Donna Goodison reports in the Boston Herald that Honey Dew Donuts is taking advantage of the weak economy to make its move against much bigger rivals Dunkin’ Donuts and Starbucks.
Honey Dew Associates Inc., the Plainville owner of the 150-location chain, has hired its first director of franchise development to orchestrate a significant expansion.
The 37-year-old company wants to fill in under-served New England markets, including central and western Massachusetts, north of Boston, New Hampshire, Maine, Vermont and Connecticut, with a targeted 15 percent annual growth in new
“We want to grow the company on a more consistent year-over-year basis,” said director of franchise development Larry Flaherty, who previously worked in franchising for the Dedham-based D’Angelo sandwich shop chain for 10 years. “Our goal is to really provide our franchisees the benefits of a larger company – increased buying power, more money to advertise and advanced development opportunities.”
Honey Dew is targeting single-unit operators and those looking to open multiple locations.
“It’s a great time for a person who wants to get into the business,” Flaherty said. “The cost of real estate has really decreased, leasing costs are down and construction costs are down. There’s an abundance of retail locations and a pool of highly qualified potential employees.”
Honey Dew has hired the Dartmouth Co., a Boston-based commercial real estate firm, to identify potential real estate locations for franchisees.
Honey Dew shops right now are primarily in Massachusetts – with the majority south of Boston – and Rhode Island, with a few in New Hampshire. The company has just one corporate-owned location, and its growth has been slow, with only about 20 locations added in the last five years.
“Honey Dew has really grown organically as people expressed interest,” Flaherty said. “They’d come in, and we’d find locations for them, but there was never any real marketing effort put behind getting the word out that Honey Dew was looking for franchisees.”
Honey Dew’s timing is right to attract franchisees, not only because of attractive real estate terms, said Ron Paul, president of Technomic Inc., a Chicago restaurant consulting firm.
“Franchises tend to do well, in terms of selling them, in a down economy,” Paul said.
Many laid-off corporate types don’t want to go back to work for larger companies even if they could, he said, because they want to be their own bosses.
“(Franchisees) are almost buying their jobs by paying a franchise fee, and the fees are usually small enough so they could get their money from families and friends,” Paul said. “If (Honey Dew) is doing well, they have a good story to convince franchisees.”
The privately held Honey Dew doesn’t disclose its annual revenue. Though it is Massachusetts’ No. 2 player, it’s dwarfed by Canton’s Dunkin Donuts, which operates 6,395 locations in 34 states and Washington, D.C., including 1,128 in Massachusetts and 2,054 in New England. Starbucks, meanwhile, has 11,181 U.S. stores, down from 11,537 in 2008, with plans to open 100 this year.
But Honey Dew considers itself a coffee and baked goods chain rather than a coffee and doughnut chain, with a menu of cookies, muffins, bagels and pastries, according to Flaherty, who sees room in the market for the smaller company.
“Although Dunkin’ is a major player in this market, we’ve been around almost as long as they have, and we find that people like choice,” Flaherty said. “Customers like our shops because they’re comfortable. Maybe they’re working in construction and don’t feel as comfortable going into a Starbucks.”