It’s difficult to call Shipley Do-Nuts a hidden gem, given that it operated 300 locations in 2021 when the longtime family-owned doughnut chain was sold to the private-equity firm Peak Rock Capital.
But it still needed some work to prepare the brand to take that next step, from regional phenomenon into a fast-growing chain with a national presence.
“The brand was family operated for 85 years,” CEO Flynn Dekker told investors at the ICR Conference in Orlando this week. “In the past three years there’s been a lot of growth and change, infrastructure, point-of-sale, online ordering, supply chain innovation.”
“The business is just modernizing,” he added. “The upside potential is huge.”
The results have been there: Since Peak Rock acquired the chain, it has increased average unit volumes by 50%. It doubled its digital sales mix last year.
The brand, which now has 351 units in 12 states, was founded in Houston in 1936 by Lawrence and Bud Shipley. The glazed doughuts were cut by hand and served hot throughout the day, and only wholesale. They cost five cents per dozen.
“We’ve raised our prices slightly,” said Dekker, who was named CEO last year. “And have a little more variety.”
The brand started a retail business in the 1940s and it expanded, mostly through franchising, first in the Houston area, where it is dominant, and moving into nearby states like Alabama, Arkansas, Louisiana and Mississippi, etc.
In addition to a wide variety of doughnuts, made-to-order beignets and cinnamon rolls, the brand sells savory kolaches, Czech pastries that are hugely popular in Texas. Shipley fills them with sausage, ham or chicken with cheese.
It gives the brand an alternative to its sweet doughnuts that customers could have for lunch. That’s not common in doughnut concepts.
“That’s a platform we have lots of opportunity with as a complement,” Dekker said. “It’s a daypart driver.”
Peak Rock acquired the company from the Shipley family in 2021, with the family keeping a financial stake in the business. Peak Rock acquired both the franchising company and its supply business, Shipley Do-Nut Flour & Supply Co.
In the years since, the company has spent time optimizing food and labor costs. It added online ordering, now available in all locations. It created a marketing co-op with its franchisees. “We never had a marketing co-op,” Dekker said. “We never had a marketing engine.”
Shipley Do-Nuts has a wide variety of doughnuts and kolaches.
That led to a limited-time offer in partnership with Skittles, with a doughnut called the Poptastic, featuring freeze-dried Skittles.
Shipley also added a loyalty program last year. It now has 75,000 members. “We have all the tools in the toolbelt,” Dekker said.
The addition of online ordering, along with third-party delivery, has helped digital sales, which is about 7%, up from 3%. Third-party delivery has been a big part of it.
The company is working to improve its prototypes to help franchisees open units with a quicker return on investment. “Our focus is on smaller and faster,” Dekker said. “Inline, second-generation, end caps with a drive-thru, and doing less build from the ground up.”
Most of the company’s development agreements are with existing franchisees, but Dekker said Shipley is beginning to see more new franchisees interested in opening locations.
The company is also shifting its approach to development. Shifting a bit away from opening in contiguous states, it is broadening its reach into the Midwest. It opened locations in five new states last year and are “seeing great results.”
“A doughnut is sort-of an everyman’s treat,” Dekker said. “We haven’t found a location yet where we can’t thrive.”
Shipley opened 19 new units in 2023. The brand expects to open another 30 this year. But it plans to double unit count over the next five years.
But throughout the company’s expansion, it remains a Houston institution. “I get massive love whenever I walk through the airport,” Dekker said. “It’s so ingrained in the culture, growing out of Houston, Texas.”
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