Bite by Bite

For most businesses, the first year is about survival. For Hurts Donut Co., a second shop in a neighboring state is on the plate.

Hurts Donut next month is slated to open its second location in a busy retail district across the street from the University of Oklahoma in Norman, Okla.

Co-owner Tim Clegg said he and his wife, Kas, are spending between $50,000 and $60,000 out of pocket to open the roughly 2,700-square-foot specialty doughnut shop in the city about a week before some 30,000 students start the fall semester.

“I lived in Norman in the early 1990s and went to school at OU,” Tim Clegg said. “It’s a good fit with our business model. We have been successful with our college demographic.”

Hurts Donut – a name born from a homonym in a classic joke – splashed on the Springfield scene last fall with its creative flair featuring gourmet doughnuts topped with M&M’s to Fruity Pebbles to Rainbow Nerds. The company, which opened its doors Nov. 18 on Park Central West, generated over $600,000 in revenue through the end of June, Clegg said, far surpassing expectations.

He said first-week sales were expected to hit $8,000 or as much as $16,000, if it really took off. But the first week brought in $23,000, and the company sold $140,000 by year’s end.

During the first six months of 2014, he said Hurts has generated $480,000 in revenue, though he said June sales were down roughly 20 percent compared to May, attributed to the end of the spring semester.

“We had originally said if we do well, we’d look at opening a second location in three to four years. It was just shy of six months that we said, ‘Let’s go ahead and sign the lease,’” Clegg said.

Management from afar
The expansion comes as the Cleggs finish a buyout of the interest in Hurts Donut from business partners Ross and Kim Tracy for an undisclosed amount. The Cleggs run the doughnut shop with 25 employees, while the Tracys hold day jobs – Ross at Arc of the Ozarks and Kim as a paralegal.

The Cleggs also own a local Sno Biz franchise, and Tim Clegg said money generated from that business is funding the investment in Norman.

Bill Donoher, head of Missouri State University’s management department and an associate professor, said there are pitfalls for new business owners growing beyond their core markets.

“This is going to be a different challenge for them than simply opening a second location in Springfield,” Donoher said. “That can be difficult enough sometimes, but now you’ve got the distance factor involved.”

He said, generally, businesses that open a second store have a host of issues to sort through and the further apart geographically, the more management challenges arise. For example, he said there could be supply challenges for products and equipment, and training and management issues are key to properly duplicating systems.

“Distance adds a third layer of complexity, so they are definitely taking a couple of steps up the ladder of difficulty,” Donoher said. “That’s not to say it won’t work or can’t work, it just highlights the challenge.”

Clegg said Hurts Donut uses a nationwide product supplier, and equipment was purchased from a bakery closing in St. Louis. The Cleggs were in Oklahoma last week to narrow down their manager candidates.

Donoher said most businesses look to grow first in the city where they have built a reputation, but if the Cleggs are familiar with Norman, Okla., that could help ensure success in the market 20 miles south of Oklahoma City.

Clegg said his interest in Norman’s Campus Corner retail center was enough to roll the dice.

“It’s directly across the street from the university. It’s basically where everybody goes between classes, as well as it is one of two nightspots in Norman. There’s lots of restaurants and clothing stores up and down the street,” he said. “There are bars and music venues, too, so it lent well to our 24-hour business model.”

The new store is designed with two outdoor patios and an espresso bar – something he said he didn’t have room for in the roughly 1,500-square-foot space in downtown Springfield.

Clegg declined to provide revenue estimates for the Norman store but said he expected it to outpace Springfield sales in its first year. To protect the brand moving forward, he said they would likely only open one store per city.

Hole food fad?
Not every specialty food shop makes it.

Chasing recent national trends, a rush of new frozen yogurt and cupcake stores have opened locally, and several did not survive the honeymoon. About half of the 15 frozen yogurt and cupcakes stores launched in the Springfield area since 2011, remain in business today, according to Springfield Business Journal research. The closures include a mix of franchise and homegrown operations, including Gelato Mio, Cherry Berry, FruityLand and two Gigi’s Cupcakes stores.

Perhaps the biggest shock to the cupcake system was national chain Crumbs Bake Shop Inc. (Nasdaq: CRMB) shutting the doors July 7 on all of its 48 stores following $18.2 million in losses last year.

The reality of trends is close to home for Hurts Donut, which operates in space vacated by Fria, a self-serve yogurt shop among the casualties. Clegg acknowledged he’s mimicking boutique doughnut shops he’s seen on the coasts, but the clever name is wholly unique.  

Donoher said a key for any growing business is that it remain distinctive and isn’t simply following trends.

“Fad-ish trends are riskier,” Donoher said. “Distinctiveness is what you aim for because without it, you are just one more purveyor of whatever it is we’re talking about. You always have to focus on distinctiveness, on a value proposition that sets you apart – and one that ideally, you can defend.

“Because the minute that someone else sees that you are successful, they will attempt to imitate.”

In Norman, the Cleggs are replicating their approach in Springfield by building buzz through social media ahead of opening day.

“So far, we are seeing some good results,” he said.

About a month before the target opening date of Aug. 10, the Norman Hurts Donut Facebook page has 1,150 likes – about the same number when the Springfield store launched. Now, Hurts Donut’s main Facebook page has over 14,200 likes.

Clegg said the company purchased a second former ambulance wrapped in  multicolored sprinkles for “emergency” deliveries and put it in front of the new store site to attract interest. People already are taking pictures with the truck and posting them on Instagram and Twitter, he said.

Clegg said while Hurts will deliver to businesses – with a minimum order of a dozen doughnuts plus a $3 delivery charge they have no interest in selling doughnuts wholesale to convenience stores. The trucks largely serve as marketing tools.

“I’m old school, I guess, but I believe we should not be devaluing our service,” he said, adding he wants to draw people to the stores. “Fun and entertainment are part of the full experience.”

Clegg said don’t be surprised if he announces a third location by the end of the year.[[In-content Ad]]