Irvine-based Dunkin’ Donuts franchisee Parag Patel will spearhead a new restaurant design for the national chain, with plans to open 20 franchised locations spread over Orange and Riverside counties within two to three years.
OC got out of the gate first on June 1, when Patel’s Lala Cream Corporation opened its first Dunkin’ Donuts in Villa Park. It debuted its second in Yorba Linda on Aug. 1. Riverside is scheduled to get its first location this fall.
They won’t be your father’s donut shop.
The Yorba Linda site features a patio with a fireplace and an interior lounge to allow customers to linger and relax while they enjoy their coffee, donuts, sandwiches and free Wi-Fi. Bar stools, charging stations for electronic devices, and floor-to-ceiling glass windows are part of the new design.
There’s also a charging station in the parking lot for electric cars.
“We wanted to provide options for our customers,” Patel said. “No other restaurants [in the chain] will have this design.”
Dunkin’ Donuts will monitor the performance of the design prior to deciding whether to launch it nationwide, he said.
Patel declined to provide revenue for the Villa Park store.
“We’re still growing the business here,” he said.
And he’s hardly had a chance to measure the operation in Yorba Linda.
Patel said he plans to hire about 75 employees per restaurant for a total of 1,500 jobs spread over north Orange County and the Inland Empire area. The typical restaurant will be about 2,000 square feet. It will open at 4 a.m. and close at 10 p.m. during the week, and at 11 p.m. on weekends.
Canton, Mass.-based Dunkin’ Brands Group, Inc. requires Dunkin’ Donuts franchisees to pay a franchise fee of $40,000 to $90,000 depending on the market, a 5% advertising fee, and a royalty fee of 5.9%. It also requires them to have a minimum of $250,000 in cash and $500,000 in net worth per unit.
The company prefers new restaurants to be in a draw area with between 15,000 and 25,000 residents within a 5-minute drive.
Donut Country
OC’s population of nearly 3.2 million and the Riverside County’s 2.3 million offer plenty of draw areas for a franchisee to consider.
“Southern California is actually a very large market for donuts,” Patel said.
It’s also home to a lot of folks more familiar with Dunkin’ Donuts than might be suggested by its recent history here—it only entered Southern California three years ago.
“A lot of people have moved to California (from other parts of the country) and already know the name,” said Daniele Natola, a marketing specialist with Havas Formula, which is working with the company in California.
Californians have much more to learn about the brand, Patel said.
“Most people know us for our coffee and visit because of the excitement about a new location,” he said.
Dunkin’ Donuts has sold coffee as an obvious accompaniment to donuts since it was founded in 1950. But it changed strategies in 2005 when it began to compete for coffee drinkers as Starbucks, smaller chains and a profusion of mom-and-pops continued to remake the competitive field across the U.S.
There are about 11,500 Dunkin’ Donuts restaurants worldwide, just less than half the number operated by Seattle-based Starbucks Corp.
Dunkin’ Donuts over the past decade has introduced flavored coffees and espresso drinks, sold its coffee beans in grocery stores, and partnered with Keurig to create branded quick-brew pods as part of the growth strategy.
New customers who come to a restaurant for espressos, lattes and mochas also get a look at the donuts, sandwiches and various blended-ice drinks offered. Donuts are on display under glass along the cashiers’ line, while video screens pitch the cold drinks and sandwiches.
“Frozen hot chocolates are very popular at Villa Park,” Patel said.
His restaurants also will be among the first in the Dunkin’ Donuts system to provide cold-brewed coffee, which removes much of the bitterness of regular-brewed coffee while maintaining flavor and caffeine levels.
Patel said his stores provide a variety of oven-toasted sandwiches—such as chicken salad or Texas toast grilled cheese—and wraps as additional options for customers.
The specialty drinks account for about 50% of store revenue, Patel said, oven-toasted sandwiches generating another 20% of sales. The remaining revenue comes from the donuts.
“Customers can still get grab-and-go food items,” Patel said.
The Yorba Linda and Villa Park stores have drive-thru service—as will most of his restaurants—and customers can order and purchase food via a smartphone app.
“After they use the app, customers come to the pickup area, give their name, and we’ll give them their order,” Patel said.
Family Business
Patel grew up with Dunkin’ Donuts—his parents are franchisees who opened their first site in 1989 and currently own 20 in and around Baltimore.
They were named Operator of the Year by Dunkin’ Donuts in 2013, and also operate a number of Baskin-Robbins franchises in the area.
Patel said he started working part time as a greeter at one of his family’s Dunkin’ Donuts locations as a kid, and continued to soak up the business as he got older.
“My father brought me to district meetings and explained business concepts and operations to me,” he said.
Patel said his father eventually began to ask for his opinion about products and operations.
Patel left Baltimore in 2000 to earn a degree in entrepreneurship from the University of Southern California, then returned home after graduating in 2004 to work for his parents full time, helping them add locations.
“I saw how hard my parents were working, and I wanted to help them,” Patel said.
Patel said other franchise owners cited his leadership and innovation skills in the Mid-Atlantic region when he was elected the district representative to attend systemwide advisory board meetings in Massachusetts.
He now has a similar role for the Southern California region and meets regularly with Dunkin’ Brands Group Chief Executive Nigel Travis.
OC Connection
Patel met his wife, Mena Kansagara, at USC. She grew up in the Yorba Linda area and moved to the East Coast after graduation.
She worked with her husband to grow the business in Maryland.
The couple moved to north Orange County in 2010 to open three Baskin-Robbins ice cream shops, which are cheaper to open compared with the donut shops.
Baskin-Robbins requires a $25,000 franchise fee. Advertising and royalty fees are the same as with Dunkin’ Donuts, but new franchise owners of the ice cream stores must have a minimum net worth of $200,000 and $100,000 in cash.
Patel said it was difficult to move away from his parents, but “it was a great opportunity in terms of real estate.”
The Patels immediately jumped on the Orange County franchise opportunity when Dunkin’ Donuts decided in 2013 to expand into California with plans to open 1,000 locations, including 150 targeted for OC and the counties of Los Angeles, Riverside, San Diego, San Bernardino and Ventura.
“They have a philosophy of contiguous growth,” Patel said.
The company first expanded in the Northeast, down the mid-Atlantic to Florida, across to Texas and eventually to California.
Organic Growth
Patel said he plans to grow his franchise organically by hiring locally, promoting the most productive employees, and then launching the next restaurant.
He said his more experienced employees will help start and operate the new sites.
“This will be the first job for a lot of our employees,” he said. “So my goal will be to help them become professionals, deal with stressful situations, remain cheerful and helpful towards everyone.”
The ultimate goal, according to Patel, is to make Dunkin’ Donuts fit into the Orange County and Southern California lifestyle.
“We want to be convenient, offer high-quality foods, and provide a good atmosphere that helps customers relax and socialize.”
