Donut King eyes European expansion

Donut-King-OutletRetail Food Group has pulled the trigger on a broad European expansion for Donut King, inking a master franchise agreement that will see the brand open a store in Sweden before Christmas.

RFG’s international chief Mike Gilbert is overseeing a bullish roll-out for the donut retailer, which is being positioned for investment in key Western European markets, including the UK.

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Under its first agreement, Swedish café and restaurant business BC Food & Beverage AB will see stores open throughout Scandinavia, with inquiries already being fielded for individual stores within the first European network.

Speaking to Inside Retail Weekly, Gilbert revealed that discussions are already underway for subsequent franchise networks with a variety of other potential partners in the UK and other key markets in Western Europe.

“Europe as a whole is a very good fit for a lot of our brands, including Donut King, as it’s a very transportable and replicable model,” he said, adding that speed of expansion will be a focus once agreements are locked down.

“[Sweden] will be the first venture into this part of the world for Donut King, but it’s being designed with supply chain and support models that have an eye on a much wider region than just Scandinavia.”

He earlier said in a media statement that Scandinavia had been identified as a “key growth market” for Donut King’s brand, and that its master franchisee in Sweden represented a firm of “experienced Swedish businessmen”.

Gilbert will expand Donut King alongside Gloria Jeans, which has recently signed a master franchise agreement in the UK and is well-established in Eastern European markets like Poland, Romania and Ukraine.

Gloria Jeans is also looking for master franchise partners in Germany, Spain, Scandinavia and Benelux, advertising documents show. 

Donut King will focus on Western European markets with a localised menu, having been identified as a unique concept that will sidestep the intensely competitive café segment.

“We’re looking to fill some of the gaps where Gloria Jeans isn’t present in Western Europe, with something that’s a bit more unique,” Gilbert explained.

The move will see Donut King move into direct competition with US giant Dunkin’ Donuts, which has been expanding into Sweden since 2014, having announced plans for 30 stores by 2019.

Gilbert said Dunkin’ Donuts had found success in Europe, but that Donut King was better positioned to due its self-contained concept and the promise of Australian coffee, which is well regarded in international markets. Meanwhile, the theatre of the in-store donut cooking offers “a more sophisticated experience” for consumers. 

“The model is a lot stronger than some of the immediate competitors, who don’t offer a coffee product that’s nearly as high quality,” he added.

Dunkin’ Donuts is also engaged in a broader European expansion, which has seen it open stores in Germany and Austria.

Krispy Kreme also has an established presence in the UK market, but is yet to venture into Western Europe.

Gilbert said the UK market was an obvious choice for Donut King, despite the presence of intensified competition.

“The UK is an obvious market, with 60-70 million people and a culture that purchases food out of home. It’s a great opportunity.”

News of Donut King’s EU expansion buoyed investors somewhat, with RFG up 1.5 per cent on Monday, a welcome reprieve from the more than 38 per cent slide in its share price since the start of calendar 17.

RFG has been struggling to gain momentum with investors, having downgraded its full-year profit expectation late last month, sending its share price down more than 10 per cent in the following days.

The company expects underlying profit growth from Donut King, Pizza Capers, Michel’s Patisserie and Gloria Jeans to be around 15 per cent, down from 40 per cent in its initial forecast.

 

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