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(October 14, 2001) -
They've flown first class. They've received a police escort from
the airport and even appeared at the White House. They've been
written up and gushed about countless times.
Now they are going on sale in the Northwest — the first
Krispy Kreme store opens Oct. 30 in Issaquah — and will get
even more publicity.
Big deal, many are saying, it's just a doughnut. Yes, but in the
case of Krispy Kreme, it's a doughnut on a roll.
Its cultlike following is legendary — customers have camped
out before an opening — and its marketing is clever. Krispy
Kreme is so good at drawing attention to the dormant doughnut business
that even competitors welcome their arrival.
"It doesn't hurt us," said Ron Roberts, senior manager
of sales and marketing for California-based Winchell's.
"There is no doubt there is a lot of excitement about doughnuts
these days."
Even at Dolce Vita on Queen Anne Hill, a place that features soy-latte
vegetarian doughnuts — they're fried in oil, not fat — the
buzz is about the new chain in town with the sweet snacks that
fans say melt in your mouth.
A Dolce Vita customer from the East Coast recently raved, "These
are almost as good as a Krispy Kreme," said Jeff Thompson,
a Dolce Vita manager.
"They are an amazing phenomenon," said retail expert
and author Robert Spector of Seattle. "I'm just waiting for
that bubble to burst."
That's not expected to happen anytime soon, said industry analyst
John Ivankoe of J.P. Morgan in New York.
"The business has been very impressive, and the outlook is
still strong," he said.
That's because much of its competition is weak and fragmented,
Ivankoe said, and even a recession might not hurt a company selling
cheap snacks.
Ask Barbara Elza. She has run the tiny Daily Dozen Doughnut (slogan: "Be
a winner, have doughnuts for dinner") in the Pike Place Market
for 13 years.
"You can spend less than 3 bucks here and bring your whole
family, and everyone gets a little treat," Elza said of her
fresh, miniature doughnuts. "You're not paying for crème
brûlée."
Elza, who said she once had a Krispy Kreme doughnut in Las Vegas,
said it was "OK" and wishes them well. That's because
this can be a scary time to open a business, Elza said, but a weak
economy may attract more people to the humble doughnut.
The sweet treat is believed to have descended from the fried cakes
brought to America by early Dutch settlers. Those had nuts in the
middle — thus the "dough nut" — which eventually
became a hole.
In some ways, North Carolina-based Krispy Kreme is like a young
Wal-Mart or Starbucks, building a strong regional base before spreading
across the country.
Although it was founded 1937, making it the oldest of the three
biggest doughnut chains, Krispy Kreme didn't begin expanding on
a major scale until the 1990s.
It went public April 5, 2000, closing after the first day at a
split-adjusted price of $9.25 a share. Since then, its stock has
been one of the hottest on Wall Street, splitting twice. It closed
Friday at $35.98, up more than 70 percent this year.
It's putting up other big numbers, reporting a profit last year
of $14.7 million on $448 million in sales. Krispy Kreme expects
its profit to increase as much as 35 percent a year over the next
three years because of store openings and existing stores' sales
growth, which was 13 percent this year. The company plans to have
400 stores open within six years.
Prices vary by location, but generally the doughnuts sell from
$5 to $6 a dozen, said company official Stan Parker.
Krispy Kreme's Issaquah store will be No. 199 and the first of
10 that will appear in Washington over the next six years, said
Gerard Centioli, who will oversee the chain's growth in Washington,
Oregon, Alaska and Hawaii.
Two will be in Seattle — one north of downtown and one just
south — and three others will open in suburban locations
not yet disclosed. Four more will be in Eastern Washington, said
Centioli, who as president and chief executive of Chicago-based
Icon, has formed a partnership with Krispy Kreme.
It's not like there aren't other doughnut shops around here. There
are plenty, from Dunkin' Donuts and Winchell's to smaller outfits
with names such as Donut House, Donut Factory and Westernco.
But while some are struggling to survive in an area known more
for its affection for granola muffins than glazed doughnuts, Krispy
Kreme, with its trademark "Hot Doughnuts Now" sign and
its "secret" recipe, arrives with a swagger that belies
its simple product line.
Centioli, a Seattle native, said he has no trepidation in bringing
a doughnut shop to the health-conscious Northwest.
"There is nowhere I'd rather do it," Centioli said. "You
can make the same argument in Southern California, but they are
doing well down there, too. I believe Seattleites will eat a great
doughnut."
Although Dunkin' Donuts has 5,000 stores across the world, it
only has five in Washington. Winchell's has 11 in the state.
Dunkin' Donuts doesn't plan to add many more stores in Washington,
said Ken Kimmel, a company vice president.
"We don't view ourselves in the same business (as Krispy
Kreme)," Kimmel said, adding that Dunkin' Donuts prides itself
on its broad product line, which includes muffins and bagels. "We
sell more coffee than doughnuts. They sell an awful lot of one
doughnut."
Krispy Kreme actually sells 15 types of doughnuts, and the Seattle-area
stores will also feature espresso drinks, but the company's specialty
is the simple hot, glazed doughnut, which can draw crowds when
the "Now" sign is on from four to five hours in the morning
and the same in the evening.
Its Issaquah store at 6210 E. Lake Sammamish Parkway S.E. is in
a strip mall anchored by a Home Depot, Fred Meyer and two Starbucks,
all sandwiched between a busy four-lane road and a hillside filling
up with new homes and offices.
Workers are putting finishing touches on the building while Centioli
and his staff are hiring 120 employees, about half of whom will
be part-timers. A sign overlooking East Sammamish Parkway has the
traditional retro Krispy Kreme design and a Centioli innovation:
a hand-operated "scoreboard" indicating the number of
days left until its Oct. 30 opening.
The sign is intended to evoke the feeling of an old-fashioned
ballpark, cash in on the Mariners' popularity and provide a public
service, Centioli said: Many people had been calling Issaquah City
Hall and the company's office in Chicago asking when the store
would open.
A Krispy Kreme store is actually a factory, Centioli said. An
average store — which has a 24-hour drive-through and a lobby
that's open about 18 hours a day — sells 18,750 doughnuts
a day and can make 57,600 a day.
Krispy Kreme even has its own Northwest training center at an
undisclosed location in Rainier Valley. Centioli said he couldn't
reveal the address for fear people might flock there to try to
buy doughnuts.
Whether that's another publicity ploy or just good business sense
can be debated, but there is no debate that Krispy Kreme is making
its mark on the American landscape.
"I don't think too many people expected it to do so well," Ivankoe
said.
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