the business?
Does the franchisor have an excellent reputation in the business for how it treats its franchisees? This is important to know since you'll be as close as icing on pastry.
Make Sure There's No Hole in Your Daily Business Operations
While you are busy serving sugar and java to hungry customers, don't lose sight of the practicalities of running your business. Skynova is a friend to small businesses, supplying the accounting and invoicing tools to ensure you can easily send out purchase orders for needed supplies, invoice for large or special orders, and keep track of your expenses and income, to manage your daily and larger financial picture with ease.
Skynova is a sweet treat for small businesses like yours.
Notice to the Reader
The content within this article is a general guide and may not apply to your specific situation. Always consult with a legal, accounting or other related professional to ensure you have all the correct advice you need to launch your donut franchise.