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Hurts Donut advances franchise plans

A former Springfield banker is taking the brand into Little Rock, Arkansas

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An executive with experience at several major retailers, and a former longtime banker are among new additions to the Hurts Donut Co. LLC family.

Ray Nagel started Sept. 4 as the Springfield-based company’s director of franchise development. He succeeds Mark Trusty, who resigned in the summer to return to work in the food sales industry, said Hurts Donut founder and co-owner Tim Clegg.

Nagel, who most recently managed real estate development for the Kum & Go LC convenience store chain, is tasked with expanding Hurts Donut’s franchise reach, particularly in real estate selection, Clegg said.

“We try to place ourselves in markets where all walks of life intersect,” Clegg said. “When we’re looking for real estate, it’s kind of got to be the best of all worlds combined.”

Nagel also has experience as director of store development for Seattle, Washington-based Starbucks Corp. (Nasdaq: SBUX) and as real estate manager in the corporate office of restaurant franchisor Subway. In addition, Nagel was formerly a franchisee with Subway and Taco Del Mar.

Also in September, Hurts Donut announced a new franchise store coming to Little Rock, Arkansas, late this year. Mark McFatridge, part of the ownership of the Little Rock franchise, has former Springfield ties and is making a transition out of the banking industry.

He previously worked for Little Rock-based Bear State Financial Inc. (Nasdaq: BSF), which converted in September to Bentonville, Arkansas-based Arvest Bank after an acquisition. McFatridge moved to Springfield in 2006 in a transfer with Regions Bank in Indiana. He held positions at Metropolitan National Bank, Guaranty Bank and OakStar Bank in Springfield, before resigning as CEO from Bear State in January 2017.

McFatridge and his wife Debbie, along with friends Connor and Heather Grimes in Arkansas, have partnered to buy the Hurts Donut franchise rights in Little Rock, Clegg said. Connor Grimes is a mutual friend of Clegg and McFatridge, and the Arkansas couples contacted Clegg with franchise interest.

“They are both very motivated couples, and they’re ready to kick this process off as quickly as they can,” Clegg said, noting the store is slated to open late this year and would be the 22nd in the franchise.

After retiring from his 30-year banking career, McFatridge said he and his wife were seeking investment opportunities. Initially, it led to the couple investing in a Little Rock’s Altitude Trampoline Park in May 2017. Hurts Donut followed this year, and depending on the first store’s profitability a second is possible.

“It’s an investment and it’s something that’s new and exciting,” McFatridge said. “At the same time, it’s a business. It’s not emotional and it can’t be.”

McFatridge declined to disclose terms of the franchise agreement or their planned investment. According to Hurts Donut materials, the franchise fee is $35,000 and royalties are 7 percent of gross sales after taxes.

In August, McFatridge attended an inaugural Hurts Donut ownership conference in Branson. Clegg said the three-day event, which included a vendor expo to showcase new products – both doughnut flavors and merchandising – was “75 percent business, 25 percent fun.” Representatives of all 19 stores currently open attended the conference, he said.

An unexpected connection
While Clegg’s friendship with one of his new franchisees resulted in a new location, he said connecting with Nagel was much more happenstance.

Nagel wasn’t looking for a new job and had never met the Hurts Donut owners before this summer. While staying at a Springfield hotel on business for Kum & Go in June, Nagel said he read Springfield Business Journal’s coverage of the doughnut company’s first-place finish in the Dynamic Dozen fast-growth awards. He emailed Clegg to compliment him. Later that day, Clegg replied and shared information about the open franchise development director position.

“I had no idea. I just wanted to reach out to them,” Nagel said of the company that started as a single shop in 2013 and last year topped $20 million in revenue. “It’s an American success story. … It’s just fun meeting those kind of people.”

Clegg and Nagel met the next day, and two months later he was officially on board. Nagel said the idea of working directly with ownership and having a hand in the franchisees was appealing.

“I’ll go wherever I need to go to support franchisee growth,” he said while on the road in New Orleans to help secure a franchise location in the Big Easy.

Clegg said New Orleans is one of the sites for new a Hurts Donut shop in 2019.

“Our plan is to have our entire calendar for next year full before the end of this fiscal year,” he said.

That means 12 new stores next year, Clegg said, which would fulfill the plan for 34 stores by 2020.

While Hurts Donut recorded revenue increases of 457 percent between 2015 and 2017, Clegg said the company this year has slowed down its sales growth strategy. The focus is on new revenue streams. As a results, the annual revenue projection of $21 million is on par with 2017 results.

“We’ll have some pretty exciting news coming up in probably the next 30-45 days,” he said, declining to disclose specifics.

That timeline would closely coincide with the company’s fifth anniversary.

Among the company’s development ideas is a specialty hot dog eatery and a pie shop farther down the line. The Zombie Dogs and Fries venture has a completed menu, according to its Facebook page. However, an opening date is not set as officials recently determined the original location, 310 Park Central Square, was too small and costly.

“We’re working with a broker to help us identify some spaces,” Clegg said.

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