Holey War

Entrepreneur, Feb, 2000 by Michelle Prather

It's doughnut against doughnut in the battle for your bulge.

"Doughnut shop" often conjures images of a surreal, artificially lighted space sporting peeling vinyl chairs and stark walls. That's why image officers of top doughnut chains are aggressively transforming what were once 2 a.m. takeout stops into more upscale, sought-after staples in the high-fat food chain.

Edging out Dunkin' Donuts Inc.'s 4'800-plus stores and $2.2 billion a year in sales is unlikely. Still, regional favorites are venturing nationwide.

Take Lincoln, Nebraska-based LaMar's Donuts International Inc. A renovated "warm and homey" atmosphere, complete with a gourmet coffee bar, now graces eight of the 35 LaMar's locations. Next in the company's plans? Growth. Chairman and CEO Joseph Field projects 491 units by 2004. Even LaMar's handmade doughnuts have grown--from three inches to five-and-one-half inches across. "We're looking at the doughnut operation as a retail facility, not a production store," says Field.

With sales estimated at $22 million in 1999, LaMar's hopes to earn third place in world doughnut sales within 10 years. But Winston-Salem, North Carolina-based Krispy Kreme Doughnut Corp. won't make it easy Nor will the media, who've embraced Krispy Kreme like it's the apple pie for the new century. ER, Just Shoot Me and The Rosie O'Donnell Show have all featured Krispy Kreme doughnuts. And the 135-plus-store chain with a 27-state presence and $238 million in 1998 sales sends freebies to high-profile people and contributes regularly to charity. With its IPO and an expected 500 stores by 2007, overshadowing this media darling will be tough but not impossible.

Hearing that LaMar's enjoyed Krispy Kreme-style, line-around-the-building fanaticism at its Montgomery, Alabama, store last October, all we can say is... they're just doughnuts, people.