How Duck Donuts Shook Up the Doughnut Category

Apart from Krispy Kreme and Dunkin’ doughnuts have generally had a difficult time gaining national recognition within the U.S., instead remaining local favorites with a niche which stick to the traditional flavors and formats. But Duck Donuts is looking to change the narrative around doughnuts, rocketing to nearly 100 locations around the country–and now a handful internationally–serving a wide variety of innovative flavors that can be customized by guests.

The founder and CEO Russ DiGilio says he doesn’t believe that there is a ceiling to Duck Donuts’ potential, however, the company is managing its franchise expansion with a measured approach.

“We’re still gathering information and analyzing demographics and what’s the best fit for our stores,” the CEO declares. “But it’s also capable of scaling. We’re not sure of all we’re headed right now but we’re having a blast in the process of getting there.”

However, as DiGilio states in an recently-aired episode on QSR‘s podcast “Fast Forward,” it wasn’t always easy. In the podcast, he discussed his thoughts on how the company overcame initial challenges and became an icon among the thrilling things happening in doughnuts today.

1. Keep going through the tough times

DiGilio worked in the healthcare industry for decades prior to having an epiphany while traveling in North Carolina’s Outer Banks. There weren’t any doughnut shops in the area back then the doctor said, yet , the area — a highly sought-after tourist spot — was ideal for a kid-friendly boardwalk doughnut shop that had an ocean-inspired atmosphere.

In the end, DiGilio along with his wife devised the idea of opening two stores simultaneously, one located in Kitty Hawk and Duck, North Carolina (thus the name). However, while an idea for a brand new doughnut shop was obvious to DiGilio himself, it did not to the customers.

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“The initial two years, 2007-2008 were terrible. We struggled. We were not known to anyone,” he says. “We were able to celebrate $300 days of sales that’s why, today, during the peak season, we’re averaging between $7,000 and $8000 a day. We had a lot of struggles, but we came out on top. In the third year we were in operation we made a profit, which told me that this business is going to be a long-term business and it’s beginning to gain momentum.”

2. Start a trial with a customer

The key to creating The Duck Donuts business was capturing customers who were in a very sluggish region. In the Outer Banks are lightly populated in the off-season as well as during peak summer months, the majority of visitors leave every single week.

DiGilio says that the group promoted their brand through handing out flyers to local visitors bureaus as well as rental agencies. The trick, he says was getting tourists and residents alike to walk to restaurants to taste the food. After that the restaurant was sure that they would be regulars.

“It took several years. But the people are quite faithful to Outer Banks and kept coming to us, then they began to look at us” the man says. “Even today, a lot of our growth is just kind of organic and people just trying our doughnuts. In the present, DiGilio states, Duck Donuts is much more sophisticated in the way it advertises itself with field marketing directors working with franchisees to market their business.

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3. Show it off

Duck Donuts isn’t like most other doughnut brands , where the doughnuts are made in advance and packed prior to orders. It’s different. Duck Donuts’ product–a cake-based doughnut – is created directly in front of customers. Customers can observe as the dough is formed before being baked, then slid down an assembly line , before being delivered to team members who apply glazes, icings, and other toppings.

“Anyone can make a doughnut, and we thought we had the right combination for a great doughnut,” DiGilio tells. “But we wanted to make it fun too. So we set the glass on top and included an incline for children. They can put their noses against the glass and observe the glass making. Not only does the made-to order procedure reduce waste in restaurant, but it also transforms the ordering into a pleasant experience for families.

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4. Take a look beyond the doughnut

Duck Donuts is steadfast in its doughnuts made from cake. DiGilio claims the company isn’t planning to launch yeast doughnuts and that its customers haven’t requested one. (There are plans to trial the possibility of a chocolate cake doughnut however.)

The most distinctive feature of the brand from the crowd is the wide assortment of toppings and icings available for topping the over doughnuts. Customers can customize their order, or choose the wide selection of special creations which are seasonal. For winter, there are chocolate icing topped with toffee crunch, lemon icing made with coconut shredded with peanut butter and icing that is topped by Oreo cookie pieces, and hot chocolate drizzle doughnuts.

However, DiGilio states that he doesn’t wants the idea to “go stale” with customers and, as such, Duck Donuts is constantly looking for ways to diversify the doughnut menu. It provides breakfast sandwiches that make use of doughnuts as the carriers, and there’s also sundaes that include a hot doughnut and ice cream and the option of toppings. This helps to expand Duck Donuts’ business to later in the morning, since DiGilio states that the majority of stores remain open until 7 or 8 p.m.

The sundaes are a great dessert item, especially when we’ve added in the ice cream,” He states. “We try to partner with local creameries wherever we can. There’s also been a new increase in the importance of beverages. We’ve moved beyond just having coffees and maybe espresso,” he adds. “We’ve been more interested in frozen drinks, caffeinated as well as non-caffeinated for children. One thing that’s been extremely well-loved is milkshakes.

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5. Follow the franchise’s demands…

When it came to Duck Donuts’ early years DiGilio did not have intention of franchising this business. But the fact that it was located in a tourist area served as a good billboard to franchise prospects and the CEO claims that he was bombarded early by regular customers who wanted to establish the concept of a Duck Donuts back in their local areas.

At the time Duck Donuts had four locations in the Outer Banks, the franchise demands won him over.

“We decided to do it just to have fun, really, to test the waters. There are four locations open and printing money and it was an fantastic for the season,” he says. “But it got so overwhelming when people started requesting”franchises,” I thought, what do you think? If we don’t try the opportunity a chance and fail, we’ll be kicking ourselves.”

The first franchises launched at Williamsburg, Virginia Beach, and Richmond Virginia. They are all just an hour away of the Outer Banks and home to numerous vacationers. The brand’s popularity grew but DiGilio claims that his team was able to see it was that Outer Banks recognition only went up to.

“The first challenge that we had was in Raleigh, North Carolina,” the author declares. “No anyone knew about us. The people who stayed there were vacationing at Myrtle Beach, [South Carolina[South Carolina].

Similar to the first locations located in the Outer Banks, though, the business picked up with time as residents experienced an increase in the Duck Donuts business. This was the proof DiGilio was in need of to turn into his growth acceleration.

“It just proved to me that we don’t have to be in a resort area,” the man states. “People don’t necessarily have to know who we are, but if we’re well placed [and] we’ve got the right partnership with franchisees, this could play anywhere, because people generally love doughnuts.”

6. But do have some guidelines

Although the initial demand for franchises provided plenty of opportunities to Duck Donuts, it didn’t always result in the best franchisees.

“I learned very quickly that enthusiasm does not equal success,” DiGilio said. “We were able to attract people to us who simply loved our brand and were so enthusiastic. However, this didn’t always work out for us in terms of business.”

The company has been more careful when selecting the best franchisees these days.

“We’re far more stringent with the interview process and making sure they have business plans, they have business sense, they have good people skills,” He declares. “There’s a lot more to it than just saying, ‘Hey, I think this is going to work in my hometown and I’m really excited.'”

Presently, Duck Donuts has 90 locations open, and contracts in place for additional 145. The company’s expansion has included Chile and is expected to launch the doors in Puerto Rico, Saudi Arabia as well as Dubai.

7. Lean into your icon

The opening of its first store opening its first store in Duck, North Carolina, did more than just give Duck Donuts a great name and a great name, but it also gave it an iconic image. A cartoon-like duck has become an official Duck Donuts mascot, and appears everywhere from the logo, to store layout and online branding.

There’s also the merchandise. Duck Donuts offers t-shirts, cups, and other items to customers who purchase from the shop and the duck is the main attraction. The core of the platform for merchandise is a bucket of rubber ducks in a variety of styles.

“Kids just love those,” DiGilio declares, “and we can’t keep them on the shelf.”

Beyond its merchandise The duck has evolved into an emblem of Duck Donuts’ community partnerships and charitable giving through the company’s “Quack Gives Back” platform.

“That’s a way to stay connected to our local communities through sporting programs and churches and schools and raising money for different groups and people in need,” DiGilio states. “It’s up to the franchisee, but we have our whole program built around that, so it makes it easy for them to stay connected with their community.”

As part of a nationwide initiative, Duck Donuts partners with Gabe’s Chemo Duck Program, a nonprofit organization that offers information and comfort to patients suffering from cancer through therapeutic games, medical-related play and stuffed ducks clad in hospital scrubs, complete with the port for chemotherapy. Duck Donuts has raised more than $140,000 from an annual campaign that supports the program.

8. Diversify your customer base

As with every other foodservice company, Duck Donuts is wrestling with the evolving business towards more off-premises and experiential experiences. DiGilio says that the firm has responded with expanding its offerings in order to offer online ordering, delivery from third parties catering, food trucks and other non-traditional locations. It has also launched its Rewards app, which is a mobile loyalty program based on points that is powered by LevelUp.

The plan to extend and expand the Duck Donuts experience beyond the store model, says DiGilio is a bid to broaden the customers’ base.

“We target three groups,” he states. “Families however, mainly mothers with children. We call them our office heroes, in which we see people bringing donuts to meetings at work or simply to express their gratitude to their staff. We also have young people who are not purchasing a large amount of donuts however they do love to stop in to get a couple of donuts as well as coffee.”