He's rolling in dough

Steven Cook at the new Federal Donuts at 16th and Sansom streets in Center City.
Steven Cook at the new Federal Donuts at 16th and Sansom streets in Center City. (David Maialetti/Staff photographer)
Posted: November 13, 2012

Steven Cook and other partners in the doughnuts-and-fried-chicken icon Federal Donuts at 2nd Street below Federal, Pennsport, now have a second outlet at 16th and Sansom streets, Center City. Last week they opened a kosher eatery, Citron and Rose, on Montgomery Avenue in Merion Station. Cook, a Wharton grad and ex-investment banker, steps out of the kitchen to talk dough with us:

Q: How'd you come up with the idea for Federal Donuts?

A: A couple guys opened a coffee shop next to a restaurant we owned. They said, "We want to do another coffee shop, but we want food. Would you be interested?" Doughnuts was on the table first, and we thought it would be cool and fun.

Q: What were the challenges?

A: When you add doughnuts, labor is huge and you're still selling things for $2 or less. It might have worked OK, but it wouldn't have been a business model to replicate. Then someone came up with the idea of fried chicken and it just sort of clicked.

Q: What part of your customer base is doughnut, vs. chicken?

A: I think it's the same customer. Maybe the doughnut people are a little bit more laid-back and the chicken people are a little bit more ready to get into the scrum.

Q: What are the keys to growing the business?

A: The customer mix is good, so you have your morning coffee-and-doughnuts, you have your lunchtime and dinnertime fried chicken, and real estate is inexpensive. So it's attractive economics, although people would be surprised by how much it costs to make doughnuts.

Q: What do you mean?

A: Our doughnuts could be 50 cents of hard costs, not factoring in oils or shortening plus a nickel for flour. We use chocolate, a lot of butter, dairy, eggs-fairly expensive things. We were conscious of how we priced things. We didn't want to become a $3 doughnut.

Q: How many jobs?

A: We always seem to need twice the employees we hire for an opening. We have about 10 full-time people at the new store and six at the first store, plus a general manager and corporate chef who oversee both stores.

Q: What's your biggest challenge going forward?

A: Few people want to get up at 3 a.m. to make doughnuts.

Contact Michael Hinkelman at hinkelm@phillynews.com or 215-854-2656. Follow him on Twitter @MHinkelman.

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