Established in 2006, Duck Donuts ventured into franchising in 2013, experiencing significant growth thereafter. With over 100 outlets across the United States, its straightforward business model and appeal to franchisees contribute to its success.
A Duck Donuts franchise presents an affordable investment opportunity, requiring an average initial investment of $382,000. However, prospective franchisees often wonder about the profitability of such an endeavor.
So, is investing in a Duck Donuts franchise a wise decision? How lucrative can this business be? Let’s delve into the potential profits to gain a clearer understanding.
Primary Statistical Data
- Franchise fee $40,000
- Royalty fee 5.0%
- Marketing fee 3% to 4%
- Investment (mid-point) $556,000
- Average sales $570,000
- Sales to investment ratio 0.5x
- Minimum net worth $350,000
- Minimum liquid capital $150,000
Duck Donuts Brand Introduction
Duck Donuts is a renowned American quick-serve chain specializing in doughnuts, with its headquarters situated in Mechanicsburg, Pennsylvania. Established in 2006 by Russ DiGilio and Robin Griffith in Duck, North Carolina, the chain offers customizable, made-to-order doughnuts, along with an array of baked goods, sandwiches, coffee, desserts, and beverages. Since initiating its franchising program in 2013, Duck Donuts has expanded significantly, boasting over 100 restaurants across the United States.
Duck Donuts franchises Advantages and Disadvantages
Advantages
1. Quality training: Duck Donuts has an extensive training program for the pre-opening, grand opening, and ongoing success of its franchisees. It trains franchise owners about its products and procedures, customer services, restaurant operations, hiring qualified staff, and growth strategies.
2. Real estate support: The franchisor provides its franchisees with real estate experts and site selection advice. It helps franchisees identify the most convenient business location, and design and construct the restaurants as per the brand’s standard specifications. It also helps them with lease negotiations.
3. Absentee ownership allowed: The brand allows for a passive investment opportunity. Franchise owners are not required to be fully involved in the daily restaurant operations.
4. Flexible franchise models: Duck Donuts offers its franchisees a variety of franchise formats that are flexible and can fit into the available real estate opportunities. Franchisees can choose to operate multi-unit development options, multiple store layout designs to fit different scenarios, non-traditional locations and food trucks, or catering and events to boost their sales.
Disadvantages
1. Competition: The brand faces a lot of competition from donut brands such as Dunkin’ Donuts and Krispy Kreme
2. No financing: The franchisor does not directly or indirectly finance its franchisees for start-up or development costs.
How much do Duck Donuts franchises cost?
You have to invest around $382,000 to open a Duck Donuts franchised restaurant.
Yet, this is an average. Indeed, it varies based on many factors, such as the location of your restaurant and its size.
In addition to the initial franchise fee of $40,000, which you must pay to the franchisor, you would also pay for construction improvements, equipment, professional fees, signage, insurance, etc.
Potential costs
Here’s the list of potential costs for startup:
- Initial franchise fees $40,000
- Equipment $91,000 – $111,000
- Insurance $3,000 – $5,000
- Other $135,066 – $288,991
- Total $289,066 – $474,991
Predicted Profits of a Duck Donuts franchise?
It is estimated that, on average, a Duck Donuts franchise makes $127,000 in profits per year. This corresponds to a 23% EBITDA margin.
This is an excellent profit margin, and as such a very profitable business.
Fortunately, Duck Donuts provides detailed information on the cost structure of its franchises, especially COGS and labor costs which we are summarizing below. Note that EBITDA isn’t given, which we had to estimate instead.
Is Duck Donuts franchise a good Choice?
With such favorable profits, it’s no surprise that Duck Donuts boasts an impressive payback period of 4 to 5 years on average. This indicates that investors typically recoup their initial investment within this timeframe, leveraging the accumulated profits to settle debts owed to creditors and investors before realizing substantial returns.
This profitability stands out, especially when compared to the average payback period of 7-8 years for restaurant franchises in the US.
However, it’s essential to consider various factors beyond profits when evaluating franchise opportunities. Factors such as the franchisor’s support, brand reputation, territorial protection, and other terms and conditions can significantly impact the long-term success and sustainability of the investment.