When the Houston Press recently blogged about “Five Foods You Miss Long After You Leave Houston,” the editor’s top choice was neither Texas barbecue nor Tex-Mex enchiladas. Their favorite was Shipley Do-Nuts.
That’s high praise for donuts, but Shipley is no ordinary donut shop. Founded in 1936, the Shipley family “do-nut” recipe has withstood the test of time. With more than 60 varieties of donuts, pastries, and kolaches made fresh daily and served hot, it's this same simple concept that has continued to bring back multiple generations of loyal customers.
Shipley Do-Nuts originated in Houston where it still maintains its offices and production facility. Today, under the leadership of Lawrence Shipley III, the chain is rapidly approaching 300 franchises with locations in Texas, Alabama, Arkansas, Louisiana, Mississippi and Tennessee. The company has plans to reach 500 stores by 2020.
Its newest location opened this spring in Universal City, TX, its 15th store in the San Antonio marketplace. The grand opening celebration featured free glazed donuts and coffee and a special appearance from "Glaze,” the company mascot. Franchise owner Veasna Heng expressed enthusiasm about introducing donuts and kolaches to a new group of potential customers. “Our hot glazed donuts are definitely hard to beat," Heng says. Shipley Do-Nuts is still growing in the San Antonio market, with plans to develop at least three additional locations by end of 2014.
Donut shops are enjoying resurgence in the current economy, so it appears Shipley Do-Nuts is expanding at a good time. The National Restaurant Association's chief economist Bruce Grindy recently pointed out that the national labor market continued to heat up in June, with restaurants remaining among the strongest growth sectors.
“The snack and nonalcoholic beverage bar segment – which includes concepts such as coffee, donut and ice cream shops – added jobs at a robust 6.1 percent rate on a year-to-date basis through May 2014,” he says. “If this trend continues, it would represent this segment’s strongest growth since 2007, as well as the third consecutive year with employment gains above 5 percent. Look for these positive growth trends to continue through the remainder of the year, as the restaurant industry continues to benefit from an improving economy and stronger consumer sentiment.”
Houston: We Have Donuts
In Houston, where Shipley Do-Nuts calls home, a number of new donut shops are popping up on the scene and adding new competition.
Glazed: The Doughnut Cafe, which is co-owned by University of Houston alumnus Edose Ohen, is jumping on the gourmet donut trend, after raising $350,000 to bring the dream to fruition, Ohen open doors on July 26, according to the Houston Chronicle. From traditional glazed donuts to lemon poppyseed or bacon and maple, Ohen has created a range of flavors for his menu, with prices ranging from 99 cents to $1.99 apiece. The full menu is expected to feature 180 items, including gourmet kolaches and other savory items.
Heavy hitters Dunkin’ Brands and Krispy Kreme have expanded their market reach in Houston. Dunkin' Donuts began in 2012 an aggressive push to open dozens of stores over the next few years. Krispy Kreme, which exited the Houston market in 2006, has announced plans to open 10 stores in the area by 2018. Shipley Do-Nuts continues to dominate the market, with more than 40 stores in the Houston area.
Newcomers to the local donut scene in Houston include billionaire and Hilcorp Energy Co. CEO Jeff Hildebrand and his wife, Mindy, who opened River Oaks Donuts in summer 2013. The shop, which offers counter service and a drive-thru window, offers traditional favorites and unusual donut flavors such as poppyseed or Cap’n Crunch.
Looking toward expansion, Shipley Franchise Co. is accepting applications for the states of Arkansas, Alabama, Louisiana, Mississippi, Tennessee, and Texas. The city of Houston is closed for development.
The Shipley Do-Nuts concept, like many successful foodservice operations, relies on well-trained staff to support its daily goal of quality and consistent performance. The company reports that it has strived over the past 77 years to simplify its operation through experience and hard work. The concept requires the development of a staff that is committed to this daily goal to ensure high standards are met.
Shipley Do-Nuts Flour & Supply Company provides a proprietary donut mix that requires only water and yeast to be added at the store level. Therefore, very little scaling or measuring of ingredients is needed that could cause inconsistent product quality. Shipley offers more than 60 different varieties of donuts, pastries and kolaches that are all produced from the same donut mix. The company maintains that while some in the donut industry have sacrificed traditional methods for automated production, Shipley boasts a more balanced approach. This allows the higher volume capability without losing the traditional customer who expects quality and variety.
Shipley Do-Nuts success is based on its commitment to simplicity, which enables the initial investment to be kept to a minimum. The cost of opening a typical Shipley Do-Nuts varies and primarily depends upon the size of the shop, the location, the real estate market in that region, the cost of leasehold improvements, in addition to equipment and fixture costs. A $50,000 franchise fee is an additional start-up cost and an adequate amount of operating capital is required. Shipley Do-Nuts has entry requirements which start at $150,000 liquid and $500,000 net worth.
As with any retail based operation, location plays an important role in the overall success. Shipley Do-Nuts flexible location requirements provide opportunities in strip shopping centers and free-standing structures. Space needs range from as little as 1,800 square feet to as large as 2,400 square feet. The various location options allow donut shops to be located in high profile trade areas with the highly sought after business and residential customer mix.
A comprehensive support system for franchisees is a key aspect of Shipley Do-Nuts success story. The franchisee is given support from the beginning to ensure the success of the relationship. This is important to the continued growth of the brand, as well as the business development of the franchisee. Shipley Do-Nuts offers a comprehensive training program that consists of more than 120 hours of hands-on training at one of the company’s training stores. The training covers daily operations, inventory control, sales, service, production, employee staffing, scheduling, bookkeeping, and marketing.
Birth of a Franchise
It was 1936, the end of the Great Depression, when Lawrence Shipley, Sr. created a gourmet recipe for “Do-Nuts.” Cut by hand and served hot throughout the day, the Do-Nuts cost 5 cents a dozen and were only sold wholesale. The product was so successful that it started to sell on the retail market by the mid-1940s. With Lawrence Sr. away on donut routes, his wife Lillie would stay behind and make the culinary delights, according to the company.
People would come from miles around to sample the hot glazed Do-Nuts. Serving them hot was a goal of the elder Shipley. Lawrence Shipley, Sr. once said, “When they bite into that hot do-nut, it will bring them back every time.”
Lawrence Shipley Jr. continued in his father’s vision by making Shipley Do-Nuts the successful business it is today. He grew the company to more than 190 stores around the nation in Alabama, Arkansas, Louisiana, Mississippi, Tennessee and Texas.
President Lawrence W. Shipley III now runs the company and has high expectations for the future. During his tenure, he has expanded the donut chain to more than 290 locations,