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Duck Donuts Goes From a Whim to a Plan

Russ DiGilio wanted a good, made-to-order donut during his vacations to the Outer Banks of North Carolina.

He ended up with his own donut chain called Read the articleDuck Donuts.

Indeed, DiGilio had no intention of becoming a full-time donut guy. He had been in the healthcare business for more than 30 years and figured his career would end that way. But his family wanted to recreate an experience they had growing up, getting made-to-order donuts on the Boardwalk in New Jersey.

“It was on a whim,” he said. “There were no donuts” on the Outer Banks. “We thought this was a great opportunity.”

That whim has turned into a 78-unit donut chain that has locations as far off as Texas, Missouri, Minnesota and even California—growth that came largely through referrals.

But now the Mechanicsburg, Pa.-based company plans to get more deliberate about that growth. It has hired a second person in its development team and is intentionally looking for qualified operators to open up locations in existing markets or in new ones where the company believes it will do well.

“Up until now our growth has been totally organic, with people having an experience in Charlotte or the Outer Banks and finding a connection to what we do,” DiGilio said. “We’re shifting. We’re becoming more intentional in our growth.”

DiGilio and his family lived in Pennsylvania and had a rental property in the Outer Banks when they saw an opportunity to open up the donut shop. They spent time developing the brand and the concept, which has a “beachy” feel and offers donuts that are made on-demand with toppings customers choose.

They opened the first two locations in 2007: one in Duck, N.C., (thus the name Duck Donuts) and another in Kitty Hawk, N.C. It would take a while for those shops to take hold with the donut-eating public, notably the vacationers frequenting the area in the summer months.

“They struggled the first couple of years,” DiGilio said. “But by the third year it caught on. And from there we built some momentum thanks to people coming there on vacation.”

The company opened two more locations, and, after five years and four successful locations, DiGilio decided to switch careers. “I was just doing this for fun,” he said. “But the response was so overwhelming I thought that I’d kick myself if I didn’t try to give it a go.”

DiGilio admitted that the company had to learn a lot about its business on the go. “We made some mistakes early on,” he said. “We’re not making as many anymore. It was a lot of trial and error. But we continue to make adjustments and keep it simple for our customers.”

The company began franchising, at first contacting people who had written to Duck Donuts over the years. A couple in Williamsburg, Va., not far away from the Outer Banks, was the first to sign up. The location worked, as did others in Virginia Beach and Richmond, Va.

Duck Donuts then got to Raleigh, N.C., where an operator successfully opened three locations. “That’s when we knew that if we’re in the right market with the right franchisee that this concept will work,” DiGilio said.

Duck Donuts has found that tourist areas are particularly receptive to its shops, given the experience customers have inside—everything is behind glass and customers can watch their donuts being made.

“We have really mastered the resort and tourism market with our brand,” DiGilio said. “Some are seasonal, some are year-round. But those markets show tremendous return on investment.”

Duck Donuts is different from most of its competitors in that none of the donuts are premade. “When you go into our store you won’t see any cases of donuts,” DiGilio said. “There’s a glass panel along the entire process for anyone to watch. Nothing is behind a wall. It’s entertaining.”

“It’s not just a great tasting donut and coffee,” he added. “It all started with the experience, really. We’re trying to tap into the emotional part of it, about reminiscing about family vacations.”

It seems to be quite a difference, going from the senior care industry to donuts, but DiGilio said there are more similarities than you’d think. “I found great satisfaction in the senior care industry,” he said. “It was more serious. But we wanted to create peace of mind for families and happiness.

“I’m still dealing with families. We’re trying to create happiness and memories—good memories—in the donut business.”

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