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A warm welcome for one red-hot treat: Local stores not worried by doughnut chain's debut
The Seattle Times
     
 

(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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