Randy’s Donuts Franchising With or Without Giant Donut
If you have good eyes, you can spot Randy’s Donuts' massive 32-foot donut as you descend into Los Angeles. For everyone else, the iconic donut dots the tapestry of pop culture from "Futurama" to "Iron Man" and a handful of really bad '80s movies.
Now, after 66 years, the concept is ready to franchise with a new owner at the helm. Mark Kelegian, owner and president of Randy’s Donuts, said it was a serendipitous acquisition.
“It’s kind of a funny story, back in October of 2014, I happened to just be on the internet and I was looking at a website called BuyBizSell,” said Kelegian. “But I was looking for a business potentially for my daughters because my other business are in casinos.”
He said he saw a listing for a “nearly 60-year-old well known restaurant,” which he thought might have been one of the classic delis in town, but turned out to be Randy’s Donuts, much to the chagrin of other investors in the area.
“I knew there would be quite the clamor for it. So as soon as I learned what it was, I asked what the price was and I paid it and that was that. I closed the deal before anyone else could get their hands on it,” said Kelegian. “For the next few months, I was inundated with phone calls on are regular basis from people wanting to buy it.”
Kelegian said he asked his neighbor, who just happened to be legendary restaurateur Bill Allen behind Fleming’s Steakhouse and the former CEO of Outback Steakhouse, how to keep it going right.
“I asked him what really was the seminal question: How does any restaurant that’s been around for over 50 years and has a reputation—how does it fail,” said Kelegian. “He said it just wasn’t the same anymore. You peel that back and just about in every case a new person came in or a new generation and they thought they were smarter than everybody else. They thought they were smarter than the guys running it successfully for 50 years. I took that very much to heart. We bent over backwards not to change a thing.”
Aside a fresh coat of paint, he said everything from the expensive flour to the donut bakers making donuts by hand in back remained. The biggest change was a line of premium-topped donuts and some more service windows at the original location to keep up with the equally iconic lines.
He said he spent two years in the business learning every aspect of the concept and spent another year getting the franchise foundation together.
At the three new locations, he said he’s seeing strong volumes, projecting average unit volume between $1 million and $1.2 million for inline locations and $2 million for drive thru locations. Investments come in between $370,000 and $500,000 for inline locations when including the $35,000 franchise fee.
He said it’s not a deal breaker if a location can’t support a massive donut.
The one thing that everyone asks is, ‘Do we need the giant donut?’” said Kelegian. “We’ll fight hard as hell with you to get that but if you can’t do it, we can do a smaller donut or a donut on the ground. It’s all about making the customer get back to that experience of the iconic store.”
He said there are six to eight new locations in the pipeline, with strong franchise interest in major markets and overseas so far. That includes two replicas of the original store in Manila and Browning, California.