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.”