Voodoo Dough­nut to shake things up

Ore­gon in­sti­tu­tion en­ters crowded mar­ket with first Hous­ton store

Houston Chronicle - - BUSINESS - By Paul Taka­hashi STAFF WRITER

Lizzie Upchurch strode up to the dough­nut shop and peered through the front win­dow. In­side, con­trac­tors were busy putting the fin­ish­ing touches on the new shop, in­stalling white stone coun­ter­tops, fix­ing the linoleum floor and in­stalling a buf­falo head on the back wall. Upchurch, 20, was about to walk away dis­ap­pointed when a store man­ager rushed to the door, hold­ing out a pink box filled with a dozen fresh dough­nuts. The Hous­ton res­i­dent’s eyes lit up, and she broke out smil­ing. “I’m so ex­cited,” Upchurch said. “I’ve never been, but they do the cra­zi­est things. It just caught my eye.”

Voodoo Dough­nut, a Port­land, Ore., in­sti­tu­tion known for its zany con­fec­tions and cult-like fol­low­ing, will open its first Hous­ton store on Wed­nes­day, en­ter­ing a crowded dough­nut mar­ket long dom­i­nated by home­town fa­vorite Ship­ley Do-Nuts. If Voodoo’s 2015 de­but in Austin is any in­di­ca­tion, throngs of lo­cal dough­nut fans are ex­pected to swarm the Buf­falo Heights store this week to try the com­pany’s sig­na­ture dough­nuts, such as the Ma

ple Ba­con Bar and Port­land Cream.

The 2,400-square-foot shop, at 3715 Wash­ing­ton, marks Voodoo’s first mar­ket ex­pan­sion since San Fran­cisco pri­vate eq­uity firm Fun­da­men­tal Cap­i­tal ac­quired a ma­jor­ity stake in the com­pany in 2017 and laid plans for ma­jor ex­pan­sion. The chain, aided by new lead­er­ship and cap­i­tal in­fu­sion, has tar­geted Hous­ton as its launch­pad to take a big­ger bite out of the $8.3 bil­lion U.S. dough­nut mar­ket.

“We’re in growth mode right now,” Voodoo CEO Chris Schultz said. “We’re ex­cited about com­ing to Hous­ton and start­ing our growth here.”

Slow grow

Voodoo was founded in 2003 by Ken­neth “Cat Daddy” Pog­son and Tres Shan­non who saw a need for a dough­nut shop in down­town Port­land. The two long­time friends rented a hole-in-the-wall store­front be­tween two night­clubs, and be­gan mak­ing and sell­ing un­con­ven­tional con­fec­tions us­ing un­usual in­gre­di­ents such crispy ba­con, Tang and Cap’n Crunch and Fruit Loops ce­re­als. Voodoo once even of­fered Nyquil, Pepto-Bis­mol and Tums-topped dough­nuts be­fore lo­cal health of­fi­cials forced the com­pany to take them off the menu.

The late An­thony Bour­dain put Voodoo on the culi­nary map in 2007 when he fea­tured the shop and its iconic Ba­con Maple Bar — a raised yeast dough­nut topped with maple frost­ing and ba­con — on his pop­u­lar Travel Chan­nel show, “No Reser­va­tions.” Since then, Voodoo has been all over the me­dia from “To­day” to “The Tonight Show,” and has be­come one of Port­land’s top tourist des­ti­na­tions.

De­spite its pop­u­lar­ity, Voodoo has grown slowly, ex­pand­ing to Eugene, Ore., in 2010; Denver in 2013; and Austin in 2015. The com­pany in 2017 and 2018 part­nered with Uni­ver­sal Stu­dios to open shops in its Ci­ty­walk tourist at­trac­tions in Hol­ly­wood and Or­lando. The com­pany will have nine lo­ca­tions na­tion­ally af­ter open­ing its Hous­ton shop Wed­nes­day.

By com­par­i­son, Krispy

Kreme has more than 1,200 lo­ca­tions world­wide, and Dunkin’ Donuts has more than 11,300 lo­ca­tions glob­ally. Ship­ley, the Hous­ton­based com­pany in op­er­a­tion for more than 80 years, has 325 stores in nine states, in­clud­ing 120 lo­ca­tions in the Hous­ton area. Texas is home to about 5.6 per­cent of the nearly 10,000 dough­nut shops na­tion­ally, the third high­est af­ter Cal­i­for­nia and New York, ac­cord­ing to IBISWorld, a mar­ket re­search firm.

David Lit­twitz, a Hous­ton restau­rant con­sul­tant and bro­ker who has not worked with Ship­ley or Voodoo, said Hous­ton is a large enough mar­ket for sev­eral dough­nut com­pa­nies to com­pete. He said Ship­ley’s should have lit­tle to worry about Voodoo. “Ship­ley won’t lose any sleep,” Lit­twitz said. “Ship­ley is ubiq­ui­tous. They’re in ev­ery neigh­bor­hood. At the end of the day, Voodoo isn’t go­ing to change the mar­ket much.”

Schultz, who was re­cruited by Fun­da­men­tal Cap­i­tal two years ago to helm Voodoo, has been tasked with grow­ing the dough­nut shop into a na­tional brand. The Cal­i­for­nia na­tive, who started his ca­reer as a dish­washer at a Mex­i­can restau­rant in Los An­ge­les, has plenty of ex­pe­ri­ence. He spent 14 years at Star­bucks, help­ing to grow the Seat­tle-based cof­fee gi­ant from 300 stores to 20,000 dur­ing his time there. He was se­niot vice pres­i­dent for op­er­a­tions at Seat­tle-based MOD Pizza for about a decade, help­ing grow the com­pany from one store to 325.

“That’s all I’ve ever done: growth,” Schultz said. “If you’re not grow­ing, you’re not giv­ing your peo­ple an op­por­tu­nity to de­velop into man­agers and dis­trict su­per­vi­sors and be the best they can be.”

Hole in the mar­ket

Voodoo is poised for growth. Surg­ing con­sumer con­fi­dence amid the eco­nomic boom has boosted spend­ing on small lux­u­ries, such as pre­mium cof­fee and pas­tries. As a re­sult, the U.S. dough­nut mar­ket has grown 3.1 per­cent an­nu­ally be­tween 2014 and 2019, ac­cord­ing to IBISWorld.

In­dus­try growth in re­cent years has been pro­pelled by the rise of wildly pop­u­lar in­no­va­tions to the staid dough­nut, such as the cronut, a dough­nut­shaped pas­try made from a crois­sant-like dough. These and other high-end of­fer­ings made with in­gre­di­ents such as s’mores, peanut but­ter and jelly and even al­co­hol have helped push profit mar­gins to an av­er­age of 7.7 per­cent, ac­cord­ing to IBISWorld.

Voodoo, which in­vented the ba­con maple bar and helped pop­u­lar­ize ce­re­al­topped dough­nuts, serves more than 50 va­ri­eties of hand­made yeast and cake dough­nuts, in­clud­ing new of­fer­ings such as the Can­nolo, a can­noli-shaped dough­nut, and Hi Tea, a dough­nut with an Earl Grey tea frost­ing and hi­bis­cus driz­zle. Dough­nuts are hand­made three times a day.

Voodoo’s dough­nuts start at 95 cents for a plain cake dough­nut to as much as $5 for a more elab­o­rate one. A box con­tain­ing a baker’s dozen, which in­cludes Ba­con Maple Bar, costs about $20. Voodoo also sells drip cof­fee, bot­tled bev­er­ages and branded mer­chan­dise such as Tshirts and hood­ies.

These new of­fer­ings have pushed dough­nuts be­yond the do­main of break­fast. Dough­nuts are now served as dessert at restau­rants and at wed­ding par­ties. Voodoo’s shops, which op­er­ate 24/7 and are closed only for Thanks­giv­ing, Christ­mas and New Years, are a pop­u­lar late-night hang­out for the bar crowd. Most of Voodoo’s busi­ness oc­curs be­tween 10 a.m. and 10 p.m.

“It’s a mis­nomer that you can only get dough­nuts in the morn­ing,” Schultz said. “We’re the tra­di­tional dough­nut in the morn­ing, a mid­day snack to treat the kids and we’re also this crazy late night event.”

Food town

Schultz, who brought MOD Pizza to Hous­ton in 2014, said he chose the city to launch Voodoo’s na­tional ex­pan­sion be­cause of its large pop­u­la­tion, di­ver­sity and grow­ing rep­u­ta­tion as a food destinatio­n. Although Hous­ton may not be as “weird” as Port­land or Austin, it’s got an “elec­tric, cool vibe,” he added.

“We’re not bring­ing hip to Hous­ton,” Schultz said. “We’re here to mag­nify what’s al­ready here.”

In­deed, Voodoo brings an eclec­tic aes­thetic to Hous­ton’s dough­nut scene. The pink, yel­low and brown-col­ored shop fea­tures ta­bles wrapped in news­pa­per obit­u­ar­ies, crys­tal chan­de­liers from New Or­leans and a buf­falo head on a wall, a nod to nearby Buf­falo Park. Mu­sic, cu­rated by store em­ploy­ees, will play over­head.

The shop, which fea­tures Voodoo’s first driv­ethru, em­ploys 70 work­ers whose pay will start at $11.50 an hour with health in­sur­ance, paid time off, pet in­sur­ance and a flex­i­ble work sched­ule.

The store man­ager is an or­dained min­is­ter, and can of­fi­ci­ate wed­dings — both real and fake — in­side the shop. Sales will be halted for about five min­utes while cou­ples get mar­ried un­der a “spirit chan­neler” paint­ing of Hous­ton na­tive Pa­trick Swayze hung in the cor­ner. Voodoo con­ducted 100 wed­ding cer­e­monies last year, Schultz said.

“When you come to Voodoo, it’s not just com­ing to a dough­nut shop,” Schultz said. “It’s truly an ex­pe­ri­ence.”

Voodoo plans to open as many as five shops na­tion­wide this year, nearly dou­bling its store foot­print. Ul­ti­mately, Schultz said he could see 15 Voodoo shops in Hous­ton, where the com­pany will have a big­ger pres­ence than in its home­town of Port­land. It is plan­ning stores in Mon­trose, Rice Vil­lage and the Heights, and even­tu­ally en­vi­sions stores in Katy, Sugar Land and The Wood­lands.

How­ever, Schultz is adamant he is not build­ing a dough­nut chain with stores on ev­ery street cor­ner. Voodoo, he main­tains, is a spe­cialty shop and has to re­main ex­clu­sive and au­then­tic to its quirky Port­land roots, where the orig­i­nal shop con­ducted le­gal wed­dings, host­ing con­certs and held weekly Swahili lessons.

“Some­times brands grow so fast, they lose what made them spe­cial,” Schultz said. “We don’t want to lose that. It’s im­por­tant for me to be re­spect­ful of what the brand is as we grow, and not be­come this ubiq­ui­tous brand with name tags.”

Pho­tos by Brett Coomer / Staff pho­tog­ra­pher

“We’re in growth mode right now,” Voodoo Dough­nut CEO Chris Schultz said. “We’re ex­cited about com­ing to Hous­ton and start­ing our growth here. … We’re here to mag­nify what’s al­ready here.”

Voodoo Dough­nut, which is known for its zany con­fec­tions, will open its first Hous­ton store on Wed­nes­day in Buf­falo Heights.

Brett Coomer / Staff pho­tog­ra­pher

Hunter Travis drops cake dough­nut dough in the fryer dur­ing a test run at the new Voodoo Dough­nut in Hous­ton. The chain is plan­ning stores in Mon­trose, Rice Vil­lage and the Heights.

Luis Cer­vantes dips a dough­nut in choco­late at Voodoo Dough­nut in Hous­ton.

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