Best Donut Franchise Businesses

Did you know that the first Friday in June is National Donut Day? In fact, there are several holidays dedicated to donuts (also spelled doughnuts). If you’re surprised that a simple sweet treat has multiple days of celebration, don’t be.

Americans consume 10 billion donuts annually, according to Dawn Foods. In fact, donut stores are an $8.4 billion industry. And donut stores are well represented by the franchise model.

We all know the big names like Dunkin Donuts, Krispy Kreme, and Cinnabon. However, in recent years, we have seen unique approaches to the donut franchise. From clever names to new and unusual flavors favored by millennials and Gen Z, the donut is experiencing a resurgence in popularity. And the rising popularity has potential franchise owners sitting up and taking notice.

Also, the donuts franchise business model includes some mobile options for the sweet treat, plus coffee. The mobility may take the shape of a concession trailer or food truck, or a small wheeled cart. As a franchise, the small version of the donuts business is much more affordable.

Criteria for Choosing the Right Donut Franchise Businesses: Our Methodology

Donut franchise businesses present a delightful and appealing opportunity for entrepreneurs. To assist small business owners and those looking to open a donut shop in finding the ideal donut franchise for their requirements, we have created a detailed set of criteria. Each criterion is assigned a ranking on a scale from 1 to 10, where 10 indicates the highest importance and 1 the lowest. Below are the essential factors to consider when selecting the best donut franchise:

1. Brand Reputation and Recognition (Rating: 10/10): The franchise’s reputation within the donut industry is paramount. A well-established and recognized brand can attract loyal customers and drive business growth.
2. Location and Foot Traffic (Rating: 9/10): Choosing the right location with high foot traffic is essential for a donut shop’s success. A prime location directly impacts visibility and customer flow.
3. Training and Support (Rating: 9/10): Comprehensive training programs and ongoing support from the franchisor are critical, especially if you’re new to the donut business.
4. Licensing and Certification (Rating: 8/10): Ensure that the franchise complies with all licensing and certification requirements in your area. Proper credentials demonstrate professionalism.
5. Franchise Fees and Costs (Rating: 8/10): Consider initial franchise fees, ongoing royalties, and startup costs. While costs are important, they should align with the brand’s reputation and support.
6. Marketing and Advertising Support (Rating: 7/10): Effective marketing support from the franchisor can significantly boost brand visibility and customer acquisition efforts.
7. Exclusive Territories (Rating: 7/10): Some franchises offer exclusive territories, preventing oversaturation of competitors in your area. This can be valuable for business growth.
8. Supplier Relationships (Rating: 6/10): Reliable and cost-effective supplier relationships can impact your bottom line but may be less critical than other factors.
9. Technology and Tools (Rating: 6/10): Modern tools and technology can enhance the efficiency of your donut shop but may be less critical than core criteria.
10. Menu and Product Variety (Rating: 5/10): The variety and quality of donut flavors and products provided by the donut franchise are crucial for appealing to a wide range of customers.

Donut Franchises

Here are the best donut franchises for aspiring entrepreneurs with a sweet tooth to consider:

Dunkin

You’d have a hard time poking a hole in this one as a fantastic franchise opportunity. The trouble is that Dunkin’ has been so successful that much of the United States is “reserved” territory. That means that while you can purchase a Dunkin’ franchise from an owner, you can’t open a new one.

Wisconsin, New Mexico, Arizona, Utah, North Carolina, Washington DC, Pennsylvania, New Jersey, New York, and all of New England are already occupied. Dunkin’ safeguards its franchisees from competition, meaning you won’t find a donut franchise location in those states.

California, Nevada, and states in the middle of the US are available. Dunkin’ is also planning expansions into the country’s northwestern states.

The requirements to open a Dunkin’ franchise are similar to all donuts franchise requirements. You need $250,000 in liquid assets and a net worth of $500,000. Total startup costs ranges from $100,000 to $1.6 million. That figure depends on the cost of real estate, including how much the franchisee owns or needs to purchase.

The franchise fee ranges from $40,000 to $90,000. The franchise fee varies by area of the country.

Krispy Kreme

You are now challenged to read the words Krispy Kreme and somehow avoid Pavlov’s salivating response. This business includes four franchising opportunities. From small to large, the fee ranges from $12,000 to $25,000.

Here are the Krispy Kreme formats:

• Factory Store – This is the complete retail sales store.
• Tunnel Oven Shop – This store features an oven and specializes in receiving pre-prepared donuts, which they then finish by adding icing and/or filling before baking.
• Fresh Shop – No oven, receives donuts ready for icing or filling.
• Box Shop – receives ready-to-eat donuts from a Krispy Kreme factory store.

The total initial investment costs vary between $200,000 and $2.7 million.

Cinnabon

Cinnabon includes three separate franchising opportunities. There are the Full Bakery, Express Bakery (with a smaller product line) and the concession bakery.

Wanna-be donut franchisees might find the Cinnabon concession bakery franchise as tempting as a hot cinnamon roll, laced with icing. The concession bakery is designed to be used at a fair, show or market run from a concession trailer or food truck.

In other words, it’s a great option for customers who prefer to get their food curbside. The franchise fee is $30,000. The startup costs vary between $200,000 and $430,000.

Dixie Creme Donut Restaurant

This franchise goes beyond donuts in its offering to also includes a deli. The franchise fee for Dixie Creme Donut Restaurant is $25,000. The start-up costs range from $146,000 to $400,000 for this franchising choice.

As with the other donut franchises, the start-up investment costs vary according to the need for land purchase, as well as local building costs.

Honey Dew Donuts

Your Honey-Do list may include researching a Honey Dew Donuts franchise. This business model allows for multiple locations to operate from a main shop, complemented by satellite carts.

The carts can be “deployed” for customers to place a quick order of coffee and donuts. The franchise owner can adjust his business to adapt to the sales opportunity as it presents itself.

Honey Dew Donuts is currently going strong in Massachusetts. The company is eager to expand into New England states.

The all-in investment cost ranges from $94,000 to $700,000. The company requires that the franchisee have $100,000 in liquid assets and a net worth of $400,000.

La Mars Donuts

This is a relatively new donut biz that has been dominant in Kansas City and Denver. La Mars Donuts focus is on the gourmet donut market, with many of its lineup including handmade donuts.

What’s unique about a La Mars location? The customers get a choice. Go through the speed line on the day that you’re in a hurry. When you’re not, relax in the seating area. The seating area is designed so customers can use it as an office away from home.

The all-in startup fees range from $250,000 to $370,000.

Duck Donuts

The Duck Donuts franchise is known for a unique approach – providing a warm, made-to-order donut for the customer. The fee to start the franchise is $40,000.

The applicant must have $150,000 in liquid assets and a net worth of $500,000. The average all-in startup costs range from $400,000 to $600,000.

Duck Donuts is fairly well established on the eastern side of the US and is eagerly expanding across the country.

Exploring Innovative Donut Trends

In the dynamic world of donut franchises, staying ahead of the curve is essential for success. As the donut industry continues to evolve, embracing innovative trends can set your franchise apart from the competition. Here are some emerging trends that aspiring donut franchise owners should consider:

• Artisanal and Gourmet Donuts: Customers are increasingly seeking unique and high-quality donut flavors. Artisanal and gourmet donuts, often crafted with premium ingredients and inventive toppings, have gained popularity.
• Health-Conscious Options: With growing health awareness, offering healthier donut options can cater to a broader customer base. Consider including gluten-free, vegan, or low-sugar alternatives in your menu.
• Customization: Allowing customers to personalize their donuts with various glazes, toppings, and fillings can create an engaging and interactive experience, driving customer loyalty.
• Local Sourcing: Supporting local suppliers and using locally sourced ingredients can resonate with environmentally-conscious consumers and build community relationships.
• Social Media Marketing: Leveraging the power of social media platforms to showcase visually appealing donuts and engage with customers can be a game-changer in marketing your franchise.
• Delivery and Online Ordering: Offering convenient delivery options and an efficient online ordering system can boost sales, especially in today’s fast-paced digital landscape.
• Seasonal and Limited-Time Offerings: Introducing seasonal and limited-time donut flavors can create excitement, drive foot traffic, and encourage repeat visits.
• Sustainability Initiatives: Implementing eco-friendly practices, such as sustainable packaging and reducing food waste, aligns with the growing sustainability trend.

What Are the Pros and Cons of a Donut Store?

According to research by IBISWorld, donuts are a growing industry. The rate of growth averages 2% per year, according to IBISWorld information. It is one of the more profitable food businesses. Revenue is steady and has low volatility.

However, there is a lot of competition. In many metropolitan and high-traffic areas, there is an oversaturation of donut shops, both franchise and independent. So, you must choose locations carefully and read the disclosure document carefully. The disclosure document should let you know how your territory will be protected.

Most donut franchises charge a royalty fee of 6 or 7% on gross sales. The royalty fee may be taken before or after taxes. Again, this should be part of the franchise disclosure document.

You may also need to take advantage of unusual offerings and eye-catching branding.

Related reading: How to Open an Artisan Donut Shop.

How Much Does a Donut Business Make?

The profit margin on a single donut is really good. A donut has an average cost of one dollar, and 70% of that is profit.

So, how much can a donut business make? It depends on the scale of your operation. There are many variables, which include the size of the business, the number of employees, and the cost of utilities, leases, or mortgages. All those things affect your bottom line and will affect what you get for your return on investment.

But here’s some food for thought, yes, pun intended. The annual income for a Dunkin’ franchise owner is around $124,000, or $60 an hour.

How Do You Open a Donut Truck?

If people can’t come to the donuts, you can bring the donuts to them. The Donut Truck as a stand-alone business entity is a relatively new idea.

Yet, although information is scant, the opportunities are boundless. And this is a donut business that doesn’t limit your creativity. How and where do you want to do business? Want to set up in the parking lot of an office complex? At a university? A manufacturing business park? Or at a special event?

Cinnabon offers a food truck franchise, and Honey Dew has a donut cart that operates from a base store.

If you want to go it alone, gather information about equipment costs. If you plan to make the donuts in the truck, you’ll need a donut fryer ($8,500), a donut robot mark ($8,500, which makes the donuts before they are cooked), a refrigerator and freezer (total of $4,000) and an exhaust hood ($3,000) as minimum equipment.

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This article, "Best Donut Franchise Businesses" was first published on Small Business Trends