Monday, June 6, 2016

When Donuts Don't Sell

In the early 1990s, I worked around with a retired-military guy who'd turned into a civilian contractor at Ramstein.  His wife had wanted to start up a business and she'd settled upon the donut concept.

You see.....forever and forever.....the commissary operations and BX operations of Germany for the US military.....had this one bakery plant where they made donuts.  On the scale of to ten.....these were a '3'.  They lacked any real taste and they never seemed fresh....even if they did come out of the bakery at 3AM this morning.  I can even truthfully say today.....from 1978 when I first tried one of the BX-made donuts.....nothing in forty-odd years has improved.

So it seemed like a great idea.  Rather than pay the BX-mafia, the commissary-mafia, or the Recreation-mafia some part of your profits.....they'd operate the shop off-base in Landstuhl.  They would go out and buy a $10-to-$20 thousand-dollar donut machine, and invest probably another $20,000 into start-up costs.  In 1990 dollars, it was a fair sum of money.

The plus side of this plan was that Germans would come and buy the donuts....adding to the structure of the idea.

Well....between 12 and 24 months into this idea and grand-opening.....the donut shop failed.  My associate had to move the donut machine out to his garage, and he spent around five years trying to market and sell it onto someone else.  His wife was frustrated about this and the real issue in the end....was that he barely sold that many donuts to the Americans.....but literally zero Germans came in after the first month of operation.

You can discuss American business ideas all day long and visualize taking something that works great in a ribs-shop, a pizza-shop, or a donut-shop, and introducing it into Germany.  The thing is.....Germans just don't go for a lot of things that Americans would eat.

Over the weekend, I noticed in the business news....Dunkin Donuts had six shops in Vienna....which folded in the last couple of weeks.  Four million in debt (that's a shocker but they probably rented prime real estate downtown).  Major failure, but no one says much on why Viennese people didn't grab onto the donut option.

For any American who has spent a fair amount of time in come to appreciate German bakery operations.  First-class coffee that is ultra-strong.  Various cakes that you can opt for in the middle of the day with your coffee.  For a breakfast might go for a dozen-odd pastry choices with half the amount of sugar that you might get with a US donut-shop.  Want a sandwich to drag along for a lunch-break?  Most German bakeries will feature at least five or six possible choices with cheese, salami, or ham.

There is something about a sugar-rush with some regular American donut shop.  But after a week or two of having this one great option kinda drift back to the German style bakery.  I think that's what happened with the Dunkin Donut operations in Vienna....they probably enjoyed one great month of success, and then kept wondering why people weren't coming back at least once a week.

So, if you ever get fired up and in some great enthusiasm for American business opportunities in Germany.....slow down.....have a coffee and some great German-made cheese cake, and then ask yourself how will things be in six months after opening.

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