Krispy Kreme owners optimistic about franchise’s future

ON THE MAIN STREET of a little neighborhood sitting on the edge of Philadelphia’s border bleeding into suburbia, a once popular pastry factory is resurrecting its namesake and the hot glazed doughnut.

Standing underneath the “HOT NOW” sign on the front lawn, standing amid gorging customers and intrigued blue suits on a soft Fall morning yesterday, the store’s owners are joined by a councilman, a cop, a general manager and a CEO — each placing a hand on the oversized novelty scissors and cutting the long, red tape in front of a small, pale-brick box of sugar and spice.

It’s official. Krispy Kreme is back in business.

“To our friends and our corporate partners from Krispy Kreme: we are very thrilled to be here and we are looking forward to a great deal of success,” says Brian Zaslow, the shorter, bearded-man in the middle wearing a gray sport coat and rectangular glasses, representing half of the store’s ownership.

Keith Morgan is Zaslow’s cousin and partner. Morgan’s the taller, rail-thin man with the slicked back gray hair to Brian’s right.

“Keith and I are thrilled to be here and to have a great opportunity to have a really wonderful store and we appreciate everyone’s help who has been here today, so thank you all for coming” Zaslow says.

The two Philadelphia natives are owners and operators of Dough Nuts for Doughnuts, LLC, the franchisee and area developers for Krispy Kreme in Philadelphia and the surrounding 13 counties.??Morgan is the acting CEO of Doughnuts, LLC, having served as CEO of his former company, Horsham-based AAMCO Transmissions, which he recently sold after his father co-founded it in 1963. Zaslow, a 1973 Northeast High School alum and former vice president of marketing for Aramark, is the new company’s president and managing director.

Their investment in Krispy Kreme, located at 7855 Oxford Ave. in Fox Chase, will be the temporary stronghold as the chain begins opening 21more stores in the next seven years in the Greater Philadelphia market, which includes Southeastern Pennsylvania, Southern New Jersey and Northern Delaware.

Their investment is in a Philly-area franchise that fell into bankruptcy in 2005, followed by the closing of Krispy Kreme locations in Langhorne, Montgomeryville and Springfield, leaving155 employees unemployed in its wake.

Keith takes a reluctant step froward and is the last to address the audience: “Well, we are very proud and happy to be here in Fox Chase. And we look for many, many years of success, so thank you for your support.”

He turns to face his cousin and throws his hands up. That’s all he’s got. Hopefully, their venture isn’t so short and sweet.

IN NOVEMBER 2002, BUSINESS WAS BOOMING. Sitting on top of Cottman Avenue adjacent to Roosevelt Mall, the spacious, white factory featured a roomy dining area, a convenient drive-thru and an intricate baking display; but a small menu.??Dozens upon dozens of Krispy Kreme fanatics packed earmuff to earmuff that first morning at 5:30 a.m. in anticipation of the opening of the sweet sensation.

A long, white tent was erected to contain the crazy. Ropes organized the anarchy days after the inaugural lighting of the “HOT NOW” sign for those aching to get a whiff of the new-doughnut smell.??But like all other over-hyped balloons, the interest deflated. Just three years later, on Dec. 26, 2005, the owners of the doughnut emporium announced the franchise was broke. Stores all over the area closed their doors.?? But this is 2010.

This is the smarter, more advanced evolution of that sweet sensation. This is the rare occasion when the sequel out-draws the original. The new owners are positive. They’re sure. Just ask them.

Morgan is sitting on a Phillies-red pleather upholstered club chair in the lounge area by the front door, one of the many new aspects of the revitalized doughnut shop. Several couches and coffee tables occupying a small space are intended to make the store a destination for leisure and relaxation; a glass wall serves as the backdrop. Morgan crosses his long legs and puts his hand to his forehead. Why will this time be different?

Watch our video for an interview with Krispy Kreme’s chef, and to view footage from the interview below with owner Keith Morgan.

NEast Philly: Why will this store succeed when the others failed?

Keith Morgan: There is a very different business model today. The economics are much more attractive because we have a smaller footprint store and so we’re making less investment there. We also have a much more broader menu here with bagels and muffins and broader options with yogurt, granola, oatmeal, fresh fruit, organic smoothies, things like that. We also have a very broadened menu offering with coffee, latte, expresso, cappuccino; it’s a very premium coffee Krispy Kreme is offering, very quality roast. Our objective is that people obviously come in for doughnuts, but to experience the taste of our coffee and come back time and time again for our broader line. We didn’t have that selection before.

NEP: A popular item with consumers that your competitors like Dunkin’ Donuts and Wawa sell is the breakfast sandwich. Did you ever consider making a line of breakfast sandwiches a part of this improved business model?

KM: They have and probably in the long run we will, but for right now it’s not something the company offers. So pretty much we are a complete breakfast line just short of hot breakfast sandwiches. I think it will eventually evolve into that, sure.

NEP: Have you taken a look at the causes of old store’s demise and figured out what went wrong and why?

KM: That store did well; it was more corporate issues, in terms of internal issues such as over-expansion and overemphasis on pushing the product through what was called the whole-sale channel. So you would be able to get a dozen doughnuts at grocery stores, or even convenient stores and gas stations, and that model doesn’t exist anymore in our market, so you’re getting a freshly made product here daily, rather than something that has been on the shelf for a while.

NEP: Why Fox Chase? What made this area so attractive even though the previous store was so close and yet inevitably failed?

KM: Well, we we wanted a location with obviously a free-standing store with a free-standing drive-thru with existing zoning. This was a Popeye’s chicken that closed. This is a nice strip here because there is a McDonald’s, a Rite Aid, a Wawa, which is tremendous. And there’s a gas station, so now we sort of complete the avenue and with the Fox Chase train station, it’s a good retail strip for the community. Also, Fox Chase is a wonderful, blue-collar working class neighborhood. It has tremendous population numbers with 300,000 people in three miles, 600,000 in five miles; so it’s a phenomenal population density. We feel this is a good place to start to rebuild the brand.

IT’S BEEN A LONG DAY. Zaslow has removed his sport coat and leans on his elbow up against a condiment island in the middle of the store. Speaking less and less with his hands, his attention and eyes begin the wander. He peers around the packed 3,500-square-foot store.

He surveys the digital menu boards, the traditional seating dining area, checks out the young adults sitting on the sofas in the lounge, some surfing the Internet on their cell phones using the wireless connection while others watch Sports Center on the flat-screen TV above their heads. He must be thinking about that first time he remembers seeing the old store on Cottman Avenue and how “it looked so cool.”

He must be thinking about watching the doughnut-making process from start to finish for the first time through the glass walls.

He must wonder if the customers are leaving happy.

For sure, Helene Ling is leaving happy. “I’m kind of embarrassed. I live in Jersey and came all the way here for doughnuts,” Ling said. “It’s really addicting. My boyfriend can eat a whole dozen by himself. My dad loves them. We saw the sign for the countdown, and I said, ‘I’m going.’ I love them, I’m trying to lose weight so I’ll have one, maybe, but I love them. Once you start it’s hard to stop.”

Brian Zaslow and Keith Morgan hopes she’s right.

This story was written by Northeast native Tom Rowan, who is reporting for NEast Philly as part of our partnership with Temple University’s Philadelphia Neighborhoods.