FORT BONIFACIO Taguig City — Balikbayans [returning Filipinos] will no longer have to carry home boxes of Krispy Kreme doughnuts to their families with the opening of the Philippine flagship store in former U.S. military base.
Jim T. Fuentebella chairman of Real American Doughnut Co. Inc. franchise holder of Krispy Kreme in the Philippines; said the company is committed to roll out 29 more stores over a five-year period. While he declined to reveal his company’s total investment in the venture Krispy Kreme Doughnut Corp.’s Web site reveals “Our franchisees must possess the capital sufficient to fund the development of the market. We currently grant franchises on an area development basis. Specifically our area developers are required to build multiple stores [10 or more] in a market. The minimum net worth requirement is $30 million or $1 million per store to be developed whichever is greater. For instance a 15-store market requires a minimum net worth of $30 000 000.”
While a franchise just opened in Maui Hawaii there are no plans for a Guam store at the moment according to Christian Joseph franchise division director of Krispy Kreme doughnuts which is based in Winston-Salem N.C.
Sold at double the price of the pioneering doughnut franchise in the country Dunkin’ Donuts Krispy Kreme is expected to attract the residents of this upscale neighborhood — where a one-bedroom condo costs $118 000 — and employees of major companies’ headquarters. Fort Bonifacio [known as Fort McKinley during the American pressence in the Philippines] now dubbed The Fort lies north of Forbes Park the traditional enclave of Manila’s longstanding affluent in Makati City.
But Fuentebella says he isn’t positioning Krispy Kreme as a high-end product “because when you think about it we’re offering fresh doughnuts every day made from quality ingredients [the dough is imported from the U.S.] so you’re actually getting good value.” A hot original glazed doughnut costs 30 pesos [60¢] apiece the same as in New York while the rest of the flavors are priced at 35 pesos [70¢]. In other areas he said the Krispy Kreme costs much more — in San Francisco it’s 55 pesos [$1.10] apiece and in the U.K. 75 pesos [$1.50].
Of the 29 permanent flavors offered in the U.S. the Philippine franchise will be selling only 15 initially. “It was a logistical decision as we have to maximize the raw materials [used for the doughnuts] ” Fuentebella said. Only raw sugar will be bought from local sources the rest of the ingredients especially the pastry dough will be imported from the U.S. KKD also offers special doughnuts at certain times of the year which the Philippine franchisee will likely follow. “If they offer something for Christmas we’ll probably offer it also ” Fuentebella says.
The popularity of U.S. brands among Filipinos is such that even one homegrown store Go Nuts Donuts has long marketed its doughnuts as similar in taste to Krispy Kreme. Despite this RAD engaged in a high-profile promotional campaign giving away 100 000 doughnuts to schools companies media outfits and bloggers before the opening of the flagship store.
By December RAD will have its second Krispy Kreme store at the SM Megamall in Mandaluyong City. Other sites lined up include Alabang in Muntinlupa; Greenhills Shopping Center in San Juan; Greenbelt Mall in Makati City; the soon-to-be-completed Trinoma Mall in Edsa North Triangle Quezon City; the Ortigas Business District in Mandaluyong; and Cebu City. “Krispy Kreme demands Triple A locations. So we went to all the malls explaining to them what we needed. Eventually we decided on [The Fort] as the location for the flagship store because it had good visibility lots of foot traffic ” according to Fuentebella.
Unlike the brightly-lit and tiled floors of the outlets in the U.S. mostly located in gas stations the Philippine stores have been patterned after a Korean franchisee’s design and are built with laminated floors and cove lights to evoke a warm cozy atmosphere. But like the U.S. the “doughnut theater” will also be the centerpiece of the Philippine stores where customers will be able to watch the doughnuts being made and rolling out the conveyor belt. The popular red “Hot Doughnuts Now” neon button which tells customers that new doughnuts are available will also be a permanent fixture of local stores. The flagship store has 30 to 40 employees working two shifts a day.
Fuentebella declined to say how much his company paid for the Krispy Kreme franchise only that “it’s really expensive.” As a franchisee RAD is obligated to pay Krispy Kreme Doughnuts a percentage of the local profits but he also didn’t want to say what it is. He said it was “extremely difficult” to get the franchise rights due to the steep requirements of the parent company.
Fuentebella is managing director of Max’s Fried Chicken the longest running family-owned fried chicken restaurant in the Philippines. It was first opened in 1945 and was a favorite hangout of American troops in Quezon City. “It took us years to hatch this [Krispy Kreme local franchise] and we are happy that they decided on us. Perhaps it’s because our companies share the same values the same long tradition and we are in the food business. They were put up in 1937. Max’s was established in 1945. We treat our chicken like they do their doughnuts — complicated but with tender loving care ” Fuentebella said. Until 2000 KKD was a family-owned company like Max’s.
As for a possible Guam franchise Krispy Kreme doughnut’s Christian Joseph told the Journal there “are no immediate plans” for one. “We have to look at strategic markets. We did Korea as a way of entry to Asia; looked at Hong Kong to get a toehold into China; and the Philippines which was strategic for Asia Pacific…. We have to look at the whole population [of a country] and we would have to be totally convinced that there are enough people to sustain a franchise.”
Battered by financial difficulties and questions about its accounting practices in the U.S. Krispy Kreme Doughnuts told federal regulators in May that it was pinning its growth on franchising stores in the Middle East Western Europe and Asia. Other franchised stores have opened in Australia Hong Kong Macau and Japan. MBJ