Duck Donuts Franchise Costs $465K – $647K (+ 2024 Profits)

Duck Donuts, a renowned name in the donut industry, is celebrated for its unique concept of “Warm, Delicious & Made-to-Order” donuts. The franchise embarked on its journey in the scenic Outer Banks of North Carolina, with the first store opening its doors in Duck and Kitty Hawk.

This humble beginning soon transformed into a global sensation, leading to Duck Donuts becoming an award-winning brand recognized for its innovative approach to donut making. The franchise took a significant step in 2013 by opening its first franchise location in Williamsburg, VA.

Headquartered in Mechanicsburg, Pennsylvania, Duck Donuts sets itself apart with a business model that emphasizes simplicity, growth potential, and ease of operation within a compact store layout. This model has been designed to cater to various operational scenarios, including traditional stores, non-traditional locations, food trucks, and even catering services, offering franchisees multiple avenues for revenue. 

Type of Expenditure	Amount
Initial Franchise Fee	$40,000
Your Training Expenses	$0 – $2,500
Premises Deposits	$2,500 – $4,500
Professional Design	$6,000 – $15,000
Leasehold Improvements	$240,000 – $350,000
Signage	$7,800 – $13,500
Furniture, Fixtures, Equipment	$110,000 – $137,000
Computer Systems	$15,000 – $17,000
Initial Inventory	$7,000 – $10,000
Grand Opening Marketing	$12,500 – $15,000
Professional Fees	$750 – $5,000
Licenses and Permits	$100 – $2,000
Insurance	$3,000 – $5,000
Operating Expenses / Additional Funds – 3 months	$20,000 – $30,000
Total (excluding tenant allowance)	$464,650 – $646,500

Note: The table above provides a snapshot of the main costs associated with starting the most common franchise format (as disclosed in the Item 7 of the Franchise Disclosure Document). For a complete overview of all the expenses involved with the various formats offered by the franchisor, please consult the Franchise Disclosure Document.

Initial Franchise Fee

When signing the Franchise Agreement, the Initial Franchise Fee is $40,000. This fee is fully earned by the franchisor and due in a lump sum upon agreement signing. It is non-refundable under any circumstances.

Development Fee

For multi-unit development, a Development Fee is charged upon signing the Multi-Unit Development Agreement. This fee is $60,000 for a minimum of two Duck Donuts outlets, plus an additional $10,000 for each extra outlet agreed to be developed. Like the Initial Franchise Fee, this fee is non-refundable and fully earned upon payment.

Royalty Fee

The Royalty Fee is 5% of weekly Gross Sales through December 31, 2024, and increases to 6% of weekly Gross Sales starting January 1, 2025. This fee is payable weekly, based on the gross sales of the preceding week.

Required Minimum Expenditure for Local Marketing and Advertising

Franchisees are required to spend a minimum of 2% of their Gross Sales on local marketing and advertising. These expenditures must be pre-approved by the franchisor.

Brand Fund Contribution

Franchisees must contribute 1% of their Gross Sales to the Brand Fund, subject to an increase to no more than 3% of Gross Sales. This contribution is made monthly.

Relocation Fee

A relocation fee of $7,500 is due if the franchisor approves the franchisee’s request to relocate their Duck Donuts outlet.

Successor Term Fee

A fee of $7,500 is payable before signing a successor agreement to continue operating the franchise after the initial term.

Transfer Fee

The Transfer Fee varies depending on the circumstances of the transfer: $20,000 for standard transfers, with reduced fees for transfers to existing franchisees in good standing, entities owned and controlled by the franchisee, or immediate family members under certain conditions.

Training Fees

Initial training for up to four people is provided at no charge. Additional trainees are charged a fee of $500 per person. Franchisees are responsible for all travel costs associated with training.

Franchise Pros and cons

The Pros:

• 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.
• 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.
• 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.
• 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.

The Cons:

• Competition: The brand faces a lot of competition from donut brands such as Dunkin’ Donuts and Krispy Kreme
• No financing: The franchisor does not directly or indirectly finance its franchisees for start-up or development costs.

How to open a Duck Donuts franchise

Opening a Duck Donuts franchise involves several steps, designed to ensure you are a good fit for the franchise. Here are the main steps to follow to open a Duck Donuts franchise.

1. Explore and Research

• Begin by thoroughly researching Duck Donuts, understanding their brand, culture, and business model.
• Review the Duck Donuts franchise website for preliminary information and to understand their value proposition and what makes them unique in the market.

2. Initial Contact and Inquiry

• Reach out to Duck Donuts through their franchise inquiry form to express your interest in owning a franchise.
• Provide the necessary personal and financial information as requested to assess your eligibility and readiness for franchise ownership.

3. Attend Discovery Day

• Participate in Duck Donuts’ Discovery Day, an event that gives potential franchisees a deeper insight into the brand, operations, and what to expect as a franchise owner.
• Use this opportunity to meet the corporate team, ask detailed questions, and get a feel for the company culture.

4. Review Franchise Disclosure Document (FDD)

• Carefully review the Franchise Disclosure Document provided by Duck Donuts to understand all aspects of the franchise agreement, including fees, investment costs, obligations, and the support provided by the franchisor.
• Consult with a franchise attorney to help interpret the FDD and provide legal advice.

5. Secure Financing

• Evaluate the total investment required, which includes the franchise fee, start-up costs, equipment, and working capital.
• Explore financing options, which could include personal savings, bank loans, or partnerships. Duck Donuts may offer guidance or have preferred lenders familiar with their franchise model.

6. Finalize Location and Agreement

• Collaborate with Duck Donuts’ real estate team to identify and secure a suitable location for your franchise, taking into account factors such as foot traffic, accessibility, and market demand.
• Negotiate lease terms if applicable, and finalize the franchise agreement with Duck Donuts, committing to the terms and conditions of operating a franchise.

7. Complete Training Program

• Undergo the comprehensive training program provided by Duck Donuts, which covers operational procedures, management, food safety, and customer service standards.
• The training may include both classroom instruction and hands-on experience in an existing Duck Donuts store.

Disclaimer

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