Shipley Do-Nuts sells more than 60 varieties of donuts in its stores and is pushing expansion beyond its core markets.
New Shipley Do-Nut franchisee Sam Khader offered this insight to those looking to invest in the concept: “Just be ready to gain about 15 pounds in the process.”
On a more serious note, Khader said the Texas donut brand’s leadership team has done an excellent job helping him and fellow franchisees succeed. “One thing that, in my mind, set Shipley’s apart is truly the team that they have behind them that’s driving that growth,” he said.
Khader grew up on Shipley donuts. His family would visit the local Shipley store every Sunday, and it’s a tradition he’s continued with his 3-year-old son. Khader opts for the signature hot glazed donuts, while his son alternates between donut holes and regular-sized treats.
Khader is one of several new multi-unit franchisees helping the Houston-based brand make a major franchise push since it underwent a change in leadership last year after being acquired by Peak Rock Capital, a middle-market investment firm. Family-owned since its inception in 1936, Lawrence Shipley III, the founder’s grandson, was running the company prior to the sale.
CEO Clifton Rutledge, who came to Shipley after stints at Jack’s Family Restaurants, Bojangles and Whataburger, wants to grow the brand, “so that the rest of the parts of the country can learn about this great product,” he said. Shipley, known for its hot, glazed donuts, has agreements signed to open 350 new stores in the next five years, and the company expects 30 or so of those stores to open this year. It recently signed three agreements to bring 55 stores to Georgia and Maryland, in addition to a deal with HPL Capital last year to bring 25 locations to the Dallas-Fort Worth market.
Shipley has more than 330 locations open today in 10 states; the bulk of stores are in Texas. Rutledge declined to state average unit sales. The cost to open a Shipley Do-Nuts franchise ranges from $450,000 to $800,000.
Michael Poates said HPL’s deal with Shipley was a no-brainer. HPL Capital is a subsidiary of MACC Investment Group and Poates, MACC’s chief executive, worked as a regional operations director in the Dallas area for Papa John’s and Whataburger earlier in his career.
Sam Khader
“It was a best-in-class product for me,” said Poates. “We used to joke in my family that their donuts were like the communion wafer of donuts. They are just a fantastic product. We loved them as a family. I never gave it a second thought.”
Even with rising inflation and broader economic concerns, Poates said he sees donuts as a durable consumer segment because people can still indulge in smaller splurges when times are tough.
Shipley famously stylizes the word donuts as “do-nuts,” which inspired the new advertising campaign, “Do-Happy.” The campaign spans Shipley’s digital channels, with more plays on the “do-” prefix. There’s “Do-find-yours,” which gives indecisive customers the opportunity to spin a wheel—called the Do-nut-doohickey—featuring Shipley’s dozens of donut varieties. There’s also “Do-swagger,” where customers can shop the brand’s merchandise.
Chief Operating Officer Hank Simpson said the Do-Happy ads speak to the brand’s mission to “make life delicious.”
“I don’t know many people that are sad after a donut,” said Simpson, who spent 18 years at Panera Bread before joining Shipley last year.
A new point-of-sale system is expanding the brand’s digital ordering features to allow for mobile and third-party ordering. “That was one of the first things we did,” said Simpson of the platform that also supports Shipley’s rewards program.
In its first major new product rollout since Rutledge came on board last year, Shipley is making a play in the coffee segment, testing iced and hot options in select Texas markets before expanding to more stores. “It’s never been an emphasis in the past,” Rutledge said. “We’re really excited about this.”
Khader’s first store in the Dallas-Fort Worth area is among those rolling out the coffee program. “They’ve really given us a product to be able to go out there and compete” with other breakfast and bakery chains, he said.