Dunking Doughnuts in Warsaw
The 200 square meter unit is located in the walkway under the Central Train Station near the McDonald's restaurant. Prime Property, which found sites for other fast food retailers like Burger King and Domino's Pizza, secured the unit for CEF.
Central European Foods was founded by Witold Michna, Anna Hejka-Arczynska, and Garry Ohlbaun, who hold a controlling interest in the company. The group has raised $4.5 million to finance the venture.
The franchise agreement between CEF and Allied Domecq covers 39 Dunkin' Donuts shops in Poland and 10 in the Czech Republic and Slovakia to be opened in the next five years. It also covers 30 Baskin Robbins ice cream shops in the three countries.
Although CEF intends to establish a strong presence in the region, Harry Grindrod, the company's chief operating officer, says they don't plan to rush into anything that hasn't been thought out thoroughly.
"We're very realistic," Grindrod said. "Our number is two stores in Warsaw and two in the Czech Republic for 1995. We'll most likely exceed that, but that's what we've planned for."
The company expects average sales revenue for a store to be around $500,000 annually. Because of relatively low overhead, they plan to make the operation profitable by the end of the year.
"It's going to be lean and mean and make lots of money," Grindrod said.
One key element yet to be finalized is the location of the central bakery which will supply the outlets with freshly-baked doughnuts. Grindrod said the company is currently looking at three sites, two in Warsaw and another outside the city limits.
With rentals in downtown locations as high as they are - upwards of $70 per square meter - Grindrod said that the concept of a central kitchen will help them cut costs dramatically. If each outlet were to bake its own doughnuts, not only would they need more space, but would also have to obtain permits from the office of sanitation, a process which can be quite expensive and time consuming.
Placement of the central kitchen for a given area becomes particularly important when expanding outside Warsaw. Grindrod said that some of the areas which would be serviced by central bakeries would be Katowice-Krakow-Czestochowa, the Gdansk-Sopot-Gdynia Tricity area, and Wroclaw-Poznan.
A central bakery, which can supply 10-15 outlets, will be electronically connected to the outlets via modem, which allows the bakery to respond to consumer demand when preparing for the stores' second orders.
"The customer has the ability to dictate the demand," Grindrod said. "If people want more peach doughnuts one day, we will give them more peach."
Giving the customer what they want is what CEF feels will make them successful in the marketplace. The company has already began experimenting with different exotic flavors including banana, mango, and kiwi fillings and equally unusual icing combinations. "Because of the relationships we have built with suppliers," Grindrod said, "we can do these weird things."
Unlike Dunkin' Donuts in Hungary which offer only around a dozen types of doughnuts, Grindrod said that here the chain will carry at least 30 brands every day, with the possibility to produce up to 70 different combinations.
"The beauty of it is that you have the ability to change the product to the local taste. The customer should decide what they want to buy," Grindrod said.
Although Dunkin' Donuts has placed some obligations on CEF as a franchisee, like spending a certain percentage on advertising, and royalty payments, Grindrod said they act more as advisers to the local operation. "Dunkin' Donuts is very supportive of letting us play around with the product as long as we don't change the integrity."
Grindrod is no stranger to Warsaw or the fast food industry. He spent three years with International Fast Foods Corporation (IFFC), the franchise holder for Burger King in Poland.
"IFFC gave me some background to do the things we want to do more effectively," said Grindrod, adding that the local market doesn't always fit into U.S. or European models. "The local market dictates things that there are no formulas for. McDonald's would have told you three years ago that a restaurant out at Janki would never work." McDonald's now has a restaurant and drive-thru in that Warsaw suburb.
Grindrod said that retail sales will not be their only source of revenue. The group would eventually like to supply grocery stores and gas stations with fresh doughnuts. In some cases, the product would carry the Dunkin' Donuts name, and that they would also be willing to produce for supermarkets or other retailers who would like to put their own name on the box.
"I want to get the name out there, but if a company would rather use their own name, I'll sell them the doughnuts," he said.
Grindrod said flexibility is the key.
"Whatever it takes to succeed here, we have the ability to adapt," Grindrod said. "I've laid in bed at night thinking of different scenarios, and I can't think of one that wouldn't work."
Central European Foods was founded by Witold Michna, Anna Hejka-Arczynska, and Garry Ohlbaun, who hold a controlling interest in the company. The group has raised $4.5 million to finance the venture.
The franchise agreement between CEF and Allied Domecq covers 39 Dunkin' Donuts shops in Poland and 10 in the Czech Republic and Slovakia to be opened in the next five years. It also covers 30 Baskin Robbins ice cream shops in the three countries.
Although CEF intends to establish a strong presence in the region, Harry Grindrod, the company's chief operating officer, says they don't plan to rush into anything that hasn't been thought out thoroughly.
"We're very realistic," Grindrod said. "Our number is two stores in Warsaw and two in the Czech Republic for 1995. We'll most likely exceed that, but that's what we've planned for."
The company expects average sales revenue for a store to be around $500,000 annually. Because of relatively low overhead, they plan to make the operation profitable by the end of the year.
"It's going to be lean and mean and make lots of money," Grindrod said.
One key element yet to be finalized is the location of the central bakery which will supply the outlets with freshly-baked doughnuts. Grindrod said the company is currently looking at three sites, two in Warsaw and another outside the city limits.
With rentals in downtown locations as high as they are - upwards of $70 per square meter - Grindrod said that the concept of a central kitchen will help them cut costs dramatically. If each outlet were to bake its own doughnuts, not only would they need more space, but would also have to obtain permits from the office of sanitation, a process which can be quite expensive and time consuming.
Placement of the central kitchen for a given area becomes particularly important when expanding outside Warsaw. Grindrod said that some of the areas which would be serviced by central bakeries would be Katowice-Krakow-Czestochowa, the Gdansk-Sopot-Gdynia Tricity area, and Wroclaw-Poznan.
A central bakery, which can supply 10-15 outlets, will be electronically connected to the outlets via modem, which allows the bakery to respond to consumer demand when preparing for the stores' second orders.
"The customer has the ability to dictate the demand," Grindrod said. "If people want more peach doughnuts one day, we will give them more peach."
Giving the customer what they want is what CEF feels will make them successful in the marketplace. The company has already began experimenting with different exotic flavors including banana, mango, and kiwi fillings and equally unusual icing combinations. "Because of the relationships we have built with suppliers," Grindrod said, "we can do these weird things."
Unlike Dunkin' Donuts in Hungary which offer only around a dozen types of doughnuts, Grindrod said that here the chain will carry at least 30 brands every day, with the possibility to produce up to 70 different combinations.
"The beauty of it is that you have the ability to change the product to the local taste. The customer should decide what they want to buy," Grindrod said.
Although Dunkin' Donuts has placed some obligations on CEF as a franchisee, like spending a certain percentage on advertising, and royalty payments, Grindrod said they act more as advisers to the local operation. "Dunkin' Donuts is very supportive of letting us play around with the product as long as we don't change the integrity."
Grindrod is no stranger to Warsaw or the fast food industry. He spent three years with International Fast Foods Corporation (IFFC), the franchise holder for Burger King in Poland.
"IFFC gave me some background to do the things we want to do more effectively," said Grindrod, adding that the local market doesn't always fit into U.S. or European models. "The local market dictates things that there are no formulas for. McDonald's would have told you three years ago that a restaurant out at Janki would never work." McDonald's now has a restaurant and drive-thru in that Warsaw suburb.
Grindrod said that retail sales will not be their only source of revenue. The group would eventually like to supply grocery stores and gas stations with fresh doughnuts. In some cases, the product would carry the Dunkin' Donuts name, and that they would also be willing to produce for supermarkets or other retailers who would like to put their own name on the box.
"I want to get the name out there, but if a company would rather use their own name, I'll sell them the doughnuts," he said.
Grindrod said flexibility is the key.
"Whatever it takes to succeed here, we have the ability to adapt," Grindrod said. "I've laid in bed at night thinking of different scenarios, and I can't think of one that wouldn't work."
