Transcription
Do you guys want to know how this donut shop right behind me sells out of donuts every single day? Well, I'm about to go talk to the owners, and we're going to find out not only how they sell out every day, but how they built the business from the ground up, how they got to where they're at, and how they make millions of dollars selling donuts. Let's go ahead and jump right into it.
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So, Santiago, how did you come up with the idea to get into the donut industry? You know, it's kind of a funny thing. I've always loved donuts, but I never knew that I was going to make this my life, right? The passion behind it. Um, the idea came from, you know, I always had donuts and I've thought, you know what? I bet you there's a niche here where we can go and not reinvent the donut, but perfect the donut. So that's been the idea. So all of our donuts, you'll see, they're not like any other donuts, but at the same time, they're not too far off of what a regular donut is that you would expect. So whenever people come in, they're not like, "Wait a minute, this isn't a donut." They're saying like, "Dang, this is a donut, but it's like a donut. This is like the dream donut, right?" So that's kind of where it came from. I just wanted to do something and perfect what it could be and what it should be.
And how did you do that? I mean, what logistically, like, how do the donuts actually look the way that they do?
Right. Well, it, it wasn't as easy as some people think, right? A lot of people think, "Hey, I'm just going to get a big old fat donut cutter and I can cut out a big fat donut," and guess what? They end up with a big fat blob nobody wants that. So it took some time to perfect that, right? Some of those things that we use are, well, it's the ingredients, right? We used a fresh, real, live yeast.
How does the donut bar, you know, separate itself from, you know, the competition?
The difference between us and other donut shops is, well, I don't know, have you ever worked in a restaurant before? I actually have, yeah, a couple. Yeah. So whenever you work in a restaurant, you have a lot of big vendors, you see tons of orders, buckets of stuff coming in, pre-made. And most restaurants, they're just assembly. We are not in the assembly business by any means. That means Krispy Kreme, they're leaning stuff. Dunkin' Donuts, 50% of their locations are frozen donuts, they get them shipped in. And some of them make them in-house, but they're basically assembling. They get the glaze sent to them by corporate, the mix is pre-made. Over here, everything is made to order, even when it comes to zesting 100 lemons a day. So when it comes down to things like that, we love getting that personal touch to everything we do here.
It wasn't all Lambos and Ferraris to begin with, to be quite honest with you. The first probably six months, I was working every single day here, seven days a week. Now, seven days doesn't mean you have your eighth day off, that means seven hard days, and I would sleep in my Jeep Wrangler parked right out here in front. Well, now it's not a Wrangler that parks out front, it's a Ferrari, a Lambo, a TRX.
What would your advice be for somebody watching trying to bootstrap a restaurant or any business for that matter? What, what piece of advice would you give to them?
You know, never give up, right? Um, there's going to be a lot of people that say, "Never give up, follow your dreams." But the truth is, it's never going to happen unless you truly put in that work every single day. There's going to be the good days, there's going to be the bad days, that's just the way it goes. But, you know what? We live for those good days, baby! There you go. Get out there and never give up.
When you sell out, then you close the shop, right?
Close the shop. Shop closes. We're open for three to four hours a day at max. We have such a labor-intensive product, which is why we are who we are. But yeah, usually like we'll sell out. We'll open like 7 or 8, depending on the day, sell out by 11:00 to 11:30 all the time. And what happens is, is, "Oh, I wanted to come get that maple bacon donut, but they're sold out." Got to go there tomorrow. But we also have another tactic that we do with our menu. We have a rotating menu here. So I'd say about 50% of the menu is always on the menu every day, but then we have a rotating part of the menu that always changes. So that's how I increase my recurring customer rate.
So are you still the one making all the donuts, or do you have people helping you now?
Well, that's a good question, right? I have people helping me now, which is fantastic. But I'll tell you this much, I'm still every single day putting my hands into everything. My hands are literally in the mix, if you will.
Wow. Yeah. You've got to be involved if you want it to be successful and really get going, right?
No, you really do. I mean, a lot of people say, "Hey, you can take some time off," and I probably should. But it becomes, um, it's, it's an addiction, right? And I'm addicted to my business, right? Like, I have to be here. And if I'm away from it, that's all I'm thinking about is my business. Not to say that you can't have your fun, but the way I look at it is, I'm living a double life. I've got my business all morning long, then the afternoons, those are mine. Yeah.
Hey, and if you enjoy what you do, it doesn't feel like work, right?
That's true. There. You still work, though.
So what is the best month that you've ever had?
Usually our best months are during summer and the holidays. People love gifting donuts to their family and friends year-round, but during the summer months is when it really picks up. Um, we, we usually do four to 5,000 donuts during the summer months. Yeah, per day. Pretty fun. Insane. San Diego is arguably the nicest place to come to in summer. I've been to over 112 countries, and I still dub that San Diego has the nicest scenery, beach, and the best donut shop in the world. So we're a tourist attraction. When you go on Google Maps and you look at San Diego, you see Donut Bar's logo before anything else, and that's 'cause people love us on TripAdvisor, Yelp, Google. We're the most reviewed donut shop in the whole world, which is an insane statistic.
How important do you think it is being in the heart of downtown?
Being in the heart of downtown is super important 'cause we're surrounded by tons of corporate offices. A lot of our orders come from corporate offices, and we're surrounded by the Union Tribune building, the Passport Office, we got WeWork, so many buildings here. And on top of that, there's so much labor for all the restaurants we have here. People are walking across the streets. It's one of the nicest downtowns in America, in my opinion. People love walking here 'cause you could take a few steps, you'll end up at the beach, and you could take a few other steps, and you'll end up at the best donut shop in the world.
How did you become such a phenomenal chef?
Yeah, I appreciate you saying that, by the way. But the truth is, I didn't go to culinary school. But what I did is I worked for five-star hotels, Ritz-Carlton, Hyatt, um, Four Seasons Hotels, and that's really where I learned the craft, not just how to prep a donut, how to make a donut, how to be a pastry chef, but I learned everything that comes along with running the business, right? As far as the customer-forward aspect of it, what guests expect on the back end of things, on the front end of of things. So it was more of a, not really going to a culinary school, I learned it kind of like through the real world, hard knocks of learning what it's like to, uh, be in a bakery 24/7.
Sure. Is it pretty hard to make a donut? I mean, could anybody make a donut that looks like that? I can't imagine they could.
That you can't. That's the fun part about it too, right? A lot of people try to make a donut at home, it's never going to turn out the same way. You need specialty equipment to make it, and you really have to learn the craft to be able to perfect the donut.
So Shyam, what is your most popular donut?
My most popular donut might be the maple bacon. Look at that sizzle.
Why did you choose to make your donuts so big?
So basically, the reason our donuts are so big is 'cause we want to take up the whole center of the average smartphone. Because when people post these things on their social medias, it takes up the whole screen. People are like, "Damn, I want to go get that." So back in the day, when we blew up on Facebook, this donut had 80 million views on Facebook. I'm talking about 2015, before Instagram and TikTok Reels even existed. So we like to do everything really big. There's a whole Pop-Tart stuffed in this guy. Also, not to mention, this is Steve Harvey's favorite donut.
Every weekend for 10 years, we've given free donuts to the kiddos, and it's just a tradition. I'm never going to stop. It's a lot of fun. I hope you're enjoying the business tour so far. Really quick, if you wouldn't mind, if you know of a business that you think would be a really cool tour, or if you own a business that you would like to get featured, all you have to do is text 480-418-5339 the word "business." Okay? Again, 480-418-5339 the word "business," and we'll see if you qualify or if the business qualifies for us to go ahead and tour it. Now, let's just go ahead and get back to the tour.
So when did you start the Donut Bar?
You know, I'm aging myself now, but I tell you, it seems like yesterday, to be quite honest. But the truth is, in 2013.
Wow, incredible. We've been going for a while. You've done a lot in 10 years, though.
When did it really take off like a rocket ship?
This is the interesting part. Day one, we sold out. I only made about 300 donuts, and I'm thinking, 300 donuts, that'll be plenty. They were gone in 20 minutes. Wow. Second day, I said, "Well, let's double that. Let's make 600 donuts." Gone in like 35 minutes. So literally, right from the jump, it's been nothing but uphill. Uphill, or is that a good word? It's been nothing but up gains the whole time.
Is that where you came up with the idea to shut the store down when you sold out?
Yeah, exactly. When, never. It just came naturally. We make as many donuts as we can. Once they're done, they're done. We do one, I always say, we do one fantastic, incredible bake. When they're all gone, they're gone.
And when you first opened, were you in the location we're standing in right now?
Right where we're at right now. Wow. You've been here the whole time? 10 years, a decade straight. And you love the location, obviously.
You know, the location is good for us, but I got some exciting news that we're going to share here real soon, okay? We'll stay tuned for that.
So how did you leverage Snapchat to create a multi-multi-million dollar donut business?
So just how we're walking right here on Snapchat and all other ad platforms nowadays, you can do something called geo-targeted ads. So anytime someone walks past my restaurant right here and they're scrolling through their phone, they get a popup that says, "Walk in a Donut Bar." So if someone walks within a certain radius, I actually mapped out this whole block. So anyone that walks around this neighborhood, 50% of the people who do, they'll get an ad on their phone that says, "Come to Donut Bar." And that's very, very important to capture, sure, all the foot traffic you may be missing out on. Make sure you're doing that if you're not already.
So we're standing out here in front of the shop, and we've got a ton of awards down here, right? So talk to me about some of the awards that you've won and TV shows and all that.
You know, it's, it's so funny, right? Um, we are like a little media magnet, but it's not just because you build it and they will come. No, you got to build it and be really on your game, right? So some of my favorite ones, of course, are Forbes, with a gold standard of donuts on Forbes. USA Today, top, uh, 10 donut shops in the country. There's, uh, so many of the awards. One of the new ones we just got was A&V, we are best in chow, the best product in all of San Diego, which is our big Pop-Tart donut. Holy cow. So that was cool.
How do you win awards like that? I mean, if somebody's watching and they have a restaurant and they want to be known to, you know, start winning awards, like, what are some practical things they could implement right now to, to maybe potentially win an award?
Right, for sure. You know what you got to do? You got to answer your emails and your phone because they'll reach out. And, you know, one of our big things, a big driver for us is Yelp, right? Um, whenever the review sites, they're blowing us up. We have over 10,000 photos on Yelp, 5,000 reviews. That's another one we just now won is, um, another award by Yelp. And, uh, all of these places, they will award good, hard work. So it's not as far as just reaching out and hopefully somebody's going to give you an award, you have to earn them. And how you earn them is being consistent every day, giving a good product, and getting, uh, a lot of people in your doors.
Truly incredible advice. I appreciate it.
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Santiago.
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So what was the initial investment to start the Donut Bar?
You know, it's not as much as most people would think, to be quite honest with you. Um, the very first day we started, uh, I think I probably had about five grand left in my pocket. And, uh, so the, the initial cost of all the equipment, everything, all in, was probably close to about $55 to $100,000. But this is me starting out with used equipment, right from the jump. And it took a while, about the first six months, where I said, "Wait a minute, we've made it all back right away, real quick." Now let's start getting that new specialty equipment that I couldn't believe.
What's the average price of a donut here?
Average price of a donut is going to range between $5 and $8, depending on what you get.
And what's your profit margin on a donut?
Our profit margins on a donuts are around 70%.
Cool. So on a single donut, I'm trying to do the math, what you could make like $3 to $5 on a donut?
Three to five bucks on a donut.
I see a lot of Nutella up there. Talk to me about how much Nutella you go through.
So it's pretty crazy. In, uh, 2017, we got an award from Nutella that said we bought more Nutella than any restaurant in the world.
Why is that?
We have a donut, it's called a Nutella Overload. This thing's pretty heavy. And one of the reasons our donuts are priced very high is the premium ingredients we use. Like I said, we got that award from Nutella for saying we use the most amount of Nutella out of any restaurant in the world.
Is this and pick this up, let me know how heavy you think that is.
Holy cow. So to give you an idea, this thing, that's got to be like a pound. This has over a quarter cup of Nutella in it. When you go to the store and you buy that big tub of Nutella for eight bucks, this has half that amount of Nutella in it.
Talk to me about your favorite donut.
I just happened to have it right here. That's the lemon pistachio donut. So some of my favorite parts about it, it's really citrusy. We have the pistachios on it. We don't buy a pistachio that's already pre-chopped because that has a lot of starches, starch on it. So we get them in whole roasted, we chop them here. The glaze itself, it's a lime lemon glaze that we make right here in-house, like everything else. But legit squeezing lemons.
Yeah. How do you make your donuts so big?
You know, it's, it's a trade secret, bro.
So what's the average size of an order that a customer will typically place here?
So I'm going to say a really crazy number, but it's definitely between $60 and $70.
Wow, that's insane. I mean, we're talking about like, uh, restaurants probably have an average order of that number.
Yeah, they do. You know, the thing with us, right, is every employee here is trained to upsell, upsell, upsell. Someone walks in wanting to buy one donut, by the time they're at the register, I got them buying a dozen for his aunt and his uncle.
What is the most amount of donuts you've ever sold in a single day?
The most amount of donuts we've ever sold in a single day is 15,000.
That is insane.
Google corporate placed an order for 15,000 donuts. Wow. And it was pretty big. We've definitely had some 10 to 15,000 donut days, definitely in the past few years for sure.
Do you have any idea what an average day is, just a typical day, how many donuts do you sell?
So the average day, we sell about 3 to 4,000 donuts, and we do sell out pretty, pretty quick.
Three to 4,000 donuts? Yes.
So what is one of the main reasons why there are so many failing restaurants out there?
It's pretty crazy, but as a creative person, you kind of fall in love with your creation, and you have a crazy emotional attachment to it. So there's so many chefs, I don't know if any of you have seen Robert Irvine, Gordon Ramsay, these guys going to the failing restaurants, and they're like, "Why do you make 100 G's a year and you have the same items on the menu?" Well, if it doesn't work, you better change it. And there's so many chefs and restaurant owners that are so passionate about their menu, they're so passionate about their grandma's pasta recipe that's on their menu. But guess what? That pasta that's on your menu could be the reason why your restaurant's losing 900 grand a year. Now, let me ask you a question: Is your passion worth your restaurant failing? No. The number one rule when it comes to opening any business, restaurants in specific, sell what sells. Don't sell what you want to sell, because at the end of the day, it's not about what you want, 'cause you're not the customer. It's about what the customers want. Sometimes people are going to say, "What's your favorite donut?" And if all the employees point to one donut every day, all day, that donut's going to be gone, and I'm going to have extra inventory. So you want to make sure your employees are trained. It's almost like split testing ads where one customer gets told that this is their favorite donut, and then another customer gets told that this is their favorite donut. That's how I guarantee I'm always sold out every day.
What are some ways as a restaurant owner that you can help cover some of your overhead?
Overhead could be some restaurant owner's biggest nightmare, but to me, overhead is my best friend, 'cause overhead just means more money in our pockets. One way I like doing that is the same method that Starbucks uses globally, and it's called impulse purchases. So impulse purchases are basically something that when you're buying something within arm's reach, there's something for you to physically grab. One product with very high margins in restaurants to sell are going to be socks. So if you look over here, here, I'll be able to grab a sock. So since all my customers are tourists, they want to take something home with them. Donuts, unfortunately, from us, go bad in one to two days. So if you want to go back home to Indiana and take your family a piece of you, travels, you can grab a pair of socks. You can wear our donuts every day, and you'd be surprised, this pair of socks right here generates us over six figures a year. Wow. So that might be a certain restaurant's overhead, and a lot of it's covered by socks right here.
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Thank you so much for watching the business tour with the Donut Bar. They are really awesome people, and you should definitely go check them out if you haven't already. All of their information will be in the link down in the description below. Definitely go check them out. And also, I'm actually standing in one of my businesses right now. So if you haven't already, I would greatly appreciate if you would consider subscribing to the channel. Drop a comment down below what you liked about the video, and definitely go check out some of my other content. I would greatly appreciate that, and I'll look forward to seeing you in the next tour.