[SOLVED] Develop a competitor report for Bakery, competitor report, management homework help – Business Finance

Develop a competitor report for Bakery.Use the Widener Library to access Hoover’s Search Delaware County Review Industry profiles i uploaded Identify 3 interesting pieces of information write a 1 page summary of your finding and why you think it might be relevant for our client.”the client i work with has a bakery & the name of the bakery is Phatso’s bakery. the client has one store and he is willing to open the new store. this is my one of the classes i have to work with client and do paper & presentation , this step is the first page of all the work i have to do. “Doughnut Stores in the US March 2016   1
WWW.IBISWORLD.COM
Hole in one: Brand recognition and greater
product offerings have driven industry growth
IBISWorld Industry Report OD4315
Doughnut Stores in the US
March 2016
Andrew Alvarez
2 About this Industry
16 International Trade
2
Industry Definition
17 Business Locations
2
Main Activities
2
Similar Industries
19 Competitive Landscape
30 Industry Data
3
Additional Resources
19 Market Share Concentration
30 Annual Change
19 Key Success Factors
30 Key Ratios
4 Industry at a Glance
29 Industry Assistance
30 Key Statistics
19 Cost Structure Benchmarks
21 Basis of Competition
5 Industry Performance
21 Barriers to Entry
5
Executive Summary
22 Industry Globalization
5
Key External Drivers
6
Current Performance
23 Major Companies
9
Industry Outlook
23 Dunkin’ Brands Inc.
11 Industry Life Cycle
24 Tim Hortons
13 Products & Markets
26 Operating Conditions
13 Supply Chains
26 Capital Intensity
13 Products & Services
27 Technology & Systems
14 Demand Determinants
28 Revenue Volatility
15 Major Markets
28 Regulation & Policy
31 Jargon & Glossary
www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com
Doughnut Stores in the US March 2016   2
WWW.IBISWORLD.COM
About this Industry
Industry Definition
This industry is comprised of
establishments that primarily prepare or
serve doughnuts, or donuts as they have
come to be spelled in the United States.
Purchases may be consumed on-site, taken
Main Activities
The primary activities of this industry are
out or delivered. A doughnut is usually
sweet, deep-fried flour dough that has been
shaped into a ring or sphere. Some contain
fillings, such as jam or custard, and some
have toppings, such as frosting or sprinkles.
Operating doughnut stores
Serving doughnuts
Serving coffee and other beverages
Serving baked goods
Serving other cafe-type items
The major products and services in this industry are
Coffee
Doughnuts in bulk
Mini doughnuts and doughnuts holes
Yeast doughnuts
Other beverages
Other doughnuts
Other items
Similar Industries
31181 Bread Production in the US
The industry manufactures bread and bakery products, such as cakes, muffins, pastries, pies and other
similar baked goods.
44529 Specialty Food Stores in the US
This industry primarily retails confectionery goods and nuts not packaged for immediate consumption.
72211a Chain Restaurants in the US
The industry comprises chain and franchised restaurants that provide food services to patrons who order
and are served while seated.
72211b Single Location Full-Service Restaurants in the US
This industry primarily engages in full-waiter service and serve food to patrons who pay after eating. Many
of these operators are locally owned.
72232 Caterers in the US
This industry includes companies that provide individual event-based food services.
72233 Street Vendors in the US
This industry primarily sells snacks and nonalcoholic beverages from vehicles.
Doughnut Stores in the US March 2016   3
WWW.IBISWORLD.COM
About this Industry
Similar Industries
continued
72241 Bars & Nightclubs in the US
This industry primarily prepares and serves alcoholic beverages.
72221b Coffee & Snack Shops in the US
This industry prepares or serve specialty snacks and nonalcoholic beverages including ice cream, frozen
yogurt, cookies, donuts, bagels, coffee, juices, smoothies and sodas.
72221a Fast Food Restaurants in the US
This industry is composed of restaurants where patrons pay before eating.
Additional Resources
For additional information on this industry
www.ddifo.org
Dunkin’ Donuts Independent Franchise Owners (DDIFO)
www.restaurant.org
National Restaurant Association
www.census.gov
US Census Bureau
www.sec.gov
US Securities & Exchange Commission
IBISWorld
writes over 700 US
industry reports, which are updated
up to four times a year. To see all
reports, go to www.ibisworld.com
WWW.IBISWORLD.COM
Doughnut Stores in the US March 2016  
4
Industry at a Glance
Doughnut Stores in 2016
Key Statistics
Snapshot
Revenue
Annual Growth 11-16
Annual Growth 16-21
Profit
Wages
Businesses
$14.0bn
4.7%
$3.6bn
$897.6m
Consumer spending
Revenue vs. employment growth
Market Share
Dunkin’ Brands
Inc.
61.6%
20
6
4
10
% change
% change
15
Tim Hortons
5.8%
5
0
-10
2
0
-5
Year 08
2.5%
7,608
10
12
Revenue
14
16
18
20
-2
Year
22
09
11
13
15
17
19
21
Employment
SOURCE: WWW.IBISWORLD.COM
p. 23
Products and services segmentation (2016)
4%
Key External Drivers
Other doughnuts
Consumer spending
Per capita coffee
consumption
5%
Mini doughnuts and
doughnuts holes
10%
Yeast doughnuts
Consumer
Confidence Index
25%
Doughnuts in bulk
Healthy eating index
18%
Other items
20%
Coffee
p. 5
18%
Other beverages
Industry Structure
Life Cycle Stage
Revenue Volatility
Capital Intensity
Mature
Low
Medium
SOURCE:
WWW.IBISWORLD.COM
SOURCE:
WWW.IBISWORLD.COM
Regulation Level
Technology Change
Light
Medium
Barriers to Entry
Low
Industry Assistance
None
Industry Globalization
Low
Concentration Level
High
Competition Level
High
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 30
Doughnut Stores in the US March 2016   5
WWW.IBISWORLD.COM
Industry Performance
Executive Summary   |   Key External Drivers   |   Current Performance
Industry Outlook   |   Life Cycle Stage
Executive
Summary
The Doughnut Stores industry is
running rings around its competition in
the food service sector, mainly due to
the dominance of the major doughnut
chains and their success in expanding
their menu offerings well beyond
doughnuts. The industry is dominated
by Dunkin’ Brands, which commands an
estimated 61.1% market share and has
over 8,000 locations in the United
States. Tim Hortons, Inc. (5.6% market
share) and Krispy Kreme Doughnuts,
Inc. (4.9%) also have significant and
growing operations. The industry has
also been helped by a rebound in
consumer spending over the past five
years, driven by lower unemployment
and rising per capita income. Over the
five-year period, consumers returning
back to work have shown renewed
interest in spending on small luxuries,
such as coffee and doughnuts. As a
result, industry revenue is expected to
grow 4.7% per year on average over the
five years to 2016 to $14.0 billion,
including a 3.2% rise in 2016.
Contrary to the industry’s name, over
50.0% of sales at doughnut stores come
from items other than doughnuts,
particularly coffee beverages. By
providing coffee and other products in
addition to doughnuts, industry
operators hope to attract consumers to
their stores more frequently. Both
Dunkin’ Donuts and Tim Hortons have
built brands around selling coffee. While
doughnut sales still account for a large
share of Krispy Kreme’s revenue, the
chain is making a concerted effort to
shift its sales mix towards more
beverages to increase visitation rates.
Krispy Kreme has added specialty
espresso drinks and a range of new drip
coffee blends to its menu over the past
five years, while Dunkin’ Donuts has
expanded its breakfast offerings.
Over the five years to 2021, as positive
conditions in the broader economy boost
consumer spending, IBISWorld projects
industry revenue to increase an
annualized 2.5% to $15.9 billion. In a sign
that the industry still has room to grow,
Dunkin’ Donuts has announced plans to
open more than 1,000 locations over the
next five years. The company is planning
a major push into states such as
California, Colorado and Texas where it is
less well known. Furthermore, the major
chains are likely to roll out new stores in
smaller retail locations that require less
capital investment. Overall, the number
of doughnut stores is expected to expand
2.6% per year on average to 26,082 over
the five years to 2021.
Consumer spending
Factors that influence consumer spending
affect the industry. During a recession, the
spike in unemployment generally leads to
declines in consumption. However, when
consumer spending is high, consumers
will be more likely to spend money at
doughnut shops. Consumer spending is
expected to increase in 2016, providing a
potential opportunity for the industry.
Per capita coffee consumption
Doughnut stores have increasingly
relied on coffee sales to generate
more revenue and attract higher
patronage. As coffee consumption
increases, doughnut shops with
coffee and similar beverages on their
menu stand to benefit. Per capita
coffee consumption is expected to
increase in 2016.
Adding
supplementary products and doughnut
varieties has helped drive demand
Key External Drivers
Doughnut Stores in the US March 2016   6
WWW.IBISWORLD.COM
Industry Performance
Key External Drivers
continued
Consumer Confidence Index
The Consumer Confidence Index
measures consumers’ perceptions about
their current and future financial
prospects. Changes in consumer
sentiment have a significant effect on the
spending of discretionary items,
including food and beverages from quick
service restaurants such as doughnut
stores. When consumer confidence is
low, consumers are less likely to
purchase higher-margin items and opt
for lower-priced value products. The
Consumer Confidence Index is expected
to increase in 2016.
Healthy eating index
Consumers are increasingly becoming
more astute and aware of issues
regarding weight and obesity, fatty-food
intake and food-safety issues. The
healthy eating index is expected to
increase slowly in 2016, posing a
potential threat to doughnut stores with
menus dominated by items high in
sugar, fat, salt or calories.
Per capita coffee consumption
Consumer spending
6
10.50
10.25
Pounds (lb)
% change
4
2
0
-2
Year
10.00
9.75
9.50
9.25
09
11
13
15
17
19
21
9.00
Year 06
08
10
12
14
16
18
20
SOURCE: WWW.IBISWORLD.COM
Current
Performance
The Doughnut Stores industry is
projected to generate $14.0 billion in
revenue in 2016, representing a 3.2%
increase from 2015, with growth
propelled by major franchises like
Dunkin’ Donuts and Tim Hortons which
are outpacing their independent
competitors. Over the past decade,
smaller independent doughnut stores
have lost market share to the aggressive
expansion of major corporate and
franchise companies. This expansion has
allowed the industry to grow at an
annualized rate of 4.7% over the five
years to 2016, while overall revenue for
independent operations has moved at a
slower pace, with the exception of
higher-end establishments in hightraffic urban environments, such as
Doughnut Plant in New York City and
Stan’s in Chicago. The number of
industry stores has also increased
significantly, with doughnut store chain
locations promulgating around the
country. From 2011 to 2016, the number
of industry establishments is expected to
increase at an average annual rate of
4.4% to 22,996.
Doughnut Stores in the US March 2016   7
WWW.IBISWORLD.COM
Industry Performance
Doughnuts to dollars
Doughnut store sales are tied to the
economic constitution of American
consumers. When consumers have little
discretionary income, they tend to cut
back on spending. However, many
consumers still indulge in small
luxuries such as doughnuts, which are
affordable and offer instant
gratification. Therefore, downturns
typically result in a decrease in industry
revenue, industry operators are
somewhat inoculated to long-term
declines, as they are also some of the
first places consumers return to during
Product innovations
and introductions
The industry has also benefited from the
growing number of product choices being
offered to consumers. Major industry
operators have expanded product
offerings to include items beyond
doughnuts; moreover, operators have
also responded to more refined consumer
tastes for coffee. By providing coffee and
other products in addition to doughnuts,
industry operators have sought to attract
consumers to their stores more
frequently and get them to spend more
per visit. For example, Krispy Kreme has
started serving specialty espresso drinks
and a range of new drip coffee blends. At
Dunkin’ Donuts stores, new product
offerings, such as an expanded line of
bakery items and sandwiches, has helped
with attracting more consumers to stores
throughout the day. In response to
growing consumer awareness about
nutrition and obesity, doughnut stores
have started carrying items that may
offset declining doughnut consumption,
including bagels, which are considered to
be a healthier option than doughnuts.
Another introduction has been smaller
doughnuts, which have fewer calories
and less fat. These new choices appeal to
health-conscious consumers that may be
more inclined to indulge more often
when smaller portions are offered.
a rebound. Over the past five years, the
continued economic recovery has
encouraged consumers to increasingly
treat themselves to coffee, doughnuts
and other related snacks, helping boost
overall industry revenue 7.6% and 5.2%
in 2021 and 2013, respectively.
Furthermore, continued declines in the
unemployment rate has increased the
propensity for consumers to grab a
quick snack on the go, as leisure time
has declined, which has subsequently
diminished many consumers’ ability to
prep and cook regularly.
The
industry has benefited
from a growing number of
product choices
Like many segments of the food
services sector, gluten-free products
have entered the lexicon of the
Doughnut Stores industry. Gluten-free
products have become increasingly
popular with consumers that have
dietary restrictions and those seeking to
avoid gluten for health reasons. To
date, gluten-free doughnuts have been
a trend confined mainly to independent
stores that cater to niche markets,
particularly those establishments in
high-income cities such as New York
and Los Angeles, where many food
trends originate. As there is a relatively
small market for gluten-free products,
and the costs associated with
production and distribution could
potentially translate into lower profit
margins, larger doughnut chains have
not invested a substantial amount of
resources into gluten-free products.
However, this did not stop Tim Hortons
from introducing a gluten-free coconut
macaroon, its first certified gluten-free
Doughnut Stores in the US March 2016   8
WWW.IBISWORLD.COM
Industry Performance
Product innovations
and introductions
continued
menu item, in 2013. Meanwhile,
Dunkin’ Donuts announced in 2014
that it would not rollout gluten-free
muffins and doughnuts that it had been
testing due to underwhelming customer
feedback. Dunkin’ also faced challenges
avoiding cross contamination with
wheat-based products its production
facilities, as well as the increased costs
associated with individually packaging
gluten-free products.
The industry has benefited from greater
consumer spending in the breakfast
daypart over the past five years, however.
The breakfast segment has been a bright
Labor versus capital
In the five years to 2016, IBISWorld
estimates that industry employment will
grow at an average annual rate of 4.0% to
211,450 people. The industry is labor
intensive because doughnut stores must
provide a high level of personalized
service. Compared with other foodservice industries, the industry relies
minimally on capital within stores, such
as the cooking equipment used in fastfood restaurants. Instead, most industry
products are produced outside the store
and delivered to store locations for
immediate purchase and consumption.
Historically, independent doughnut
stores produced many of their items
in-house. However, with the growth of
franchise locations, such as Dunkin’
spot in an otherwise slow-growing foodservices sector in the five years, as growth
in the lunch and dinner dayparts has
stagnated. However, industry operators
have been forced to contend with
increased competition from fast-food
operators like McDonalds and Burger
King, which recognize that serving
specialty coffee during breakfast is a key
way of drawing customers through the
door. For this reason, doughnut stores
have added a greater variety of food items
such as breakfast sandwiches, wraps and
fruit to their menus to complement their
core doughnut items.
Stores
are increasingly
sourcing doughnuts and
other food products from
outside locations
Donuts, and the subsequent desire for
consistent quality products, doughnut
stores are increasingly sourcing
doughnuts and other food products from
outside locations. Also, as the industry
has shifted toward offering a broader
product range with a focus on coffee and
other beverages, labor intensity has
increased, as these products require more
labor input.
Doughnut Stores in the US March 2016   9
WWW.IBISWORLD.COM
Industry Performance
Trends that drove the industry’s
growth during the past five years will
remain mainstays over the next fiveyear period, particularly as dominant
player Dunkin’ Brands continues to
expand franchise locations and
product offerings. As positive
conditions in the overall economy
place upward pressure on consumer
spending, IBISWorld projects industry
revenue to increase at an annualized
rate of 2.5% to $15.9 billion.
Industry revenue
20
15
% change
Industry
Outlook
10
5
0
-5
-10
Year 08
10
12
14
16
18
20
22
SOURCE: WWW.IBISWORLD.COM
Expanding product
offerings
Despite robust growth, industry operators
will have to contend with changing
consumer trends that may point to
declining doughnut consumption. Per
capita consumption of sugar is expected to
grow slowly at an annualized rate of 1.1% to
139.9 pounds in the five years to 2021,
primarily the result of modest population
growth. As a result, industry players are
expected to introduce more healthconscious choices, such as low-fat
doughnuts or beverages that contain fruit.
As new operators enter the Doughnut
Stores industry, they will similarly need to
provide healthy options to potential
patrons. Nevertheless, IBISWorld expects
enterprise growth to move at a slower pace
over the next five years because most new
doughnut stores will likely be opened by
franchise corporations, such as Dunkin’
Brands and Krispy Kreme; however,
independent operators with niche offerings
are expected to continue to play a part in
enterprise growth over the next five years.
Franchise expansion will primarily drive up
the number of industry locations, however,
which is projected to increase at an
annualized rate of 2.6% to 26,082.
While per capita sugar consumption
stagnates somewhat, per capita coffee
consumption is projected to remain
steady over the five-year period, at
about 10.5 pounds. Doughnut stores
have already caught on to the coffee
trend, expanding their beverage options
beyond basic coffee. This move is
placing the industry in direct
competition with major coffee chains,
including Starbucks, as well as fast food
outlets such as McDonalds that have
also entered the coffee game. Doughnut
stores generate about 38.0% of revenue
from beverage sales, including about
20.0% from coffee, with these shares
expected to increase over the next five
years because of the aforementioned
trends in consumer preferences and the
competitive landscape. In fact, major
company Dunkin’ Brands currently
generates about 57.0% of its revenue
from beverages. Other beverages
offered by doughnut stores include an
assortment of shakes, ready-to-drink
(RTD) beverages and fountain sodas.
These offerings will continue expanding
as stores attempt to attract more
customers by strengthening their
beverage product portfolios. Moreover,
such low-cost, high-profit menu items
offer a quick way for companies to
increase revenue and fatten their
bottom line.
Doughnut Stores in the US March 2016   10
WWW.IBISWORLD.COM
Industry Performance
Major player
divergence
The number of people employed by the
industry is expected to grow 2.7% per
year on average over the next five years to
242,151 due to the expanding number of
stores. The industry will remain labor
intensive, and only major chains such as
Dunkin’ Donuts will likely have any
success in reducing labor costs as a share
of revenue. While Dunkin’ benefits from
significant economies of scale and has the
ability to rollout laborsaving technology
nation-wide, the majority of independent
doughnut shop operators rely on
personalized customer service to drive
revenue. In fact, labor intensity is likely
to rise for many operators that seek to
increase their coffee offerings due to the
time and skill required to make espresso
coffee drinks.
Over the next five years, profit
margins will remain flat for most
operators because of ongoing
competition in the increasingly
Dominant
player Dunkin’
Brands’ expansion will help
drive industry growth
saturated domestic market. By 2021,
average industry profit is expected to
equal 6.4%, representing no change
from 2016. Operators that experience
stagnant or declining margins will likely
exit the industry, paving the way for the
continued expansion of major company
Dunkin’ Brands that has generally
outperformed the industry in profit. In
fact, in early 2014, Dunkin’ Brands’
Chief Executive, Nigel Travis,
announced the chain could eventually
have 15,000 outlets in the United States.
Its higher margins and recent IPO have
given it substantial capital necessary for
such aggressive expansion.
Doughnut Stores in the US March 2016   11
WWW.IBISWORLD.COM
Industry Performance
Life Cycle Stage
The industry is growing at a slightly
faster rate than the US economy
The number of industry establishments
is growing robustly
% Growth in share of economy
Product offerings across doughnut
stores are expanding
20
Maturity
Quality Growth
Company
consolidation;
level of economic
importance stable
High growth in economic
importance; weaker companies
close down; developed
technology and markets
15
Key Features of a Mature Industry
Revenue grows at same pace as economy
Company numbers stabilize; M&A stage
Established technology & processes
Total market acceptance of product & brand
Rationalization of low margin products & brands
10
Quantity Growth
Many new companies;
minor growth in economic
importance; substantial
technology change
5
0
Grocery Wholesaling
Specialty Food Stores
Doughnut Stores
Chain Restaurants
Bread Production
Coffee Production
Decline
-5
Shrinking economic
importance
-10
-10
-5
0
5
10
15
20
% Growth in number of establishments
SOURCE: WWW.IBISWORLD.COM.AU
Doughnut Stores in the US March 2016   12
WWW.IBISWORLD.COM
Industry Performance
Industry Life Cycle
This
industry
is M
ature
The Doughnut Stores industry’s life cycle
stands between mature and growing. The
industry has been around for decades,
and after stagnant growth in the 1980s
and 1990s, the industry has experienced
somewhat of a revival over the past
decade. This revival has occurred as
doughnut stores, led by industry giant
Dunkin’ Brands, have expanded their
product offerings far beyond doughnuts
to include items such as sandwiches,
smoothies and, critically, coffee. Thus,
the industry’s move from predominantly
doughnut stores to all-inclusive cafes that
focus on doughnuts, has allowed it to
enter a period of strong growth. This
business model has also allowed Dunkin’
Brands to expand locations aggressively
over the past 10 years. Between 2010 and
2015 (most recent data available),
Dunkin’ Brands’ US locations increased
from about 6,772 to 8,392. Overall, the
number of industry establishments is
expected to grow at an annualized rate of
3.5% to 26,082 over the 10 years to 2021.
The industry’s value added (IVA), or
its contribution to the US economy, is
expected to increase at an average annual
rate of 3.7% over the 10 years to 2021.
Over the same period, US GDP is
projected to grow at an average annual
rate of 2.2%. Therefore, the industry is
slowly increasing its share of the US
economy. IVA growth equal or similar to
US GDP points to a mature industry,
while growth faster than that of US GDP,
points to an industry in a growing life
cycle stage. The Doughnuts Stores
industry currently stands closer to
mature since the number of companies is
growing minimally because most new
locations are operated by a small number
of firms and under an existing brand,
such as franchisor Dunkin’ Brands.
The rate of technological change
within the industry is moderate, but the
rapid increase in internet penetration
and smartphone usage over the past five
years has presented savvy operators with
the opportunity to engage with customers
on a number of new levels. Many small
doughnut store operators have utilized
online advertising, informative and
interactive company websites and social
media such as Twitter and Facebook to
increase their brand recognition and
revenue. Furthermore, technology is also
being used to boost profit margins,
improve service levels and to help
minimize labor costs, reducing food
waste, improving business processes and
improving customer experiences. For
example, new systems and technology are
designed to ensure quality service and
reduce customer waiting time such as
electronic ordering systems linking the
front counter with the kitchen as orders
are taken. This is particularly true of
franchisers that can benefit from the
economies of scale.
Doughnut Stores in the US March 2016   13
WWW.IBISWORLD.COM
Products & Markets
Supply Chain  |   Products & Services  |   Demand Determinants
Major Markets  |   International Trade  |   Business Locations
Supply Chain
KEY BUYING INDUSTRIES
99
Consumers in the US
Industry products are primarily purchased by individuals.
KEY SELLING INDUSTRIES
Products & Services
31192a
Coffee Production in the US
This industry supplies coffee to operators.
42441
Grocery Wholesaling in the US
This industry supplies pre-made food and beverage products to operators.
42443
Dairy Wholesaling in the US
This industry supplies dairy products to operators.
42444
Egg & Poultry Wholesaling in the US
This industry supplies egg and poultry products to operators.
Products and services segmentation (2016)
4%
Other doughnuts
5%
10%
Mini doughnuts and
doughnuts holes
Yeast doughnuts
25%
Doughnuts in bulk
18%
Other items
20%
Coffee
Total $14.0bn
18%
Other beverages
Doughnuts
Doughnuts make up 44.0% of total industry
revenue; however, this segment is declining
as doughnut stores expand their offerings in
order to attract more customers more
frequently. Most doughnuts are sold in
bulk: by the dozen or in a greater quantity.
Such sales generate about one quarter of
industry revenue. Nevertheless these
packages can include an assortment of
doughnut varieties.
Doughnuts can be made from yeastbased or cake-based batter. Yeast-based
doughnuts sold as stand-alone products
are more popular than cake-based
SOURCE: WWW.IBISWORLD.COM
doughnuts and contribute more to the
industry’s bottom line. Doughnuts also
vary in shape and size, with an increasing
share of industry retailers offering
smaller portion sizes to health-conscious
consumers. Smaller varieties include
miniature doughnuts and doughnut
holes, and they generate about 6.0% of
industry revenue.
Beverages
The average doughnut store generate
about 38.0% of revenue from
beverage sales, including about 20.0%
from coffee. For most doughnut
Doughnut Stores in the US March 2016   14
WWW.IBISWORLD.COM
Products & Markets
Products & Services
continued
Demand
Determinants
stores, this segment comprises s a
smaller proportion of revenue, but for
major company Dunkin’ Brands’
doughnut stores, the beverages
segment generates about 60.0% of
revenue. In comparison, the secondlargest company, Krispy Kreme,
generates about 15.0% of revenue
from beverages. Other beverages
offered by doughnut stores include an
assortment of smoothies, ready-todrink (RTD) beverages and fountain
sodas. This segment is expanding as
stores look to attract more customers
by strengthening their beverage
product portfolios.
Demand for doughnut stores is driven by a
number of factors including household
income, consumer confidence, attitudes to
health and propensity to eat out, rather
than at home. The industry is driven by
consumer demand for industry products,
which fluctuates primarily with disposable
income, convenience and health concerns.
Each of these demand determinants is
projected to shift favorably for the industry
in the next five years, boosting revenue for
operators. As industry companies expand
into more markets, doughnut stores will
become a more convenient stop for
consumers and, therefore, attract more
frequent buyers. Also, companies are
expanding their offerings in order to attract
more consumers more frequently.
point for industry products relative to
substitute beverages. Industry operators
like Dunkin’ Brands have responded to
this by offering smaller-size products at
lower price points to attract additional
demand from lower-income
demographics or people still unsure of
their financial outlook.
Income and expenditure
Per capita disposable incomes help
determine the ability of consumers to
spend on discretionary purchases like
doughnuts or coffee. When disposable
incomes are low or declining consumers
tend to reduce their spending on all but
essential items. Disposable incomes are
expected to increase during the next five
years, which should translate into higher
demand for industry goods. Demand for
industry goods is concentrated in higher
income brackets because of the high price
Other products
Doughnut stores also sell other items,
from breakfast sandwiches and coffee
beans to branded merchandise and
locally made art. IBISWorld estimates
that this segment generates about 18.0%
of revenue. This percentage has
increased over the past five years as
many of the major chains, particularly
Dunkin’ Donuts, have expanded their
product lines to grow their market base.
Health and lifestyle
Trends in personal nutrition and health
can impact demand for this industry’s
products. Health consciousness has been
increasing in the US due to the obesity
epidemic. Furthermore, scientific studies
have established links between fatty
foods and increased risks of certain
diseases. The healthy eating index, which
measures the degree that the average
American adheres to the consumption
guidelines set out by the US Department
of Agriculture, has actually been falling
during the past five years, though, and is
forecast to continue falling through the
next five years. Declines in the index
indicate that health consciousness may
not damper demand for industry
products, which are generally regarded as
unhealthy. Nonetheless, many industry
operators are expanding the types of
products they offer to also attract healthconscious consumers.
Doughnut Stores in the US March 2016   15
WWW.IBISWORLD.COM
Products & Markets
Demand
Determinants
continued
Major Markets
Demographics
The changing age structure of the
population influences industry demand.
Two broad demographic trends have
encouraged industry growth in the past
decade. Firstly, the baby-boomer
generation has access to higher
disposable incomes than previous
generations, meaning they are more
likely to spend on eating out. Also, young
adults aged between 18 and 30 years old
are delaying marriage and having
children compared to previous
generations; this allows them to spend a
greater proportion of their income on
eating out. Young adults in this age
bracket spend more of their food budget
on eating out than any other age group.
Convenience
Convenience, value for money and time
are other important demand
determinants. Recent social trends such
as busy lifestyles, heavy workloads and
long working hours have helped boost
demand for food service establishments
as time-poor consumers look to cut down
cooking time.
Major market segmentation (2016)
8.1%
12.4%
Afternoon customers
(3pm to 6pm)
Early morning customers (4am to 8am)
30.0%
Mid-morning customers (8am to 11am)
13.0%
Dinnertime customers (6pm to 10pm)
14.3%
Nighttime customers (10pm to 4am)
Total $14.0bn
Morning doughnut consumers
Most consumers visit doughnut stores in
the morning. About 12.4% walk in
between 4 am and 8 am, while another
30.0% of consumers make their
purchases between 8 am and 11 am.
Some of these consumers also purchase
additional doughnuts, food items or
beverages for their peers, coworkers or
classmates. Many doughnut stores sell
coffee to compliment doughnut
purchases, which further boosts the
revenue earned per morning customer, or
to people who simply want their morning
coffee. For example, major company
22.2%
Lunchtime customers (11am to 3pm)
SOURCE: WWW.IBISWORLD.COM
Dunkin Brands earns an above-average
share of revenue from coffee sales and it
attracts a higher proportion of customers
in the morning hours than competitors
like Krispy Kreme, which is not yet
known for its coffee selection. As a result,
the majority of doughnut store revenue is
typically generated before noon.
The morning segment decreased as a
share of revenue over the past five years,
though, and the cause is twofold. Firstly,
employment fell, which meant fewer
people were up and on their way to work
in the mornings and people made fewer
bulk purchases from doughnut stores.
Doughnut Stores in the US March 2016   16
WWW.IBISWORLD.COM
Products & Markets
Major Markets
continued
Secondly, doughnut stores increasingly
offered sandwiches, beverages and snacks
to attract more customers throughout the
rest of the day.
Consumers during other times
For the typical doughnut store, sales
peak in the morning and trickle out
International Trade
The Doughnut Stores industry only
includes US retailers and, therefore,
conducts no international trade.
throughout the day. Some stores,
however, experience another spike at
dinnertime, between 6 pm and 10 pm,
when some people like to hang out in
the stores. For example, industry
player Krispy Kreme experiences a
secondary increase in customer visits
during this time.
Doughnut Stores in the US March 2016   17
WWW.IBISWORLD.COM
Products & Markets
Business Locations 2016
West
New
England
AK
0.5
Great
Lakes
WA
ND
MT
4.8
Rocky
Mountains
ID
OR
2.4
West NV
1.0
1.8
SD
0.4
WY
0.6
MN
0.2
0.5
Plains
CO
0.7
KY
0.8
9
OK
1.0
NC
2.1
TN
AZ
NM
1.7
0.5
Southwest
TX
5.6
HI
0.7
Additional States (as marked on map)
1 VT
2 NH
3 MA
4 RI
5 CT
6 NJ
7 DE
8 MD
0.2
1.8
0.8
4.1
4.3
0.3
SC
Southeast
0.6
MS
AL
0.7
1.0
GA
1.8
0.5
LA
1.1
FL
4.8
Establishments (%)
0.8
1.6
AR
8
0.5
1.1
15.0
7
WV VA
2.0
0.7
1.4
CA
West
3.4
MO
KS
2.1
OH
1.7
3.7
6
4.2
IN
IL
0.6
UT
PA
2.9
0.9
0.7
1 2
3
NY
7.5
5 4
MI
1.4
IA
NE
0.2
WI
ME
MidAtlantic
9 DC
0.4
Less than 3%
3% to less than 10%
10% to less than 20%
20% or more
SOURCE: WWW.IBISWORLD.COM
Doughnut Stores in the US March 2016   18
WWW.IBISWORLD.COM
Products & Markets
Distribution of establishments vs. population
30
20
10
Southwest
Southeast
Plains
New England
Rocky Mountains
Establishments
Mid-Atlantic
Great Lakes
0
West
The industry’s business locations are
distributed according to the US
population’s distribution. Because the
industry sells treats to many on-the-go
consumers, they need to be located near
their customer base.
The West region contains the highest
number of establishments, with 24.4% of
the industry total. This high percentage is
due to the large population of the region
(17.0% of the US total) and the fact that
region is also a tourism and business hub.
California alone has about 15.0% of the
nation’s doughnut stores, only one of which
is a Dunkin’ Donuts store. The state mainly
has smaller franchised shops, including
Krispy Kreme and Winchell’s. For example,
the majority of Winchell’s doughnut stores
(about 64) are located in California. Other
states with a high proportion of
establishments include New York (with
7.5% of establishments), Texas (5.5%),
Florida (4.8%) and Washington (4.7%).
Correspondingly, other regions with a
significant number of establishments
include the Mid-Atlantic (with 18.1% of
establishments), the Great Lakes (13.2%)
and the Southeast (17.0%). Again, these
shares follow that of the population.
There is a larger share of
establishments in the Southwest and New
England regions, and a smaller share in
%
Business Locations
Population
SOURCE: WWW.IBISWORLD.COM
the Rocky Mountains and Plains regions.
The Southwest and New England have
higher concentrations of franchised
establishments and a higher population
density. This level of geographic
concentration is not expected to change
rapidly because demographic trends are
not anticipated to shift. Nonetheless,
industry player Dunkin’ Brands is
expected to continue aggressive expansion
into less-saturated markets during the
next five years.
WWW.IBISWORLD.COM
Doughnut Stores in the US March 2016  
19
Competitive Landscape
Market Share Concentration  |   Key Success Factors  |   Cost Structure Benchmarks
Basis of Competition  |   Barriers to Entry  |   Industry Globalization
Market Share
Concentration
Level
Concentration
in
this industry is H
igh
Key Success Factors
IBISWorld
identifies
250 Key Success
Factors for a
business. The most
important for this
industry are:
Cost Structure
Benchmarks
IBISWorld estimates that in 2016, the
top four players in the Doughnut Stores
industry account for about 72.1% of the
available market share, providing this
industry with a high level of
concentration. There are a large number
of small players operating in the industry
that only serve local markets. However,
the industry is dominated by a small
number of large chains with a growing
national footprint. Dunkin’ Brands in
particular, which alone garners 61.6% of
the industry, has experienced significant
growth over the past five years, leading
to a more concentrated industry. Dunkin’
Donuts’ revenue has increased 6.1% per
year on average over the past five years,
higher than the rate at which the
industry is expected to grow over the
same period. Canadian-based doughnut
retailer Tim Hortons has also made a
push into the US market and expanded
its store count by about 200 over the
past five years. Over the past five years
Tim Hortons revenue has grown an
estimated 10.6% per year on average to
capture 5.6% market share. Due to the
power of the big national brands,
industry concentration is anticipated to
rise over the next five years.
Economies of scope
Companies that offer a wider variety of
products are most likely to attract more
repeat customers, boosting revenue.
Easy access for clients
Doughnut stores located in highly
populated areas, such as metropolitan
centers, airports and tourist attractions
benefit from heavy foot traffic.
Franchising operations
Franchises benefit from brand
recognition and operations support. The
largest companies in this industry exist as
franchised chains that license the name
and business model of a parent company.
Profit
The Coffee and Snack Shops industry’s
profit is based on earnings before interest
and taxes. Profit margins vary between
players depending upon the size of the
business. Larger operators, such as
Dunkin’ Donuts, benefit from economies
of scale; however, the highly competitive
nature of the industry means most
operators can only access slim profit
margins. The types of products an
operator sells also influences profit. For
example, Dunkin’ Donuts has added a
number of complementary food items to
its menu in an attempt to access higher
profit margins. Meanwhile, over 80.0% of
Krispy Kreme sales are derived from
Ability to control stock on hand
Gauging which items are most and least
popular and then stocking appropriately
helps companies lower costs and operate
more efficiently.
doughnuts and it is attempting to sell a
higher percentage of coffee and beverages
in part to access a higher profit margin.
IBISWorld estimates that in 2016, the
average industry operator will obtain
profit equivalent to 6.4% of revenue, up
from 2011 due to the rise in demand and
use of technology to lower labor costs.
Purchases
Industry purchases make up about 38.8%
of revenue in 2016. Fluctuations in the
cost of food and other inputs can
significantly impact industry revenue and
profit. In the short term, many of these
cost increases cannot be passed on to the
consumer or client; therefore, menus,
WWW.IBISWORLD.COM
Doughnut Stores in the US March 2016  
20
Competitive Landscape
portion sizes and other food service
inputs must be monitored. The industry
must also monitor wastage. Fluctuations
in demand, and the oversupply of meals
or excess ingredients that cannot be used,
negatively impact industry operators.
As the industry has expanded its
product offerings, purchases have
increased as a share of revenue.
Furthermore, input prices rose over the
five years to 2016. As the industry
continues to expand its offerings and
world demand for food continues to
escalate, purchases are forecast to
increase as a share of revenue during the
next five years.
Wages
Wages also represent a high cost for
operators due to the labor-intensive
nature of food preparation, cooking,
serving and clean up. These costs include
wages and benefits, such as health,
workers’ compensation and
unemployment insurance. Menu prices
and industry profitability are affected by
labor intensity because cost increases
cannot simply be passed directly onto
consumers in the form of higher prices.
Wage costs are expected to account for
25.4% of an average operator’s revenue in
2016. Since 2011, labor costs have
increased just slightly as a percentage of
revenue, as operators have struggled to
cut labor amid increasing competition
and the subsequent necessity to provide
exceptional customer service.
Other costs
Other industry costs vary significantly
between companies. Operators that are
part of large franchises, like Dunkin’
Donuts or Krispy Kreme, must pay
franchise fees and related expenses.
Depreciation costs are also highest for
big franchises; for example, major
Sector vs. Industry Costs
Average Costs of
all Industries in
sector (2016)
Industry Costs
(2016)
5.8
6.4
21.8
25.4
47.3
38.8
2.6
6.5
3.3
3.4
12.5
13.5
10.2
100
80
Percentage of revenue
Cost Structure
Benchmarks
continued
n Profit
n Wages
n Purchases
n Depreciation
n Marketing
n Rent & Utilities
n Other
60
40
20
0
2.5
SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM
Doughnut Stores in the US March 2016  
21
Competitive Landscape
Cost Structure
Benchmarks
continued
company Dunkin’ Brands has aboveaverage depreciation because of its high
dependence on advanced technology to
drive revenue. Rent costs depend on
location, including its foot traffic, square
footage, city and visibility. Meanwhile,
small independent operators have higher
insurance, administrative and marketing
costs (as a share of revenue). The “other
costs” category also includes
transportation, which can be significant
for doughnut stores that may deliver
their products to third-party resellers
like supermarkets.
Basis of Competition
Internal competition
Doughnut shops compete based on quality,
price and convenience. Because doughnuts
are often considered a treat, people expect
them to be tasty. Doughnut stores that sell
inferior products, therefore, will not
generate as much repeat business and will
bring in less revenue.
Doughnut stores are increasingly
competing based on price. As the number
of establishments rises, market
saturation is increasing and people have
more of a choice on where to buy
doughnuts. Consumers with tighter
budgets are expected to deviate toward
products that are priced affordably.
Industry operators also compete
based on convenience. As a result, their
locations and range of offerings can be
key to attracting customers. Stores
located in higher foot-traffic areas
increase the likelihood of on-the-go
purchases. Also, doughnut stores that
sell a wider range of products, like coffee
or sandwiches, can increase the
frequency with which consumers shop at
their establishments.
Level & Trend
ompetition
C
in
this industry is
High and the trend
is I ncreasing
Barriers to Entry
Level & Trend
arriers to Entry
B
in this industry are
Low and I ncreasing
Barriers to entry are low in this industry,
given that an operator can lease
premises, equipment, furniture and
fittings, which lowers the initial capital
costs, outlays and borrowings for the
industry. The industry’s biggest player,
Dunkin’ Donuts, dominates some trends
within the industry and has a large
impact on product developments,
however, in other market segments it
have limited influence.
Franchise agreements
Entry to the industry can occur through
signing a franchise agreement, which
External competition
Especially as companies expand their
offerings to more than just doughnuts, the
industry competes with a variety of other
food service establishments, including
coffee shops. Other businesses that sell
doughnuts include supermarkets,
warehouse clubs, convenience stores and
diners. Furthermore, competitors that sell
substitute items, like muffins, bagels and
pastries are even more numerous. As the
number of establishments across these
industries rises in the next five years,
external competition is forecast to escalate.
Barriers to Entry checklist
Competition
Concentration
Life Cycle Stage
Capital Intensity
Technology Change
Regulation & Policy
Industry Assistance
High
High
Mature
Medium
Medium
Light
None
SOURCE: WWW.IBISWORLD.COM
includes outfitting and equipment, as
well as training and computer systems.
The industry’s three biggest players,
WWW.IBISWORLD.COM
Doughnut Stores in the US March 2016  
22
Competitive Landscape
Barriers to Entry
continued
Industry
Globalization
Level & Trend
lobalization
G
in
this industry is
Low and the trend
is I ncreasing
Dunkin’ Donuts, Tim Hortons and Krispy
Kreme are all significant franchisers.
Franchisors normally supply food and
beverages, national marketing support
and some financial and accounting
functions for a proportional share of
revenue from their franchisees. This
lowers operational costs and can
minimize some risks, especially for
inexperienced persons entering the
industry. However, individual franchisees
still carry much of the day-to-day
operational and management risks
associated with their own business.
building, shopping centers or malls to
lower costs. While industry regulation
and licensing is significant, including
health and food-service regulations and
general occupational health and safety
issues, these regulations do not create
any insurmountable barriers to enter or
operate in this industry.
Location
There is significant competition among
the major franchised companies to obtain
suitable sites, which has increased the
cost of many prime sites. However, some
major franchised operators are now
co-locating within an area or single
Barriers to success
Overall, the industry’s barriers to entry
are low. Meanwhile, barriers to success
(i.e. the ability to stay profitable and in
operation for more than a few initial
years) are significantly higher. According
to various sources, over half of new food
services establishments change hands
within three years of opening. Even
among those family owned-and-operated
establishments that are successful,
owner burnout is high since the hours
are often demanding.
Considering that there is no industry
trade and most companies are US-owned
and operated, industry globalization is
low. Nonetheless, major company
Dunkin’ Brands is expanding its
international presence. The company
already operates in 58 countries,
including many fast-growing emerging
economies. Expanding its presence in
such markets is one of the company’s
long-term growth strategies. Likewise,
Krispy Kreme has significant operations
abroad. Tim Hortons, the industry’s
second biggest player, is based in Canada
and is currently pursuing an aggressive
growth strategy in the United States. The
company has made significant inroads
into the US market over the past five
years and currently has over 850
locations in the US. Nonetheless, aside
from these three chains, most companies
in the industry are regional players and
are not expected to franchise abroad
during the next five years.
Doughnut Stores in the US March 2016   23
WWW.IBISWORLD.COM
Major Companies
Dunkin’ Brands Inc. | Tim Hortons | Other Companies
Major players
(Market share)
Tim Hortons 5.8%
32.6%
Other
Dunkin’ Brands Inc. 61.6%
Player Performance
Dunkin’ Brands Inc.
Market share: 61.6%
Industry Brand Names
Dunkin’ Donuts
Dunkin’ Brands Inc. is an international
donut, coffee and ice cream retailer that
sells these products under its Dunkin’
Donuts and Baskin-Robbins brands.
Dunkin’ Brands has about 18,000
distribution points in 60 countries,
including over 7,600 locations in the
United States. Dunkin’ Donuts was
founded in Quincy, MA, in 1950, and today
it is one of the largest coffee and baked
goods chains in the world. Contrary to the
company’s name, the majority of store sales
come from beverages, with donuts only
accounting for between 15.0% and 20.0%
of a typical store’s sales, and coffee
comprising about two-thirds of its sales.
Dunkin’ Donuts’ growth has been fueled
mainly by coffee; according to the company
website, it sells more than one billion cups
of coffee each year. Baskin-Robbins was
founded in 1946 in Glendale, CA, and is
one of the world’s largest hard-serve ice
cream franchises, with over 6,000 outlets
SOURCE: WWW.IBISWORLD.COM
in 35 countries. In the United States,
Baskin-Robbins operates 2,600 outlets and
develops and sells a full range of frozen ice
cream products, serving more than 3.7
million people each week. Dunkin’ Brands
is now a publicly listed company, having
being previously owned by a consortium of
private-equity firms.
Dunkin’ Brands pursues an asset-light
business mode, with more than 99.0% of
its retail locations operating under
franchise agreements. This has allowed
the company to open over 1,500 Dunkin’
Donuts locations over the past five years.
About 84.0% of Dunkin’ Donuts’ points
of distribution are traditional
restaurants, consisting of stand-alone
locations and those contained in gas
stations and convenience locations. In
addition, the company has full- and
self-service kiosks in grocery stores,
hospitals, airports, offices and other
locations with small retail footprints.
Dunkin’ Donuts (US industry-specific segment) – financial performance*
Year*
Sales
($ million)
(% change)
Operating Income
($ million)
(% change)
2011
6,433.0
8.6
444.8
20.7
2012
6,774.2
5.3
501.1
12.7
2013
7,255.8
7.1
606.8
21.1
2014
7,719.5
6.4
666.8
9.9
2015
8,206.4
6.3
740.9
11.1
2016
8,632.4
5.2
836.4
12.9
*Estimates
SOURCE: ANNUAL REPORT AND IBISWORLD
Doughnut Stores in the US March 2016   24
WWW.IBISWORLD.COM
Major Companies
Player Performance
continued
Financial performance
In the five years to 2016, Dunkin’ Brands’
US-specific sales are expected to grow at
an average annual rate of 6.1% per year to
$8.7 billion. The company’s Dunkin’
Donuts segment has led the charge, with
system-wide sales growing in each of the
past five years. The addition of hundreds
of new locations has contributed to the
brand’s sales growth. This growth has
been further bolstered by an increase in
the average spending per customer at
Dunkin’ Donuts, mainly due to premium-
priced cold beverages and differentiated
sandwiches. Dunkin’ Donuts has also
heavily marketed its afternoon offerings,
resulting in higher sales of beverages and
donuts during this time slot. Meanwhile,
the company’s Baskin-Robbins brand has
underperformed in relation to the
broader industry. The ice-cream segment
has struggled due to rising competition
from healthier alternatives, such as
frozen yogurt. Baskin-Robbins added
four new stores in 2013, the first time it
increased its retail footprint since 2006.
Player Performance
Tim Hortons Inc. is a Canadian-based
fast-casual restaurant that focuses on
coffee and donuts. The company was
founded in 1964 in Hamilton, Ontario
and is the biggest retailer of its kind in
Canada. Tim Hortons caters to a broad
range of consumer tastes, with a menu
that includes premium-blend coffee,
espresso-based hot and cold specialty
drinks such as lattes, cappuccinos and
espresso shots, teas, cold beverages, fruit
smoothies and a growing range of food
options such as soups, sandwiches,
wraps, yogurt and baked goods.
Tim Hortons opened its first US store
in 1985 in Buffalo, NY and expanded
rapidly through the 1990s by acquiring
former locations of fast-food chains. The
company has made significant inroads
into the US market over the past five
years and currently has just under 900
locations in the United States. Tim
Hortons owns and operates only a small
number of company restaurants,
preferring to franchise the majority of its
locations. The chain operates both
full-service restaurants, as well as
self-serve kiosks, that offer a limited
product offering and operate in offices,
hospitals, colleges, airports and
convenience stores. The company’s
strategy is to use self-service kiosks
where existing full-service locations are
at full capacity. The company has a
Tim Hortons
Market share: 5.8%
Tim Hortons (US industry-specific) – financial performance*
Year
Sales
($ million)
(% change)
Locations
(units)
(% change)
2011
473.0
7.7
714
18.6
2012
532.0
12.5
804
12.6
2013
586.5
10.2
859
6.8
2014
694.3
18.4
884
2.9
2015
710.2
2.3
869
-1.7
2016
782.8
10.2
891
2.5
*Estimates
SOURCE: IBISWORLD
Doughnut Stores in the US March 2016   25
WWW.IBISWORLD.COM
Major Companies
Player Performance
continued
Other Companies
vertically integrated supply chain and
supplies paper, dry goods, frozen baked
goods and refrigerated products to a
majority of its stores.
As of December 2014, Burger King
acquired Tim Hortons. Subsequently,
both chains were taken off the stock
market and combined under Restaurant
Brands International (RBI), a holding
company that is also based in Canada and
majority-owned by 3G Capital. The
acquisition and subsequent combination
of companies under Restaurant Brands
International is expected to significantly
boost the company’s market share in the
coming years, as RBI is expected to
continue to aggressively expand Tim
Hortons worldwide. According to the new
company, the combined companies
comprise over 19,000 restaurants in
about 100 countries and employ 450,000
individuals worldwide. Moving forward,
the company’s business strategy aims to
expand internationally, while defending
its dominant position in Canada and
aggressively competing in the saturated
US market. The company plans on doing
this through significant menu overhauls,
introducing premium products and
extending its brand reach in urban areas
through nontraditional formats.
Krispy Kreme Doughnuts, Inc.
Estimated market share: 4.9%
Founded in 1937, Krispy Kreme is a
leading branded retailer and wholesaler of
doughnuts and packaged sweets. The
company produces more than 20 varieties
of doughnuts, along with a broad array of
coffees and other beverages. Krispy Kreme
generates revenue from company-owned
stores, domestic franchise stores and
international franchise stores. As of June
2014, the company had 95 company
stores, 159 domestic franchise stores and
574 international franchise stores in 21
countries. Krispy Kreme employs about
3,300 people, of which about 1,500 people
are full-time employees.
As well as selling products through its
retail outlets, Krispy Kreme also
wholesales branded doughnuts and
packaged sweets to a variety of retail
customers, including convenience stores,
grocery stores, and other food service
establishments. Doughnut sales account
for about 88.0% of the company’s retail
sales, while beverages represent just over
10.0% of sales. The company is making a
concerted effort to shift its sales mix
toward more beverages to increase
visitation rates. In light of this, Krispy
Kreme has added specialty espresso
drinks and a range of new drip coffee
blends over the past five years while also
running beverage and doughnut
promotions to try to boost sales. In the
five years to fiscal 2016, US system-wide
sales are expected to grow at an
annualized rate of 5.4% to $692.3 million.
Financial performance
Tim Hortons’ US franchise system-wide
sales are estimated to hit $783.0 million
in 2016, representing annualized growth
of 10.6% over the five years to 2016. Tim
Hortons has added about 330 franchises
in the United States over the past five
years and the average check per
customer visit has also increased. Tim
Hortons is focused on building brand
awareness in the United States, since the
coffee market is saturated by industry
giants Starbucks and Dunkin’ Donuts.
The US fast food market is crowded and
the most competitive in the world,
however, Tim Hortons expects to add
another 300 stores in the United States
over the next five years. The company’s
growth in Canada, where it dominates
the coffee stores industry, has begun to
slow, so the United States is a major
priority for the chain.
Doughnut Stores in the US March 2016   26
WWW.IBISWORLD.COM
Operating Conditions
Capital Intensity   |   Technology & Systems   |   Revenue Volatility
Regulation & Policy   |   Industry Assistance
Capital Intensity
Level
The level
of capital
intensity is M
edium
The Doughnut Stores industry is
characterized by a low-to-moderate level
of capital intensity, due to the highly
labor-intensive nature of day-to-day
operations. IBISWorld estimates that for
every $1.00 the industry spends on
labor, $0.13 is allocated toward the use
and replacement of capital. The industry
is labor intensive, given the need for
personal, face-to-face service and labor
input in all areas, from acceptance of
supply deliveries, order-taking, serving
and cleaning and in the management of
each store. Compared to other foodservice industries, the industry relies
minimally on capital within stores, such
as the cooking equipment used in
fast-food restaurants. Instead, most
industry products (e.g. doughnuts) are
Capital intensity
Capital units per labor unit
0.5
0.4
0.3
0.2
0.1
0.0
Economy
Consumer
Goods &
Services
Doughnut
Stores
Dotted line shows a high level of capital intensity
SOURCE: WWW.IBISWORLD.COM
produced outside the store and delivered
to store locations for immediate
purchase and consumption.
Tools of the Trade: Growth Strategies for Success
New Age Economy
Investment Economy
Recreation, Personal Services,
Health and Education. Firms
benefit from personal wealth so
stable macroeconomic conditions
are imperative. Brand awareness
and niche labor skills are key to
product differentiation.
Information, Communications,
Mining, Finance and Real
Estate. To increase revenue
firms need superior debt
management, a stable
macroeconomic environment
and a sound investment plan.
Labor Intensive
Capital Intensive
Chain Restaurants
Doughnut Stores
Grocery Wholesaling Coffee Production
Traditional Service Economy
Bread Production
Wholesale and Retail. Reliant
Specialty Food Stores
on labor rather than capital to
sell goods. Functions cannot
be outsourced therefore firms
must use new technology
or improve staff training to
increase revenue growth.
Change in Share of the Economy
Old Economy
Agriculture and Manufacturing.
Traded goods can be produced
using cheap labor abroad.
To expand firms must merge
or acquire others to exploit
economies of scale, or specialize
in niche, high-value products.
SOURCE: WWW.IBISWORLD.COM
Doughnut Stores in the US March 2016   27
WWW.IBISWORLD.COM
Operating Conditions
Capital Intensity
continued
Historically, independent doughnut
stores produced many of their items
in-house. However, with the growth of
franchise locations, such as Dunkin’ Donuts,
and the subsequent desire for standard and
consistent quality products, doughnut stores
are increasingly sourcing doughnuts and
other food products from outside locations.
Centralized production is a major
element of Dunkin’ Brands supply chain
that is designed to support growth for the
company and supply its various franchise
locations. These centralized
manufacturing locations deliver freshly
baked products to Dunkin’ Donuts stores
on a daily basis and are designed to
simplify restaurant-level operations. In
2013, Dunkin’ Brands operated 114
production locations in the United States.
The growing use of production locations
has reduced capital intensity for doughnut
stores that rely on doughnuts produced by
third-party suppliers; however, it has
increased capital and investment
requirements for new companies that wish
to produce items in-house.
Technology & Systems Doughnut store operators regularly leverage
technology. However, there are various
low-cost options that assist store efficiency.
Most operators now have point-of-sale
systems in stores to speed up service, which
helps lead to larger purchases on average
and cuts down on labor costs. Retailers are
increasingly accepting credit card
payments through devices such as Square,
which connect directly to the store’s iPad or
iPhone and facilitates ease of transaction.
Customers can sign with their finger on a
touchscreen rather than with a pen and
have the receipt emailed to them. Certain
doughnut stores have adopted mobile
technology, allowing for the ordering of
coffees and food items via mobile
applications and online.
Major company Dunkin’ Brands’
references network and information
technology systems as integral to its
business. The company uses various
customized and web-based computer
systems. One of these is the company’s
FAST system, which is used by its US and
Canadian franchisees to report weekly sales
and pay corresponding royalty fees and
required advertising fund contributions.
When sales are reported by a franchisee, a
withdrawal for the authorized amount is
initiated from the franchisee’s bank. The
FAST system is critical to Dunkin’ Brands’
ability to accurately track sales and
compute royalties due from its franchisees.
Level
The level
of
Technology Change
is M
edium
technology to reduce labor and food costs to
increase sales. They also use it to improve
business processes, support growth,
maintain current operations and improve
meal experiences.
Quality of service
The majority of technological adoption by the
industry aims to address new systems and
processes that are designed to promote
quality service and reduce customer wait
time. Wireless electronic ordering systems
that link front-of-the house orders to kitchen
meal preparation are an example of such
innovation. Equipment such as advanced
bean grinders and coffee machines are used
to minimize coffee brewing times. The
increasing sophistication of the internet and
mobile technology have also allowed industry
players to reach wholesalers and suppliers
online. This has allowed for increased
efficiencies in coordinating supplies and
other pre-prepared food items. Parent
franchise companies, such as Dunkin’
Brands, have redesigned kitchen layouts and
ordering systems in an effort to reduce food
preparation times.
Point of sale systems
The small-business nature of the industry
means many operators do not have the
capacity to invest heavily in advanced
Doughnut Stores in the US March 2016   28
WWW.IBISWORLD.COM
Operating Conditions
Technology & Systems Social media
Technology has also aided doughnut
continued
store owners with marketing. Social
media such as Facebook, Twitter and
Instagram allows savvy operators to
connect directly with customers and
tailor their brand’s message to target
fragmented consumer segments.
Revenue Volatility
The industry has been characterized by a
low level of volatility over the five years to
2016. Volatility is mitigated by the
expansive geographic distribution of
industry locations, so that a downturn in
economic activity in one region may be
offset by growing activity in other regions.
Furthermore, the industry has been
increasing its product portfolio over the
past decade; therefore, declining
consumption of particular foods among
the American public can be made up by
sales of other products. Because of rapid
establishment expansion by major
industry operator Dunkin’ Brands, any
extreme revenue volatility was mitigated.
of
Volatility is L ow
A higher level of revenue
volatility implies greater
industry risk. Volatility can
negatively affect long-term
strategic decisions, such as
the time frame for capital
investment.
When a firm makes poor
investment decisions it
may face underutilized
capacity if demand
suddenly falls, or capacity
constraints if it rises
quickly.
Volatility vs Growth
1000
Revenue volatility* (%)
Level
The level
Hazardous
Rollercoaster
100
10
Doughnut Stores
1
0.1
Stagnant
–30
–10
Blue Chip
10
30
50
70
Five-year annualized revenue growth (%)
* Axis is in logarithmic scale
SOURCE: WWW.IBISWORLD.COM
Regulation & Policy
Level & Trend
he level of
T
Regulation is
Light and the
trend is S
teady
The Doughnut Stores industry is subject to
a medium level of regulation that is
increasing. There are regulations covering a
range of areas, from food safety and
standards, to labor conditions and
franchising requirements. Most regulation
is enacted and enforced at the state level,
but many federal and local laws also apply.
Food safety and standards
There are more than 3,000 state, local and
tribal agencies that have responsibility to
regulate the retail food and foodservice
industries in the United States. The main
agency responsible for providing guidance
and regulation is the US Food and Drug
Administration’s (FDA). The FDA’s Model
Food Code, which is a best-practice guide to
food handling and presentation, applies to
this industry and is updated each year. The
FDA Nutritional Value applies as well. Since
1996, the FDA regulations have set standards
for nutritional values of individual foods and
meals. If claims like “low fat” or “heart
healthy” are on a menu, an owner must be
able to demonstrate to officials that there is a
reasonable basis for the claim. For instance,
the meal may be based on a recipe from a
Doughnut Stores in the US March 2016   29
WWW.IBISWORLD.COM
Operating Conditions
Regulation & Policy
continued
health association or a recognized dietary
group. Complete nutritional information,
however, is not required to be on menus.
Labor relations
The industry employs a high number of
young and low-skilled workers at hourly rates
and, therefore, is subject to minimum wage
and employee benefits regulations. Workers
in the US are entitled to be paid no less than
the statutory minimum wage, which as of
2014 was $7.25 per hour. Each state also
formulates and regulates its own minimum
wage, with some states implementing rates
higher than the federal rate.
The implementation of the Affordable
Care Act over the next five years will have a
minor impact on the industry. Employers
with 50 or more employees that work 30
hours a week will be required to provide
healthcare coverage or pay a fine. However,
the large majority of companies in the
industry employ less than 50 staff. According
to Krispy Kreme’s latest annual report,
federal legislation regarding governmentmandated health benefits is expected to
increase both the company’s costs and the
costs of its domestic franchisees.
Industry Assistance
Level & Trend
he level of
T
Industry Assistance
is N
one and the
trend is S
teady
Each jurisdiction has developed legislation
separately; however, most laws are
relatively consistent. There are some
differences pertaining to the circumstances
in which ventilated smoking rooms are
permitted and the distance smoking is
banned outside a building. California was
the first state to enact a statewide ban on
smoking, with most other states imposing a
ban in the mid to late 2000s.
Smoking bans
Smoking laws are generally enforced at the
state level as the US Congress has not
attempted to enact any nationwide federal
smoking ban. Smoking is banned in
restaurants, bars and non-hospitality
workplaces in many states and some local
jurisdictions ban smoking in outdoor areas.
Franchising laws
A large proportion of industry
establishments are operated under
franchise agreements. There are both
federal and state laws governing
franchising, which vary from state to state.
Franchising is regulated at the federal level
by the US Federal Trade Commission and
applied in any region within the United
States. At the state level, various state
agencies regulate franchises and laws vary
between states. A state’s franchise laws
usually only apply if the sale of a franchise
is made in the state and the business is
located in the state. Laws generally fall
under three categories: disclosure laws,
registration laws and relationship laws.
Under the FTC Franchise Rule there are
three elements of a franchise: the franchise
has a trademark under which the franchisee
is given the right to distribute goods and
services; the franchisor has significant
control of or provides significance to the
franchisee’s method of operation; and the
franchisee is required to pay the franchisor
at least $500 before opening for business.
Although the Doughnut Stores industry
receives no formal assistance in the
form of government aid or monetary
compensation, there are industry
associations that help the industry as a
whole. These associations, such as the
National Restaurant Association and
the National Franchisee Association
and the Dunkin’ Donuts Independent
Franchise Owners, provide industry
news, research, sponsoring events,
networking opportunities, and
representation, among other things.
There are also organizations and
business associations that provide the
same services on a more local level.
WWW.IBISWORLD.COM
Doughnut Stores in the US March 2016  
30
Key Statistics
Industry Data
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Revenue
($m)
9,299.8
10,960.1
10,379.1
10,595.9
11,143.0
11,994.5
12,616.6
13,071.4
13,585.1
14,024.3
14,451.6
14,734.0
15,107.6
15,442.6
15,855.4
Annual Change
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Revenue
(%)
17.9
-5.3
2.1
5.2
7.6
5.2
3.6
3.9
3.2
3.0
2.0
2.5
2.2
2.7
Industry
Value Added Establish($m)
ments
3,185.1
16,428
3,372.8
18,482
3,605.7
17,881
3,581.4
17,949
3,845.0
18,552
4,259.7
20,100
4,580.0
20,558
4,462.5
21,461
4,759.1
22,195
4,929.8
22,996
5,079.7
23,701
5,187.7
24,268
5,278.6
24,909
5,423.2
25,483
5,555.8
26,082
Enterprises Employment
6,721
174,536
6,596
199,302
6,413
182,673
6,547
171,298
6,816
173,826
6,970
183,545
7,111
184,344
7,343
194,863
7,510
201,871
7,608
211,450
7,758
218,347
7,927
225,116
8,069
230,784
8,221
237,003
8,395
242,151
Exports
—————-
Imports
—————-
Wages
($m)
2,392.5
2,804.5
2,650.7
2,685.0
2,803.1
2,999.1
3,218.7
3,359.3
3,468.8
3,568.1
3,668.9
3,766.7
3,856.2
3,938.0
4,030.1
Domestic
Demand
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Industry
EstablishValue Added
ments
(%)
(%)
5.9
12.5
6.9
-3.3
-0.7
0.4
7.4
3.4
10.8
8.3
7.5
2.3
-2.6
4.4
6.6
3.4
3.6
3.6
3.0
3.1
2.1
2.4
1.8
2.6
2.7
2.3
2.4
2.4
Enterprises Employment
(%)
(%)
-1.9
14.2
-2.8
-8.3
2.1
-6.2
4.1
1.5
2.3
5.6
2.0
0.4
3.3
5.7
2.3
3.6
1.3
4.7
2.0
3.3
2.2
3.1
1.8
2.5
1.9
2.7
2.1
2.2
Exports
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Imports
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Wages
(%)
17.2
-5.5
1.3
4.4
7.0
7.3
4.4
3.3
2.9
2.8
2.7
2.4
2.1
2.3
Domestic Consumer spendDemand
ing in the US
(%)
(%)
N/A
-0.3
N/A
-1.6
N/A
1.9
N/A
2.3
N/A
1.5
N/A
1.7
N/A
2.7
N/A
3.2
N/A
3.0
N/A
4.6
N/A
2.8
N/A
2.4
N/A
2.5
N/A
2.7
Key Ratios
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
IVA/Revenue
(%)
34.25
30.77
34.74
33.80
34.51
35.51
36.30
34.14
35.03
35.15
35.15
35.21
34.94
35.12
35.04
Figures are in inflation-adjusted 2016 dollars.
Imports/
Demand
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Exports/
Revenue
(%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Revenue per
Employee
($’000)
53.28
54.99
56.82
61.86
64.10
65.35
68.44
67.08
67.30
66.32
66.19
65.45
65.46
65.16
65.48
Wages/Revenue
(%)
25.73
25.59
25.54
25.34
25.16
25.00
25.51
25.70
25.53
25.44
25.39
25.56
25.52
25.50
25.42
Employees
per Est.
10.62
10.78
10.22
9.54
9.37
9.13
8.97
9.08
9.10
9.20
9.21
9.28
9.27
9.30
9.28
Average Wage
($)
13,707.77
14,071.61
14,510.63
15,674.44
16,125.90
16,339.86
17,460.29
17,239.29
17,183.25
16,874.44
16,803.07
16,732.26
16,709.13
16,615.82
16,642.92
Consumer spending in the US
($b)
10,041.6
10,007.2
9,847.0
10,036.3
10,263.5
10,413.2
10,590.4
10,875.7
11,225.9
11,562.7
12,099.4
12,432.4
12,729.5
13,051.2
13,397.4
Share of the
Economy
(%)
0.02
0.02
0.03
0.02
0.03
0.03
0.03
0.03
0.03
0.03
0.03
0.03
0.03
0.03
0.03
SOURCE: WWW.IBISWORLD.COM
Doughnut Stores in the US March 2016   31
WWW.IBISWORLD.COM
Jargon & Glossary
Industry Jargon
DONUT An Americanized spelling of doughnut that
spawned in part from Dunkin’ Brands’ shortening of the
term for aesthetic appeal and cost savings on signage
and marketing materials.
ESPRESSO Coffee brewed by forcing a small amount of
nearly boiling water under pressure through finely
ground coffee beans.
FOOD SERVICE The practice or business of making,
transporting, and serving or dispensing prepared foods
outside the home.
IBISWorld Glossary
BARRIERS TO ENTRY High barriers to entry mean that
new companies struggle to enter an industry, while low
barriers mean it is easy for new companies to enter an
industry.
CAPITAL INTENSITY Compares the amount of money
spent on capital (plant, machinery and equipment) with
that spent on labor. IBISWorld uses the ratio of
depreciation to wages as a proxy for capital intensity.
High capital intensity is more than $0.333 of capital to
$1 of labor; medium is $0.125 to $0.333 of capital to $1
of labor; low is less than $0.125 of capital for every $1 of
labor.
CONSTANT PRICES The dollar figures in the Key
Statistics table, including forecasts, are adjusted for
inflation using the current year (i.e. year published) as
the base year. This removes the impact of changes in
the purchasing power of the dollar, leaving only the
“real” growth or decline in industry metrics. The inflation
adjustments in IBISWorld’s reports are made using the
US Bureau of Economic Analysis’ implicit GDP price
deflator.
DOMESTIC DEMAND Spending on industry goods and
services within the United States, regardless of their
country of origin. It is derived by adding imports to
industry revenue, and then subtracting exports.
EMPLOYMENT The number of permanent, part-time,
temporary and seasonal employees, working proprietors,
partners, managers and executives within the industry.
ENTERPRISE A division that is separately managed
and keeps management accounts. Each enterprise
consists of one or more establishments that are under
common ownership or control.
ESTABLISHMENT The smallest type of accounting unit
within an enterprise, an establishment is a single
physical location where business is conducted or where
services or industrial operations are performed. Multiple
establishments under common control make up an
enterprise.
EXPORTS Total value of industry goods and services sold
by US companies to customers abroad.
FRANCHISE An independently owned location that
operates under a branded licensing and business model.
POINT-OF-SALE (POS) SYSTEM A system used at
checkout in retail stores using computers and cash
registers to capture transaction data at the time and
place of sale.
READY-TO-DRINK (RTD) A beverage produced and
packaged for immediate consumption.
IMPORTS Total value of industry goods and services
brought in from foreign countries to be sold in the
United States.
INDUSTRY CONCENTRATION An indicator of the
dominance of the top four players in an industry.
Concentration is considered high if the top players
account for more than 70% of industry revenue.
Medium is 40% to 70% of industry revenue. Low is less
than 40%.
INDUSTRY REVENUE The total sales of industry goods
and services (exclusive of excise and sales tax); subsidies
on production; all other operating income from outside
the firm (such as commission income, repair and service
income, and rent, leasing and hiring income); and
capital work done by rental or lease. Receipts from
interest royalties, dividends and the sale of fixed
tangible assets are excluded.
INDUSTRY VALUE ADDED (IVA) The market value of
goods and services produced by the industry minus the
cost of goods and services used in production. IVA is
also described as the industry’s contribution to GDP, or
profit plus wages and depreciation.
INTERNATIONAL TRADE The level of international
trade is determined by ratios of exports to revenue and
imports to domestic demand. For exports/revenue: low is
less than 5%, medium is 5% to 20%, and high is more
than 20%. Imports/domestic demand: low is less than
5%, medium is 5% to 35%, and high is more than
35%.
LIFE CYCLE All industries go through periods of growth,
maturity and decline. IBISWorld determines an
industry’s life cycle by considering its growth rate
(measured by IVA) compared with GDP; the growth rate
of the number of establishments; the amount of change
the industry’s products are undergoing; the rate of
technological change; and the level of customer
acceptance of industry products and services.
Doughnut Stores in the US March 2016   32
WWW.IBISWORLD.COM
Jargon & Glossary
IBISWorld Glossary
continued
NONEMPLOYING ESTABLISHMENT Businesses with
no paid employment or payroll, also known as
nonemployers. These are mostly set up by self-employed
individuals.
PROFIT IBISWorld uses earnings before interest and tax
(EBIT) as an indicator of a company’s profitability. It is
calculated as revenue minus expenses, excluding
interest and tax.
VOLATILITY The level of volatility is determined by
averaging the absolute change in revenue in each of the
past five years. Volatility levels: very high is more than
±20%; high volatility is ±10% to ±20%; moderate
volatility is ±3% to ±10%; and low volatility is less than
±3%.
WAGES The gross total wages and salaries of all
employees in the industry. The cost of benefits is also
included in this figure.
www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com
At IBISWorld we know that industry intelligence
is more than assembling facts
It is combining data with analysis to answer the
questions that successful businesses ask
Identify high growth, emerging & shrinking markets
Arm yourself with the latest industry intelligence
Assess competitive threats from existing & new entrants
Benchmark your performance against the competition
Make speedy market-ready, profit-maximizing decisions
Who is IBISWorld?
We are strategists, analysts, researchers, and marketers. We provide
answers to information-hungry, time-poor businesses. Our goal is to
provide real world answers that matter to your business in our 700 US
industry reports. When tough strategic, budget, sales and marketing
decisions need to be made, our suite of Industry and Risk intelligence
products give you deeply-researched answers quickly.
IBISWorld Membership
IBISWorld offers tailored membership packages to meet your needs.
Disclaimer
This product has been supplied by IBISWorld Inc. (‘IBISWorld’) solely for use
by its authorized licenses strictly in accordance with their license agreements
with IBISWorld. IBISWorld makes no representation to any other person
with regard to the completeness or accuracy of the data or information
contained herein, and it accepts no responsibility and disclaims all liability
(save for liability which cannot be lawfully disclaimed) for loss or damage
whatsoever suffered or incurred by any other person resulting from the use
of, or reliance upon, the data or information contained herein. Copyright in
this publication is owned by IBISWorld Inc. The publication is sold on the
basis that the purchaser agrees not to copy the material contained within it
for other than the purchasers own purposes. In the event that the purchaser
uses or quotes from the material in this publication – in papers, reports, or
opinions prepared for any other person – it is agreed that it will be sourced to:
IBISWorld Inc.
Copyright 2016 IBISWorld Inc
Bakery Cafes in the US December 2015   1
WWW.IBISWORLD.COM
Warming up: High-quality menu items and
increased coffee consumption will bolster revenue
IBISWorld Industry Report OD4319
Bakery Cafes in the US
December 2015
Andrew Alvarez
2 About this Industry
16 International Trade
2
Industry Definition
17 Business Locations
2
Main Activities
2
Similar Industries
19 Competitive Landscape
30 Industry Data
3
Additional Resources
19 Market Share Concentration
30 Annual Change
19 Key Success Factors
30 Key Ratios
4 Industry at a Glance
29 Industry Assistance
30 Key Statistics
19 Cost Structure Benchmarks
21 Basis of Competition
5 Industry Performance
22 Barriers to Entry
5
Executive Summary
22 Industry Globalization
5
Key External Drivers
7
Current Performance
23 Major Companies
9
Industry Outlook
23 Panera Bread Company
11 Industry Life Cycle
24 Einstein Noah Restaurant Group
13 Products & Markets
27 Operating Conditions
13 Supply Chains
27 Capital Intensity
13 Products & Services
28 Technology & Systems
14 Demand Determinants
28 Revenue Volatility
15 Major Markets
29 Regulation & Policy
31 Jargon & Glossary
www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com
Bakery Cafes in the US December 2015   2
WWW.IBISWORLD.COM
About this Industry
Industry Definition
This industry comprises companies that
produce food that is flour-based in an
on-site oven for immediate consumption.
Typical products include bread, cakes,
Main Activities
The primary activities of this industry are
pastries, pies and bagels, as well as
complementary products, such as
sandwiches, soups and salads. Purchases
may be consumed on-site or taken to go.
Producing flour-based, baked products in an on-site oven
Retailing food and beverages for immediate consumption
Operating a cafe with on-site seating
The major products and services in this industry are
Beverages
Bread and sandwiches
Other
Similar Industries
31181 Bread Production in the US
Bread producers manufacture fresh and frozen bread and baked goods including cakes, muffins and
croissants but excluding cookies and crackers, and sell to downstream supermarkets.
44512 Convenience Stores in the US
Convenience stores are primarily engaged in retailing a limited line of goods.
44529 Specialty Food Stores in the US
This industry primarily retails confectionery goods and nuts not packaged for immediate consumption.
72221b Coffee & Snack Shops in the US
This industry serve specialty snacks and nonalcoholic beverages including ice cream, frozen yogurt, cookies,
donuts, bagels, coffee, juices, smoothies and sodas.
72221a Fast Food Restaurants in the US
This industry primarily provides food to patrons who pay before eating. Generally, there is limited or no
waiter service involved.
Bakery Cafes in the US December 2015   3
WWW.IBISWORLD.COM
About this Industry
Additional Resources
For additional information on this industry
www.atbi.org
Allied Trades of the Baking Industry
www.americanbakers.org
American Bakers Association
www.nrn.com
Nation’s Restaurant News
www.restaurant.org
National Restaurant Association
www.retailbakersofamerica.org
Retail Bakers of America
IBISWorld
writes over 700 US
industry reports, which are updated
up to four times a year. To see all
reports, go to www.ibisworld.com
WWW.IBISWORLD.COM
Bakery Cafes in the US December 2015  
4
Industry at a Glance
Bakery Cafes in 2015
Key Statistics
Snapshot
Revenue
Annual Growth 10-15
Annual Growth 15-20
Profit
Wages
Businesses
5.8%
$7.4bn
$1.7bn
$360.6m
Consumer spending
Revenue vs. employment growth
% change
Panera Bread
Company
63.3%
Einstein Noah
Restaurant Group
7.4%
30
6
20
4
% change
Market Share
10
0
-10
Year 07
3.0%
2,522
2
0
09
Revenue
11
13
15
17
19
21
-2
Year
08
10
12
14
16
18
20
Employment
SOURCE: WWW.IBISWORLD.COM
p. 23
Products and services segmentation (2015)
20.4%
Key External Drivers
Beverages
Consumer spending
Per capita coffee
consumption
Consumer
Confidence Index
50.2%
Bread and sandwiches
Healthy eating index
29.4%
Other
p. 5
SOURCE:
WWW.IBISWORLD.COM
SOURCE:
WWW.IBISWORLD.COM
Industry Structure
Life Cycle Stage
Growth
Regulation Level
Light
Revenue Volatility
Low
Technology Change
Capital Intensity
Low
Barriers to Entry
Industry Assistance
Low
Industry Globalization
Low
Concentration Level
Medium
Competition Level
High
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 30
Low
Medium
Bakery Cafes in the US December 2015   5
WWW.IBISWORLD.COM
Industry Performance
Executive Summary   |   Key External Drivers   |   Current Performance
Industry Outlook   |   Life Cycle Stage
Executive
Summary
The Bakery Cafes industry is heating up as
consumers become more interested in
moderately priced, high-quality menu
offerings. Bakery cafes specialize in serving
flour-based baked goods and
complementary food items, such as
sandwiches, salads and soups, for
immediate consumption. The industry has
surged ahead since the recession and
outperformed the overall food service
sector, driven largely by changing
consumer preferences. Consumers are
increasingly demanding healthy, gourmet
and custom-made cuisine at an affordable
The
industry has surged ahead of the food
service sector, driven by changing preferences
price. Based on these trends, industry
revenue is expected to grow at a strong rate
of 5.8% per year on average over the five
years to 2015. As operators add more stores
in 2015 and consumer awareness of this
relatively new segment increases within the
food sector, industry revenue is expected to
rise 3.5% in 2015 to $7.4 billion.
The industry has undergone heavy
consolidation over the past five years as
major chains, such as Panera Bread,
Einstein Bros. Bagels and Tim Hortons,
rapidly expanded. The franchise model
Key External Drivers
Consumer spending
Consumer spending patterns influence
fluctuations in industry revenue. In times
with low economic growth, spikes in
unemployment can lead to reduced
consumer spending, resulting in lower
industry revenue growth. When
consumer spending is high, consumers
are more likely to spend money on
out-of-home food. Consumer spending is
expected to increase in 2015,
representing a potential opportunity for
the industry.
most of the major players operate under has
accommodated the rapid growth in
establishments as operators require less
capital and take on lower risk while growing
market share. Many small, independent
bakery cafes that have traditionally serviced
local markets have been pushed out of the
industry, unable to compete with the
geographic reach and marketing spend of
the major chains. However, many savvy
independents have made profitable
businesses with niche, high-end offerings,
such as cupcakes or macaroons.
The industry is expected to continue on
a growth trajectory over the next five years
as many of the same influential trends
continue. Economic fundamentals, such
as consumer spending and disposable
income, are anticipated to perform
strongly over the outlook period, creating
a favorable operating environment for
bakery cafes. To avoid price-based
competition and to protect profit margins,
operators are expected to target markets
with greater potential for growth, such as
the breakfast crowd. The breakfast market
has traditionally been less competitive and
bakery cafes are expected to bolster sales
by offering a greater range of breakfast
sandwiches, bagels and coffee. Over the
five years to 2020, industry revenue is
expected to grow by 3.0% per year on
average to $8.5 billion.
Per capita coffee consumption
Coffee and other beverages account for a
large portion of industry revenue, as
most industry establishments serve coffee
alongside baked goods. When coffee
consumption increases, bakery cafes
generally experience revenue growth. Per
capita coffee consumption is expected to
increase slowly in 2015.
Consumer Confidence Index
Consumer sentiment measures consumers’
perceptions about their current and future
Bakery Cafes in the US December 2015   6
WWW.IBISWORLD.COM
Industry Performance
financial prospects. Changes in consumer
sentiment have a significant effect on the
spending of discretionary items, including
items from snack and coffee shops. During a
recession, consumers tend to forego highermargin items and opt for lower-priced value
products. The Consumer Confidence index is
expected to increase in 2015.
Healthy eating index
The healthy eating index is expected
to increase in 2015, posing a potential
threat to the industry. Consumers
have become increasingly aware of
issues related to weight and obesity,
fatty-food intake and food-safety
issues, which are particularly
applicable to the Bakery Cafes
industry. Increases in the healthy
eating index are a threat to the
industry, especially if consumers shift
away from coffee consumption due to
the perceived impact of caffeine on
people’s health.
Per capita coffee consumption
Consumer spending
6
10.50
10.25
Pounds (lb)
4
% change
Key External Drivers
continued
2
0
-2
Year
10.00
9.75
9.50
9.25
08
10
12
14
16
18
20
9.00
Year 06
08
10
12
14
16
18
20
SOURCE: WWW.IBISWORLD.COM
Bakery Cafes in the US December 2015   7
WWW.IBISWORLD.COM
Industry Performance
Consumer trends
The Bakery Cafes industry has been one
of the best-performing industries within
the food service sector over the past five
years. While many food service
establishments were hampered by the
recession and have undergone an
unimpressive recovery since 2010, bakery
cafes have surged ahead. The industry is
cashing in on changing consumer
preferences, such as a need for greater
convenience and affordable quality
cuisine. As a result, industry revenue is
expected to grow 5.8% per year on
average over the five years to 2015. In
2015 alone, revenue is forecast to rise by
3.5% to a total of $7.4 billion.
The Bakery Cafes industry is composed of
establishments that offer menus
consisting mainly of baked goods, such as
breads, cakes, pastries and pies, as well
as complementary items like sandwiches,
salads and soups. Food is prepared for
immediate consumption and most
operators provide dining areas for on-site
consumption, while some provide
drive-thru facilities. The industry
occupies a middle ground between
quick-service restaurants, which have a
focus on fast food cuisine and minimal
table service, and full-service restaurants
that offer the full dining experience
through table service and expansive
menus. The industry has outpaced the
broader food service sector over the past
five years as it has tapped into new
consumer trends. Increased consumer
awareness of the dangers of obesity and a
growing focus on gastronomic excellence
have given rise to consumers seeking
high-end, affordable, healthy cuisine.
Baked goods and fresh produce that form
the centerpiece of the average bakery
cafe’s menu have therefore become
popular. For example, wraps and
Industry revenue
30
20
% change
Current
Performance
10
0
-10
Year 07
09
11
13
15
17
19
21
SOURCE: WWW.IBISWORLD.COM
sandwiches featuring artisanal breads,
such as ciabatta, sourdough and
pumpernickel have become more
frequent on bakery cafe menus. The
ability of operators to deliver food quickly
has also aided industry growth as
consumers with busier lifestyles have
increasingly sought greater convenience.
In urban locations, niche operators
targeting high-income consumers have
driven a barrage of store openings.
Establishments selling French pastries,
such as macaroons, brioches and
croissants have been especially prominent.
The gourmet cupcake craze has been part
of this trend as store numbers have
proliferated over the past decade. Crumbs
Bake Shop Inc., a cupcake chain with over
60 stores nationwide, experienced a great
deal of success and subsequently went
public in 2011. However, Crumbs’ sales
have since dropped, indicating this
segment of the market may have reached
the saturation point. Overall, operators
that sell a diverse range of baked goods
and have adapted to consumer
preferences over the past five years have
remained successful.
Bakery Cafes in the US December 2015   8
WWW.IBISWORLD.COM
Industry Performance
Industry structure
Profit
Large chains, such as Panera Bread,
Einstein Bros. Bagels and Au Bon Pain,
dominate the industry. These chains have
been the primary instigators behind
growth in industry establishments, which
are estimated to increase at an annualized
rate of 5.2% over the five years to 2015 to
4,520. For example, Panera Bread opened
about 400 locations in the five years to
2015. Major bakery cafe chains with
multiple locations and large profit
margins have made life difficult for
traditional independent bakeries. The big
chains have large marketing budgets and
access to capital that allows them to
expand quickly and penetrate local
markets. The opportunity for independent
operators to enter the industry and
succeed serving niche markets still
remains; however, barriers to entry have
increased, as the larger players have
solidified their market share.
Despite soaring revenue, operators in
the industry still earn modest profit
margins. Prices of food products, such
as flour, sugar, milk, salt and yeast, are
the industry’s greatest expenses, and
they have slowly increased over the past
five years due to growing global
demand. These rises have not had a
detrimental impact on profit margins,
as operators have increased prices to
accommodate for the increases. The
average industry profit margin has
expanded over the past five years due to
an increase in demand, and is
anticipated to account for 4.9% of
revenue in 2015. However, operators
still rely on high product turnover to
break even. The large chains earn the
healthiest profit margins because they
can take advantage of economies of
scale and purchase goods in bulk on
favorable terms from wholesalers.
The industry is labor intensive due to
the high level of service required. In many
ways, service has also been key to the
industry’s growth, with many operators
deploying higher-than-average staff
numbers to greet and serve customers to
create a more amiable atmosphere.
Despite the high level of service, labor
costs remain low, as the low-skilled nature
of the work that cooks, service attendants
and cleaners undertake keeps the average
industry wage at $19,246. Over the five
years to 2015, industry employment is
estimated to increase nearly in line with
revenue at 5.3% per year on average to
89,860 employees.
Barriers
to entry have
increased as larger players
have solidified their
market share
Bakery Cafes in the US December 2015   9
WWW.IBISWORLD.COM
Industry Performance
Industry
Outlook
The Bakery Cafes industry is set to surge
ahead over the next five years. The
industry has plenty of room for growth
and aggressive store openings by major
players is set to continue as consumer
demand increases. The broader economic
environment is expected to improve
during the outlook period, meaning
growing consumer spending and
confidence will spur revenue growth.
However, IBISWorld expects the industry
will reach the saturation point toward the
end of the five years to 2020, further
tempering revenue growth. Industry
revenue is expected to grow 3.0% per
year on average over the five years to
2020. This is a slightly slower rate than
the previous five years, but much
stronger than GDP growth over the same
period. By 2020, IBISWorld expects the
industry to earn $8.5 billion in revenue
and account for a greater share of the
broader food service sector.
Consolidation
Industry consolidation is expected to
continue over the next five years as
establishments grow at a faster rate than
enterprises. In the five years to 2020, the
number of industry establishments is
anticipated to grow at an annualized rate
of 3.4% to 5,355, compared with
enterprise growth of 2.9% per year on
average. Panera Bread has already
received commitments for 159 new
franchise openings over the next few
years and is expected to continue to
assert its position as the number one
industry operator. Franchise agreements,
which is the preferred business model
The US economy’s continued
recovery over the next five years will
play a major role in industry growth.
Consumer spending will increase at an
annualized 3.1% over the five years to
2020 as per capita income and
confidence improves. This will
stimulate spending on out-of-home
meals and enable consumers to splurge
on more expensive menu items. While
value will remain an important factor
for most consumers, the trend toward
premiumization within the entire food
service sector will continue. As
consumer awareness about the
nutritional content of products
becomes more widespread, bakery cafes
will continue to include more healthy
offerings. Healthy, high-quality cuisine
will become the norm and consumers
with higher incomes will be prepared to
pay a premium for it, which will further
assist industry revenue.
Independent
bakery cafes
will struggle to compete
without a strong local
reputation
used by most major chains, will enable
operators to open a large number of new
locations with limited capital investment
and lower risk. Meanwhile, independent
bakery cafes will struggle to compete
unless they have a defined target market
and a strong local reputation.
Bakery Cafes in the US December 2015   10
WWW.IBISWORLD.COM
Industry Performance
New markets
The industry has been mostly successful
over the past decade targeting the lunch
crowd, with most operators deriving well
over the 50.0% of their daily revenue
and profit between the hours of 11:00
am and 4:00 pm. While this will remain
the most lucrative period for bakery
cafes, many will continue to aggressively
target the underserviced breakfast
market. This strategy will help operators
avoid price-based competition in an
increasingly competitive industry.
Operators will attempt to attract
Profit
The average industry profit margin is
projected to increase minimally over the
next five years as demand increases and
costs remain under control. Bakery cafes
will still be subject to low profit margins
as competition remains fierce, although
some operators will gain access to high
margins through product differentiation.
If demand remains strong, as expected,
operators will be able to raise prices if
input costs inflate. Wages as a share of
revenue are expected to remain relatively
stagnant over the next five years, as
technology improvements help operators
consumers with extended breakfast
menus and early-morning deals. Chains
like Einstein Bros. and Corner Bakery
Cafe have already introduced breakfast
sandwiches and have started to make it
a greater priority to include healthy
breakfast alternatives, such as granola,
fruit and yogurt on their menus.
Traditionally, breakfast is the meal mos…
Purchase answer to see full
attachment

Why Choose Us

• 100% non-plagiarized Papers
• 24/7 /365 Service Available
• Affordable Prices
• Any Paper, Urgency, and Subject
• Will complete your papers in 6 hours
• On-time Delivery
• Money-back and Privacy guarantees
• Unlimited Amendments upon request
• Satisfaction guarantee

How it Works

• Click on the “Place Order” tab at the top menu or “Order Now” icon at the bottom and a new page will appear with an order form to be filled.
• Fill in your paper’s requirements in the "PAPER DETAILS" section.
• Fill in your paper’s academic level, deadline, and the required number of pages from the drop-down menus.
• Click “CREATE ACCOUNT & SIGN IN” to enter your registration details and get an account with us for record-keeping and then, click on “PROCEED TO CHECKOUT” at the bottom of the page.
• From there, the payment sections will show, follow the guided payment process and your order will be available for our writing team to work on it.