How I Made My Millions

How a Single Doughnut Shop Grew Into a Successful Business

Mark Klebeck|Co-founder, Top Pot Doughnuts
Top Pot Doughnuts

In February of 2002, my brother Michael and I opened our first Top Pot Doughnuts on Seattle’s Capitol Hill.

We never imagined at the time that our little doughnut joint would be the precursor for several other café openings — much less that it would launch a six-year doughnut wholesale partnership with Starbucks, a deal that would supply nearly 14,000 stores worldwide.

We never imagined our own line of great coffee beans, or a city full of fans asking to buy our products at the grocery store, or a cookbook that lets regular cooks test our own hand-forged doughnut-making skills at home.

Shifting Gears

As great as our experience with Starbucks was, we realized that the partnership limited our growth and that, ultimately, we needed to take on a direction we could better control.

Our company saw opportunities in expanded café growth, expanded grocery wholesale of both our doughnuts and coffee and the development of a franchise model based on increasing outside interest in our brand.

In all honesty, it was scary. In many ways, when we changed directions in 2011, it felt like 2002 again, like we were starting all over. But we realized that the change meant strong margins that could help us enormously over the long term.

When we left Starbucks, our first priority was to focus on expanding our café business. After all, the growth of our business can be attributed to our coffee and doughnuts' popularity in their initial homes — cafés like our flagship Fifth Avenue store in Seattle.

In 2011, we aimed to open five new cafés in the Puget Sound area. As aggressive as this might sound, we realized that with almost 10 years of business experience, we had built a tremendous (and devout) patronage that expanded way beyond the regions our first cafés served. Simultaneously, we built the groundwork to develop a Top Pot franchise model that could be successfully replicated outside the Pacific Northwest.

In April 2012, we initiated plans to launch the brand in various domestic and international markets. As of July 2012, our company had grown to 12 company-operated cafés right here at home.

Recently, with expanded café presence, grocery retail demand has spiked for both Top Pot-brand doughnuts and coffee — with all Pacific Northwest Kroger-owned QFC stores now retailing both products. Projections through 2015 will take us to a count of nearly 30 company-operated cafés, reflecting our aim to fully capitalize on the size of our coffee- and doughnut-making capacity.

In 2011, we also realized that our afternoon customer base could be stretched beyond doughnuts and coffee. People wanted ice cream.

In the summer of 2012, we created our own doughnut-ice cream line that captures the Top Pot experience in flavors like "Maple Bar" and "Apple Fritter." There’s even a "Valley Girl Lemon Sorbet" (named for one of our house favorites), and all the ice creams are now sold within every Top Pot café.

Like Top Pot coffee and doughnuts, the demand for ice cream at the grocery retail level is growing and will inevitably find a presence on retail shelves, outside our establishments.

Increase your chances of success

Growth is a crucial key within every business, but charting the direction of your company’s growth is equally important. Breaking away from a pattern that brought you initial success and security is extremely difficult at best. We like established patterns.

But as a business owner, it’s best to remember that risk is an ongoing challenge, not just something you face when you start. No business is immune to external changes; in fact, complacency can ultimately dismantle the dream you created.

So open your eyes. Be aware of every possible change. Change increases your potential for success.

Watch the full story of Top Pot Doughnuts on "How I Made My Millions" Sunday, July 29 at 8 p.m. ET.

Mark Klebeckand his brother Michael launched Seattle's Top Pot Doughnuts in 2002. His love of building and designing spaces with his brother along with making doughnuts were the inspiration behind Top Pot Hand-Forged Doughnuts.