How an International Donut Empire Was Built With Only $25
The Overlooked Story Behind A Simple Dessert
If you can describe in one word a memorable activity back when you are still 18, I bet it’s not waking up early in the morning to knead the dough, so that you can deliver donuts on time later on.
For Vernon Randolph, that was his case — he helped his uncle first started with selling yeast-raised doughnuts. Now we have the Original Glazed Donut that is now popularized in the mainstream media as a “must-have” staple dessert.
As we uncover the origin story of Krispy Kreme, as a Bonus, I’ll share my personal Top 3 Takeaways at the end of How a teenager built one of the most renowned companies in the world, all just with a doughnut. Let’s get into it!
It’s Not An Original Recipe
Unlike most popular restaurants chains where recipes are guarded in close secret and passed down from generations in the family, the secret doughnut recipe for Krispy Kreme was actually bought.
After seeing the potential when they first tasted the donut, 18-year-old Vernon Rudolph with his uncle purchased it from a chef and decided to open up a store in Nashville, Tennessee. This would be the birth of the world-famous empire.
Far from today where Krispy Kreme donuts are served fresh right from their store, the two co-founders began their stint by selling it at wholesale to the grocery chains.
And it did well.
Grocery shoppers flocked to the donut aisle every time they shop. This gave an advantage to stores selling Vernon’s confectionary dessert. It gave the grocery an added boost of new customers who are coming because of the sought after doughnut.
The two co-founders benefited from the huge market acceptance for their product. They sold more donuts that Vernon’s father moved to Nashville to help them with the business.
But like in every business, there will be setbacks. In this case, one of the founders struck out on their own.
When A Co-founder Leaves The Business
Rudolph decided that he wants to have his shop. He specifically chose a location in North Carolina.
Ironically, he decided to put up a store in that area, not because of its good foot traffic but because his favorite cigarette company was located near the area.
But even if this decision for a now 22-year-old boy seems childish, this didn’t stop for the donut chain to scaling the business operations
The Hustle: Why Only Having $25 Didn’t Stop Rudolph
Along with 2 employees, Rudolph proceeded to spend all of the $25 to rent. He worked on a space in front of Salem Academy and College.
Because he struck out on his own, life was not looking hopeful for Rudolph. What he brought along with him are:
- $25 — all spent on rent
- A couple of donut-making machines
- The Secret recipe
- Right of use for the name, “Krisp Kreme Doughnuts”
- His Pontiac used in moving to North Carolina
Lack of funding is a common reason why businesses don’t last a year and two. This is why aspiring entrepreneurs today are taught to prepare every contingency in place and have an emergency fund in case the business suddenly can’t operate for 3 months.
But the lack of capital didn’t destroy Rudolph from his entrepreneurial resolve.
Rudolph followed the strategy of what was already working: Selling donuts to convenience stores. The problem was he doesn’t have enough to pay the ingredients to create the first batch of donuts. (He could have sold his Pontiac, but we’ll get to that later)
Knowing this, he decided to get creative and struck a deal with his supplier: To provide Rudolph with free ingredients and pay the supplier immediately once the first batch of donuts was sold.
A Hole-In-The-Wall Business, Literally
Besides selling to grocery stores, Rudolph went and sold donuts in his car. Turning his Pontiac into the very first donut delivery truck.
Selling to grocery stores and driving around town still didn’t meet his success.
It wasn’t until at one instance when Rudolph was going to his routine and preparing his batch of donuts at midnight. While cooking, the scent of a sweet aroma attracted workers who are in the midnight shift
The reason Rudolph prepared cooked his batch starting at Midnight up to 4 in the morning so that he can meet the deadline for getting his donuts on the shelves of grocery stores during the day.
Nearby workers decided to follow the scent until reaching Rudolph’s are where he is seen freshly cooking.
They started asking, “Can I buy a doughnut?”
Rudolph took advantage of this and cut out a huge portion of the wall to start selling his donuts, having a good display to attract the attention of passersby
Word spread like wildfire and Krispy Kreme Doughnut became known throughout the country. Rudolph expanded soon, opening stores on neighbor cities.
Things seem going great for the company, they become wholly-owned subsidiary by Beatrice Foods. But that’s when the problem starts.
The Problem with Expansion
At this point, Rudolph complained that the doughnuts weren’t consistent from store-to-store, this was among numerous problems that Krispy Kreme Corporations is facing.
This was why by 1982, a group of franchises bought the company in a $22 million leveraged buyout. It was soon purchased by JAB Beech, a German Investment firm for $1.35 billion in 2016.
Throughout all of this, Krispy Kreme continued to open new stores and attracted a strong fan base of people who are devout to the brand. And it was until this day Krispy Kreme remained the world’s most famous donut.
My Top 3 Takeaways:
- Stick to what’s already working
Rudolph stuck to what’s already proven and working. He went the path of wholesaling donut to the grocery stores. You don’t need to re-invent the wheel every time.
2. Find New Methods
This is counterintuitive to the previous point but if you want to grow, seek innovative ways. Following a proven method is enough if you just want to survive and thrive. There is no shame in sticking to it.
There is no problem in being content & retire without worrying money for the rest of your life.
But if your calling is to create a Million-dollar brand, then you need to have a Million-dollar mindset.
And that is the only point where you should search for New Methods. The point where you decide that it’s enough to avoid playing safe. This then propels your mind to solve larger problems in the world.
For Elon Musk, founder of Tesla and SpaceX. Besides creating innovative companies, he also addressed the climate impact throughout the world. He directed efforts in solving air pollution with the widespread of electric vehicles and a rocket that can return to Earth instead of wasting materials creating a new one for every time.
Unsolved BIG Problem + Find New Methods = Large World Impact
The problem you are trying to solve may not be as big as trying to save the entire planet — even something as simple as creating a recyclable water bottle can do the job.
Unknowingly, you are already solving problems for your customers throughout the supply chain:
- Plastic Bottle Abuse
- Save Money per Meal (by instead bringing water for free)
- Reduce the Impulse Purchase Behavior
- Novelty Appeal — the appearance of a movement of what you stand for
You think that the problem you are trying to solve is not ‘big’ enough, but actually it is.
This is a simple water bottle example I pulled out of thin air and it has already contributed in reducing 4 problems. What more, if we dive deep enough?
3. Ask Yourself Why. Why You Are Making That Decision.
When Rudolph ventured out on his own to create his store, he chose the location to be in North Carolina — not because of the large foot traffic but rather an emotional decision, because his favorite cigarette company is located near him. It was not a wise decision.
Yes, it didn’t stop him from creating a Billion dollar company that we love today. But if you are an entrepreneur who is just starting, you need to ask yourself every business decision that comes your way,
“Am I doing this to benefit myself or to benefit the business?”
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About the Author:
Jed Silverlake is a brand journalist & storyteller who has written articles of Fortune 1000 companies & private clients. He specialized in writing brand stories of E-commerce Business, Influencers, Consultants & Coaches. For more content similar to his, you can follow his Medium profile.
Miner, K., 2019. This Is Why Krispy Kreme Doughnuts Are So Delicious. Mashed.com. Available at: <https://www.mashed.com/156056/this-is-why-krispy-kreme-doughnuts-are-so-delicious/>
Krispy Kreme. 2020. History — Krispy Kreme. Available at: <https://krispykreme.ca/about-us/history/>
McGee, J., 2014. Lewis Rudolph, A Krispy Kreme Founder, Dies. Usatoday.com. Available at: <https://www.usatoday.com/story/money/business/2014/12/30/lewis-rudolph-a-krispy-kreme-founder-dies/21085249/>