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Sweet Buzz: Inside the Team Spirit and Creative Force that Powers the Rise of Sugar Shack Donuts 

click to enlarge The doughnuts in the case at the Lombardy Street Sugar Shack are a mix of standards, such as maple bacon and the ever-popular sprinkle-topped, plus combinations that the staff is encouraged to create.

Scott

The doughnuts in the case at the Lombardy Street Sugar Shack are a mix of standards, such as maple bacon and the ever-popular sprinkle-topped, plus combinations that the staff is encouraged to create.

As you drive west on Interstate 64, you’ll pass a big billboard on your right. It often sports an ad for Adolf’s Jewelers. But that’s not what first catches your eye. The most obvious element to pop out is the large, pink doughnut in the upper left corner.

And on the right, it’s the Sugar Shack Donuts logo. On a billboard advertising diamonds. I drove by it twice to make sure I really saw Adolf’s Jewelers’ name in the lower right corner.

I ask about how the deal happened, and Sugar Shack owner Ian Kelley says that the jewelry store approached him with the idea. Adolf’s is in the middle of a multimedia ad campaign, and as a part of it, wants people to use the hashtag #doitinrva — if you were wondering, the double entendre is intentional.

click to enlarge Adolf Jewelers asked Sugar Shack to become a part of its slightly racy advertising campaign titled Do It in RVA. - SCOTT ELMQUIST
  • Scott Elmquist
  • Adolf Jewelers asked Sugar Shack to become a part of its slightly racy advertising campaign titled Do It in RVA.

It sounds like a crazy idea, a local chain of doughnut shops working with a completely unrelated Richmond company on a little mutual advertising. Nonetheless, for Kelley, teamwork is ingrained. It’s his first instinct.

While we sip coffee at Kuba Kuba — “I suggested this place just to have an excuse to eat a piece of tres leches cake,” he says — the dimpled, light-eyed Kelley tells me about growing up in Powhatan County.

“I was on the dance team — I was also in the art club, the chemistry club and soccer. I didn’t fit in,” he says. “My friends and I got along, but I was constantly harassed.”

Note the number of teams Kelley belonged to. Although he felt out of his high school’s mainstream, he was a part of four different — sometimes incongruous — groups.

And when he started Sugar Shack in 2013 at age 28, teamwork became the blueprint for his business. There are now three stores in Richmond, plus a doughnut truck, another shop in Virginia Beach, and ones in Fredericksburg, Stafford, Alexandria, Arlington, Cocoa and Melbourne — both in Florida — plus three more opening later this year.

click to enlarge Ian Kelley began thinking about a coffee shop that also sold sandwiches, bagels and doughnuts in 2010, but when the first store opened in 2013, he discovered that customers only wanted his doughnuts — and lots of them. - SCOTT ELMQUIST
  • Scott Elmquist
  • Ian Kelley began thinking about a coffee shop that also sold sandwiches, bagels and doughnuts in 2010, but when the first store opened in 2013, he discovered that customers only wanted his doughnuts — and lots of them.

Baking wasn’t Kelley’s first love — he started out as a cook and evolved into a chef.

His father, architect Mac Kelley, tried to put pressure on his son to follow in his footsteps. But Kelley resisted. He started at 16 working in the kitchen at the Koger Center Holiday Inn after school most days. Along the way he met Todd Manly, owner and chef at Pescados — fortuitously, it turned out. Manly became a mentor and a friend.

But when he told his father that he wanted to go to culinary school, the elder Kelley told his son that he’d be on his own financially. Instead, Kelley ended up at the Virginia Military Institute, planning a career in the U.S. Air Force after graduation. A kayak injury quashed that idea, and his next stop was Richmond and Virginia Commonwealth University.

“That was the first time I’d come to Richmond and actually lived here,” he says.

But VCU didn’t have much of a chance after Kelley met chef Dave Napier. The two opened the Old City Bar in 2005. Kelley ran it while Napier focused on his White House Catering business. It was a short partnership.

“I was 22 years old when I left and I realized there was nothing more I was going to learn,” he says. “I realized that if I stayed, it would be a dead end.”

Kelley sold everything and headed west. After a couple of stops in Colorado and Mexico, he ended up in Seattle. He worked in a French bistro there for an owner with no restaurant experience. “I learned what not to do,” he says.

He also began to think about his own restaurant. There were a lot of burger places in Seattle and a lot of doughnut shops, and he saw a gap in the Richmond market. It was time to move back to see what he could do.

Kelley started coaching the girls’ soccer team at the Maggie L. Walker Governor’s School for Government and International Studies. That’s where a small, run-down building across the street from the school caught his eye.

“I was leaving practice one day, and there was a woman outside tacking up a For Lease sign and I walked across the street and asked about it,” he says. “I said I’d take it.”

No bank would give him a loan to start the business. He managed to piece together the money with credit cards, contributions from friends and family, and finally, a small business loan. At the time, he planned to open a coffee shop with bagels, sandwiches — and maybe a few doughnuts. But from the very first day Kelley opened the doors in 2013, the place was overrun.

“We couldn’t keep up with the menu,” he says. They took it off the wall two hours later, and it’s never gone back up. “That first four days Sugar Shack was open defined what it was going to be.”

Eventually, the crowds lessened and things became manageable — until USA Today, in 2014, named Sugar Shack as one of the best doughnut shops in the country. It noted Kelley’s free daily doughnut promotions: “April showers bring May flowers. Bring in a flower to score a free house doughnut!”

“It got really weird,” Kelley says, “crazy busy, lines out the door every day.” And that’s when the requests for franchises started to come in.

It seems like a natural evolution for the kind of company he started, and Kelley seriously considered it. But he decided to go a different route.

click to enlarge The first Sugar Shack store, pictured here, opened on Lombardy Street across from Maggie L. Walker Governor’s School for Government and International Studies in a former used car dealership. Kelley cobbled together the money to renovate and buy equipment from family, friends and a small business loan.
  • The first Sugar Shack store, pictured here, opened on Lombardy Street across from Maggie L. Walker Governor’s School for Government and International Studies in a former used car dealership. Kelley cobbled together the money to renovate and buy equipment from family, friends and a small business loan.

One of the first people to contact Kelley was Edwin Grimes. A retired military man, he was running a wholesale nursery in Fredericksburg. On a visit to Richmond, he stopped by Sugar Shack and was impressed.

“I emailed him,” Grimes says, “and asked if he’d thought about expanding.”

As Grimes notes, a lot of people think other Sugar Shack stores, such as the ones in Northern Virginia owned by Kelley’s friend Rob Krupicka and the Florida shops owned by Steve DiNisio and Dustin Smith, are franchises.

“We try to fight that [idea] as much as possible,” Grimes says. Instead, Kelley formulated a licensing deal — he gave Grimes and the others rights to the brand, but each are sole owners of their shops — no partnerships, no franchising deals.

Still, it’s an unusual sort of arrangement. The other owners, led by Kelley, have formed a Sugar Shack community of sorts. Michael Goins, a childhood friend of Kelley’s who came on as a general manager of the Lombardy store in the early days and is now the self-titled “chief donutologist,” sends recipes and photos to the other stores, along with a suggested price.

The different shops swap recipes with Goins as well, and he stays in touch to make sure their equipment is working properly and travels periodically to check on how the doughnuts in each shop look and taste. Everything is made with fresh ingredients.

“I just want to make sure the brand is intact,” Goins says.

“It’s trust both ways,” Grimes says.

It’s a different kind of business model, and so far, it seems to be working for everyone concerned.

Kelley, though, with an eye on more expansion, hasn’t made up his mind whether he wants to make the leap into franchising. He could make a lot more money that way. But he’s also pondering creating four partnership groups under an umbrella company. That would keep the team vibe intact. He’s still considering which direction he wants to go with the company.

For now, his wife, Tanya, handles branding and marketing, and his two childhood friends, Goins and James Henderson, the director of operations, are integral parts of the business. Buckhead’s Chop House owner Mark Herndon is chief financial officer, and many of Kelley’s employees have been with Sugar Shack since the first store opened. Each shop is independent and Kelley isn’t sure if he wants to give up the community that he’s created.

click to enlarge Shift manager Tony Sumerville checks the rise of the doughnuts proofing at the Lombardy Street store. He’s been with company since its early days in 2013. - SCOTT ELMQUIST
  • Scott Elmquist
  • Shift manager Tony Sumerville checks the rise of the doughnuts proofing at the Lombardy Street store. He’s been with company since its early days in 2013.

I’m in the back of the Midlothian store and Kelley hands me an apron. It’s time for me to learn how to make doughnuts.

As I go through the steps — mixing what will become a stretchy, 77-pound ball of dough that must be heaved from its enormous bowl onto a wooden, flour-strewn table, to cutting it and patting it into large rectangles, I realize that I’ve only seen the automatic machined-based-process of doughnut-making — the one at which you gaze in wonder from behind the glass at Krispy Kreme.

At Sugar Shack, the dough goes through a double proofing process, and each doughnut is cut with a single, hand-held cutter and then is dropped, one-by-one, into the fryer.

Kelley uses what look like long chopsticks to move and flip the doughnuts in hot oil. He resembles a drummer as the sticks quickly rise and fall, and he says some of his doughnut makers can handle 50 doughnuts at once, divided between two fryers, flipping and turning all of them in the 120 seconds it takes to cook them properly.

The Lombardy Street store sells about 2,500 doughnuts a day on weekdays and as many as 5,000 on Saturdays and Sundays.

Kelley shows me the array of glazes and toppings available and says I can make whatever kind of doughnut I like. That’s what he tells his employees, too.

“The way that I designed this company — and why we don’t have menus is [to support] the creative freedom of the people in the kitchen,” he says. There are about 10 standard varieties that need to be in the case every day. Other than that, it’s up to the staff members who make the doughnuts to decide.

“When people start, they ask, ‘What do I make?’ Kelley says. “And we always say, ‘Anything you want.’”

That’s how you might run across a doughnut like the one I spotted in the Lombardy store, striped with caramel and vanilla icing, sprinkled with chocolate cookie crumbs and looking for all the world like a round, doughnut-shaped plaid handkerchief. You may see ones piled high with crumbled Oreos or garnished with bacon. Red velvet is popular and Easter inspired a special variety with a carrot cake glaze and candied walnuts. Doughnuts topped with Peeps prove irresistible to a 3-year-old in line with me one day.

click to enlarge feat17_donuts_red_velvet.jpg

Kelley has stepped back from the backbreaking long hours of the early days. He has three children — one miraculously born on National Doughnut Day — and he’s attempting to balance work and family.

“Ian’s brain never shuts off,” says Tanya Kelley. “I used to resist it, but now I know it’s the only way he’s happy.”

The company participates in an overwhelming number of charity events. It’s helped Carver Elementary School paint its classrooms and bought new blackboards for the school, it has donated free doughnuts to PTA meetings and numerous fundraisers — you could say that if a nonprofit needs something, Kelley will figure out how to give it to them.

Sugar Shack also recently worked with Passion Academy on a special doughnut and a partnership with St. Jude’s launches later this year. He even helped push a crowdsourcing effort to get the Foo Fighters to play in Richmond that benefited the Pink Ink Fund.

And Kelley has another project in the works: Luther Burger.

He’s never forgotten his original idea for a burger place he came up with in Seattle, and the first one will open in Midlothian later this year. The plan is to take about half of the space in the Midlothian store and turn it into a spot that sells just burgers. The business will be related to the doughnut shop — it’ll share a kitchen and staff — but it won’t be a part of it. If it doesn’t work out, he says, he’ll move on to something else.

Kelley, a young man who had a big idea that succeeded spectacularly, still can’t stop the steady stream of more flowing. “Ian is very energetic and he has a good business sense without being over-confident or arrogant,” Grimes says. “He’s a great visionary.” S

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