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Former Mr. Rooter GM tries hand at Duck Donuts

“A sweets-oriented country” is how Marcial Dieguez-Acuna describes his native Chile, and given what he said next, that’s an understatement. There’s 5 o’clock tea, or “té con leche,” where cakes and pastries are also eaten, and, “after you’ve had the main meal and dessert, people will put out another tray of sweets with coffee,” says Dieguez-Acuna.

That culture, coupled with a growing foodie scene and Chileans’ desire for foreign brands, make it ripe for entry by Duck Donuts, the donut franchise Dieguez-Acuna is bringing to the country under the umbrella of his company, Inversiones Rio Potomac Ltd. Through OBX Alimentos, the master franchisee group he set up under Rio Potomac, Dieguez-Acuna will initially open 10 Duck Donuts locations in Chile over the next four years, starting in the capital of Santiago.

“Chile has a growing donuts business,” says Dieguez-Acuna, pointing out Dunkin’ has had a presence in the country for 20 years and began accelerating development five years ago to reach 80 locations. “Donuts are also becoming a product you see more in supermarkets.”

But perhaps the biggest positive indicator came first-hand, when Dieguez-Acuna, who lives in Virginia, saw huge lines out the door of the Duck Donuts shop in Arlington and watched his son experience the made-to-order treat. “The biggest driver behind this was the reaction I got from my 2-year-old son, Simon,” says Dieguez-Acuna.

‘A donut experience’

Duck Donuts—named for the North Carolina town in which it was founded, not the waterfowl—was Russ DiGilio’s solution to a lack of made-to-order donuts available in the state’s Outer Banks region. A former healthcare executive, he opened the first location in 2007 and, following the launch of franchising in 2013, the brand now has 73 stores.

Kids love to watch the donuts as they’re carried down the line, dipped, topped and served warm. That’s the donut experience, says DiGilio, Duck’s CEO.

“That’s our niche—you watch the entire process,” he says, explaining how the brand’s vanilla cake donut is dipped in a coating such as cinnamon sugar, then topped with the chosen sprinkle and drizzled with, say, salted caramel.”

“Quite frankly, there’s no one doing donuts the way we do them,” he continues. “We don’t case any donuts, everything is made fresh.”

With plenty of growth in the pipeline domestically, DiGilio wasn’t actively looking to take the franchise outside the United States. In fact, the founder was hesitant after first being approached by Dieguez-Acuna and the two went through a lengthy due diligence period before signing the agreement.

“Marcial is a great guy, but that only goes so far,” says DiGilio, but as he learned, Dieguez-Acuna had the financing and business experience to back up his interest.

From Mr. Rooter to Duck Donuts

Fifty years ago, Dieguez-Acuna’s father and uncle launched what would become Disal Chile, a multimillion-dollar international business focused on environmental engineering and waste management. The company was also the master franchisee of Mr. Rooter, and for several years Dieguez-Acuna was the general manager and helped develop the franchise.

“Sales and marketing is what I’ve done for most of my professional life,” says Dieguez-Acuna, and when the family sold its controlling stake in Disal he started looking for new ventures. While he didn’t have foodservice experience before Duck Donuts, business partner and COO Juan Aguila opened multiple restaurants in Chile, and consultant Felipe Infante was part of the franchisee group that brought Johnny Rocket’s and Chuck E. Cheese to the country.

All this impressed DiGilio, and after he and his executive team spent a week in Santiago learning about the culture and “getting a feel for how business is done there,” DiGilio says he was convinced Chile “would be a good first try.”

“Marcial, no pun intended, whet our appetite,” he continues. Chileans “love the way we present ourselves—they gravitate toward American brands.”

Making another reference to the country’s foodie scene, Dieguez-Acuna notes consumers are hungry for more elaborate, sophisticated products such as those offered by Duck Donuts, and the brand’s interactive concept will appeal to children who in turn influence their parents’ decisions.

“The kid focus, the family focus is big,” says Dieguez-Acuna. “Chileans do a lot of purchasing around kids.”

Chile’s adherence to international trade laws and the country’s strong alignment with U.S. economic policies make it an attractive market for franchise brands. Consumer spending continues to increase and, thanks to social media, excitement is already building in advance of Duck Donut’s debut at Alto Peñalolén, a new open-air mall in Santiago.

“Everyone is glued to their phone 24/7 and not just younger people,” says Dieguez-Acuna of Chileans’ smartphone addiction. “Social media has really accelerated the buzz.”

The opening menu will mirror that of Duck Donuts in the U.S., with incorporation of local flavors later on. The design, however, will include more seating compared to traditional locations because diners in Chile prefer a sit-down experience.

“If they’re paying to buy something in a restaurant, they want to sit in the restaurant,” says Dieguez-Acuna. He’ll continue to hunt for locations with high foot traffic, such as strip malls and open-air shopping centers, along with real estate with a high commercial and residential mix.

“Sixty percent of people are on foot or are taking public transit,” notes Dieguez-Acuna. “Santiago has an extensive metro system.”

Duck Donuts has invested heavily in its corporate infrastructure and training, stresses DiGilio, and his team will travel to Chile a week before the first opening “and stay until a comfort level is achieved.”

As a result of this first international deal, Duck Donuts is putting more resources behind its growth both domestically and abroad, hiring a franchise salesperson for the first time.

“We need to be more intentional in our actions” versus relying on organic growth, says DiGilio, “so we’ve made the decision to aggressively seek franchisees.”

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