LaMar’s Donuts and Coffee is a famous donut chain with over 24 stores spread across five states—Arizona, Colorado, Kansas, Missouri, and Nebraska. Ray Lamar, who had been perfecting his original doughnut recipe since 1933, introduced the first-ever LaMar’s Donuts in Kansas City, Missouri, in 1960. Aside from life-changing donuts, the chain serves other bakery products such like cinnamon rolls and fritters.
How Much Does it Cost to Open a LaMar’s Donuts w/ Fee’s?
LaMar’s Donuts’ franchise cost is $28,500 for a 10-year renewable agreement, while the total initial investment could range between $300,000 to $500,000. You’ll also need a liquid capital of at least $150,000 and a net worth of $350,000 to be considered for this franchise
Still interested in what it takes to run a LaMar’s Donuts? I did an investigative report into the advantages, risks, and fees associated with running this franchise to help you determine if this is the right option for you. I have no direct ties or advertising relationship with this company and am not in any way being compensated by the company to conduct this review. These are my unbiased opinions of the concept after reviewing the companies financial details and history.
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Financial Requirements and Fees
As you plan to franchise this business, one of the thing you need to understand is the financial requirements and costs of the company. I wanna save you the hassle so I listed all the basic financial requirements to help you learn about the costs of establishing your own LaMar’s Donuts business below. But first, let me explain some financial terms you’ll encounter in this section.
- Liquid capital – refers to the entire amount of cash you will need on hand and is available to use at any time.
- Net worth – refers to the value of all your non-financial and financial assets minus the value of all your outstanding liabilities.
- Total investment – is the total capital or the total money you will need to put into the franchise over time to get it up and running.
- Franchise fee – refers to the amount you must pay to the franchisor to use its brand and resources.
|Fees or Expenses||Financial Amount|
|Total Investment||$300,000 to $500,000|
To meet the financial requirements of this donut chain, you will need at least $150,000 in liquid capital and a total net worth of $350,000. Moreover, the total investment in this franchise could range between $300,000 to $500,000. LaMar’s Donuts’ franchise cost is $28,500 for a 10-year renewable agreement.
It is important to note that before diving on a franchise opportunity, you should thoroughly assess the total cost of the business. Some franchise opportunities may advertise minimal franchise fees, but there are also many other expenses to consider such as training fees, technology fees, payroll fees, and so on.
Average Sales / Revenue Per Year
According to Business Journals, the average Denver location generates roughly $680,000 in annual sales, while outlets outside the state generate around $550,000 annually. However, this data was taken from an article published almost two decades ago. There is no newly published data available from reliable resources and LaMar’s Donuts also doesn’t make sales and profit publicly available. As a result, the best I’m able to do is estimate revenue quotes in interviews with the company.
LaMar’s has received multiple awards and positive reviews for their handmade donuts from publications such as The New Yorker and Gourmet magazine. LaMar’s also had the first donut to be rated and acclaimed by Zagat, a rating system that restaurants and guests rely on for trustworthy restaurant ratings and reviews. Many people refer to LaMar’s Donuts as “simply a better donut.”
LaMar’s Donuts has continued to operate throughout the pandemic, although with closed indoor dining areas and a limit on the number of customers allowed in each store at a time. Fortunately, donuts and coffee are easily sold as a takeout item. This makes the company more resilient during lockdowns.
LaMar’s Donuts Franchise Facts
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|Incorporated Name:||Lamar’s Donuts and Coffee|
|Industry:||Donut Industry, Coffee Industry|
The origins of LaMar’s Donuts can be traced back to 1933, when Ray Lamar, then 17, began working as a fryer at the Jack Frost Donut Shop. When World War II interrupted his career, Ray Lamar had worked his way up to become a partner at the said company. He experimented with new types of doughnuts, criticizing the fact that it was difficult to get anything other than the plain flavors. Back then, donuts were either plain or sprinkled with powdered sugar or granulated sugar
By the early 1940s, Ray Lamar had added new varieties to the menu, including devil’s food donuts, chocolate frosted donuts, and an apple spice donut. “We came up with a fruitcake doughnut and actually ground up citrus fruit and put it in the batter…people didn’t like it too well.” the founder once recalled.
Nonetheless, Lamar took that innovation with him when he started his namesake donut store in a converted gas station on Linwood Boulevard in Kansas City, Missouri, in 1960. The handcrafted doughnuts were instantly loved by the locals, and LaMar’s Donuts eventually became a Kansas City institution. The shop was well-known for its fresh, delectable doughnuts, and the employees never turned down a special request.
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The company was so successful that Ray Lamar and his wife Shannon decided to franchise it in 1990. Just within months of the offering, LaMar’s Donuts had 15 new Kansas City branches lined up. The donut chain now has 24 locations spanning throughout five states: Arizona, Colorado, Kansas, Missouri, and Nebraska.
The chain has been featured in Zagat’s Survey, The New Yorker, and Gourmet Magazine, and was named one of America’s five best donuts by AOL Cityguide in the summer of 2008. The founder was a guest on The Tonight Show with Jay Leno, The Today Show, and Good Morning America.
How Much Profit Does A Franchisee Of LaMar’s Donuts Make Per Year?
The amount a donut shop can make yearly is determined by many factors, including the lease/mortgage, inventory supplies, the number of employees, and the cost of utilities. All of these factors impact the bottom line of a donut shop. LaMar’s Donuts doesn’t publish official sales and profit figures, but it is estimated that a standard donut shop franchise located in a high-traffic location can earn between $120,000 – $150,000 in profit annually.
Given the size of the donut industry, which is worth roughly $10 billion per year, there is a good probability that LaMar’s Donuts will be profitable. The brand also stands out in a crowded market, having been highlighted in publications such as The New Yorker, Gourmet, Better Homes and Gardens, and Town and Country.
Donuts, generally speaking, are also a high-margin product. It’s not uncommon for a donut to have a margin of 75% – 85%. This means if you sell a plain donut for $2.00, you can expect to have at least $1.50 left over in profit.
Coffee has a good margin on it as well. According to one estimate, you can expect to make around $.60 in profit per cup of coffee sold. Keep in mind there are more costs associated with serving a cup-of-joe than you might think including the beans, paper cup, plastic lid, creamer, sugar, napkin, and filtered water. There’s also overhead like lease, taxes, and labor to be considered. All that being said, running a donut shop is appealing from a profitability perspective.
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Advantages of Franchising LaMar’s Donuts
Aside from the financial requirements and profitability, you also need to know what separates a LaMar’s Donuts from the other donut shops in your area. Here are a few of the distinct qualities of a LaMar’s Donuts franchise.
Cheaper Franchise Fee
The franchise costs of opening a LaMar’s Donuts location is lower compared to other popular donut franchises. The company will only require a $28,500 franchise fee, $150,000 of liquid capital, and $350,000 of net worth. In contrast, Dunkin’ Donuts will require a franchise fee that ranges from $40,000 to $90,000, liquid capital of $250,000, and a net worth of $500,000.
Another comparison is the Shipley Do-Nuts that requires a $35,000 franchise fee, $200,000 liquid capital, and net work of $600,000. While the overall startup costs vary depending where you open (cost of land in the area, permits, location, and other factors) LaMar’s donuts low startup costs compared to alternative food franchise opportunities.
Established Donut Brand
If you grew up in Kansas City, you grew up with this established donut brand. The place is a Kansas City institution similar to BBQ. The donut brand has clearly stood the test of time locally and the company has expanded to two dozen LaMar’s locations.
Lots of Awards
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They have also appeared on numerous award lists, some of which are Travel Channel’s Best of Missouri in 2017, Best Restaurant in Kansas and Denver in 2016 by Zomato.com, Best of KC by 435 Magazine and Pitch Magazine in 2014, Colorado’s Best Food and Beverage Brand by Yahoo News in 2014, Best of Omaha in 2016 by Omaha Magazine, and Feast Magazine’s best donut shop in 2016. You’d he hard-pressed to find a donut shop with better culinary credentials than this place.
Proven Operations System
Great franchisors provide systems and assistance so that franchisees can live up to the brand standards and meet customers expectations. So when choosing a franchise system to invest in, it’s important to consider the level of support you will receive.
The good thing is that LaMar’s Donuts already has a proven operation and marketing plan. The company gives their franchisees step-by-step guidance on every part of the business, such as management and accounting procedures, hiring and personnel policies, daily operations procedures such as opening and closing the store. The process is the secret behind these one-of-a-kind donuts is the process.
Advertising and Marketing Guidance
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Advertising and marketing assistance is one of the most effective strategies to boost revenue. The good thing is, aside from operations support, LaMar’s Donuts also provides their franchisee’s advertising and marketing guidance to help you attract new customers.
LaMar’s franchise program offers a vast library of advertising and marketing resources such as ads, point-of-purchase material, web presence, press releases, radio spots, and loyalty cards.
Challenges of Franchising LaMar’s Donuts
As with any business, you will inevitably confront challenges as a franchisee. But the important thing is to be aware of the challenges of a company before diving in. Here are the challenges of owning a LaMar’s Donuts franchise from my perspective.
Because of the dominance of other donut chains with menu items that extend beyond donuts, the donut market is particularly competitive. Dunkin’ Donuts is one of the strongest competitors that has established itself not just in the United States but internationally. Dunkin’ specializes in coffee and doughnuts but has subsequently expanded its menu to include products other than donuts. They are also known for being extremely cheap with a plan donut still only costing $.99. This concept has strong appeal to the budget oriented part of the market.
No International Stores
Unlike many other donut franchises, LaMar’s Donuts has only operates in a few parts of the United States. Even if the brand already has a good following here, having overseas stores can help the company grow and become more well-known and popular. This can help with marketing and business growth because having international locations enables the franchisor to establish and enhance its brand as a global competitor and hedge reliance on the U.S. consumer.
Limits Your Creativity
Franchises like LaMar’s Donuts have a predetermined brand. This means that everything that has something to do with branding and innovation is considered to be predetermined, and as a franchisee, you are not permitted to make any changes to the existing company system unless allowed by the franchisor. If you want to use your business as an outlet to exhibit your creativity and talents, then LaMar’s Donuts franchise is not suited for you. If you want to be creative with donut flavors and styles, start an independent donut shop instead.
Is The LaMar’s Donuts Franchise Right For You?
To determine whether this franchise opportunity is right for you, start by conducting a self-assessment. In other words, be honest with yourself about the realities of operating a donut shop.
You should consider investing in a franchise in a chosen field that you will stay interested in for at least the next ten years. The ideal franchisee candidate will have a passion for the brand, entrepreneurial spirit, and experience in sales, marketing, and restaurant management.
What is an alternative LaMar’s Donuts franchise?
There are many other good alternatives to LaMar’s Donuts that have experienced much faster growth and have more recognized brands. However, most of these have more expensive franchise fees and higher net worth requirements that in part support these national advertising campaigns.
Some of these alternatives are Shipley Do-Nuts or Dunkin’ Donuts. These companies offer the similar menu items as LaMar’s Donuts, but have in the case of Dunkin’ have more than 13,000 locations around the world. That’s broad brand appeal right there.
Shipley Do-Nuts has an initial franchise fee of $35,000 while Dunkin’ Donuts has a franchise fee that ranges from $40,000 to $90,000. I hope this report gives you better insight into the advantages and disadvantages of this concept.