Gourdough’s Big Fat Donuts: $15K Deal to Open a Wimberley Truck

Nathan: Now, we know donuts are a sweet business. The question is, do they make sweet profits? Paula: All of a sudden, I looked up and we’re at 20 grand profit a month. Nathan: I’m here in Austin at Gourdough’s, which really grew big before COVID before hitting some problems. Paula: Our average sales per year, generally between 800 and a million is what we do in dollars. Nathan: I would never guess that out of this thing right here. That’s got to be like Apple’s retail stores. They have the highest revenue per square foot. You might give them a run for their money. Paula: They are the fan favorite when you’re a little tipsy on a Friday night and need something sweet. We typically would do like 150,000 a month. Nathan: If I’m aligned with their vision and I see a clear path where I can help them grow, I’ll cut a deal on the spot. I want to make you an offer — $1.50 per donut sold until I’m paid back $20,000. Nathan: Hey guys, how are you? Paula: Hi. Nathan: I’m Nathan. Paula: I’m Paula. Nice to meet you. Nathan: Paula, these donuts look insane. Tell us a little bit about the business. Paula: These donuts are not your typical glazed doughnut. These are big. They’re all fried to order. Just to ensure that they’re hot and fresh every single time, because that’s what it’s all about. Nathan: So, are you actually cooking and making them back there right now? Paula: Yes. We do it as soon as it’s ordered. Nathan: Very cool, Paula. I want to try the product. These things look amazing. What do you recommend? Paula: My personal favorite is the Cinnabomb. It’s like the center of a cinnamon roll. Nathan: Okay, let’s do that. Ring me up. I want to actually see the economics here. Cinnabomb. Like a bomb on the end, right? Paula: Yes. Cinnabomb. Nathan: So I’m going to pay. So, okay, so it’s $9.74. Is that a typical price point for one of the donuts? Paula: Yes, they’re huge. They’re about 5 to 6 inches and made to order, handmade. We don’t use any equipment for icing. Everything is pretty much by hand. Nathan: I see them back there. They’re huge. Can we come back and take a peek? Paula: Yeah, absolutely. Nathan: Big fat donuts. Paula, take it away. How do these things get made? Paula: We actually hand press the donuts back here — hand press the dough. And then we cut the center. And then you’ll see here we drop it in the fryer. Nathan: Wow. Paula: They take about 5 minutes to fry. It’s all fresh in that regard, not pre-making. Paula: When we kind of came up with the business, we looked at other concepts. Krispy Kreme, for instance — they’re popular because when that sign goes on, hot now, you know, hot and fresh now. So, how could we do that every single time? Nathan: What does it cost? We’re looking at all the equipment in here. What did this cost to put together? Paula: I would say you could easily get a unit up and going for probably $25,000. Nathan: That’s about what it cost you guys? Paula: Yes. So, tell us the backstory. It’s 800,000 in sales — that was 2024 or this year projected? Paula: This year we’re a little under that. Nathan: When did you launch the business? What year? Paula: 2009. We were younger at that time obviously and wanted to travel to Coachella and all these places just to have something fun to do at the music festivals. And then we opened and it took off like I had I never imagined and really just thought maybe I could make a car payment or do a little extra side income — and all of a sudden I looked up and we’re at $20 grand profit a month. Nathan: How quickly was that 20K of profits? Paula: A good 6 to 8 months. Nathan: Oh my order’s ready. Can I get my Cinnabomb? Paula: Yes. Nathan: This literally does look like a bomb of cinnamon. So Paula, these are not something you would wake up and eat — because if I ate this in the morning, it would knock me out. I would need a nap. These are like desserts, almost late at night. Paula: Yes. So that’s what’s interesting about them. We’ve tried the whole breakfast thing and we just realized a lot of people don’t have time for breakfast in the mornings. So we’ve become a place where it’s late night. The beauty of it is it puts smiles on people’s faces. Nathan: What did it cost you to get started — like before your first dollar of sale? How much did you have to invest? Paula: About $25,000. Nathan: Was that a drop in the bucket or was that your life? Paula: I bootstrapped it. It was like “this deal needs to close so I can put the fryer in.” I really thought we were going to have one or two employees and it was just going to be a fun thing. Nathan: Help me understand what happened before COVID. How big did you guys grow or was it slow growth? Paula: It was actually really quick honestly. So we had a full brick-and-mortar restaurant. This is primarily desserts, but we had a full menu — we would do a donut with a potato pancake on it because it goes sweet or savory with the chicken-fried steak, gravy, and cranberry habanero jelly. We had doughnut burgers. Salads with a garlic donut on the side. It was wildly popular. Nathan: How expensive was that to open? Paula: About $250,000. But this was able to fund that project. Nathan: You weren’t coming up with new money or bringing investors? Just used profits from the truck to open the brick-and-mortar? Paula: We did it all ourselves. We had a 10-year lease, and our lease was up in 2023. The problem at that restaurant — it was so wildly successful, but during that time employees would not want to work. We just made the decision instead of trying to find a new location and move, we just ended up closing it for now. Nathan: What was your best month in terms of sales at the brick-and-mortar? Paula: At the brick-and-mortar we typically would do like $150,000 a month. Nathan: What was the biggest month? Paula: Probably at the brick-and-mortar would be like $225,000. Here would be $85,000. Nathan: $85,000 in a month just from the food truck? Paula: Yeah, from this truck back then. We do $50 to $60 now. Nathan: Well, I would never guess that out of this thing right here. Paula: When COVID happened, we did open a huge three-story brick-and-mortar on the Riverwalk in San Antonio. Nathan: That would have been your second brick-and-mortar. Paula: Yes. Our landlord, an elderly lady, had been in her family forever. Our rent was $43,000 a month and she didn’t want to work with us and said no. Nathan: How were you feeling like in that moment when you realized, oh my gosh, it’s March 2020, everything’s shutting down? Paula: It was devastating. We had this big huge vision and goal. We had to actually file bankruptcy on that location. All of them are separate entities — LLCs, right? So we don’t have that anymore and we’re free from all of that. Nathan: Is there a lot of foot traffic right here late at night? Paula: No, but you’re going to see tons of taxis just getting with groups of people out — bridal showers dropping off. Nathan: Can we break down the margin on this thing? I paid $9.74. What do you pay for just the ingredients? Paula: With labor, overhead, everything you’re probably at around $5 cost. Nathan: Okay. So $9 minus $5, there’s $4.74 left. Is that all profit, or is there other expenses I haven’t asked about? What’s it cost you to actually have the space — or do you own this piece of real estate? Paula: No, we pay about $2,200 a month here in rent. Nathan: Where do you want to take the business? Paula: My vision — we have four other trucks that are ready to go. Even our lawyer was like, “Gourdough’s is a national brand without even trying.” We have people who drive from Houston and Dallas and all over. What I would really love to see is it scaled, like on every corner. Nathan: You have the four trucks though. So what’s stopping you from popping those up tomorrow? Paula: Cash. We’ve done so many surveys and everybody saying they want to see something up north. Nathan: Are you eyeing a spot location? Paula: One of my top spots right now that I’m very close to pulling a trigger on is in Wimberley. Every weekend when you go there, it’s packed. Nathan: How much cash would it take to open in Wimberley? Paula: I already have the truck pretty much ready to go. So it probably wouldn’t — I would say like $15,000. Nathan: I’m actively thinking about: is there a way that I can help you open that second location with some of my cash plus your ideas? I could either make an offer to do $15,000 bucks and have it be equity oriented — meaning I own a chunk of the business, maybe of just the LLC in Wimberley. Or we could structure it where I’m writing a check and I’m getting paid back some amount per donut sale in Wimberley. Do you have a strong preference one way or the other? Paula: My thing is, just being candid, like I could open the Wimberley one. I don’t need capital for that necessarily. I would love for somebody who has some cash that could actually help it scale in a huge way. Nathan: What’s holding you back from doing that? Paula: I would say I can open one, two, or three. But how do I go and do deck slides and get investors? Nathan: If you’re talking PowerPoints and Google slides, you are speaking my language. This is what I do all day every day. Paula: I really want to see it like where we could sell our products in grocery stores. I want to see toys of the donut guy. I have huge visions for the company, but I don’t have necessarily that skill set of having it grow where it needs to grow. Nathan: Look, we’re just meeting, so I don’t know if we’re going to work well together or not. But I like the product. I like the vision. Everyone knows the brand, which is really hard in this day and age with everyone behind their computers on AI. The fact that you’ve got taxis coming out of their way from Sixth Street or Rainey to come here specifically is a big deal. So what I’d like to do is make you an offer where I get involved at Wimberley. We sort of test — hey, do we like each other? Is this working? And if that works well, we can then do things like you find the next locations. I help raise capital, the slide decks, the proformas for those other locations. But you’ve got to be the driver on where the locations are going to be. Like, we have 500 portfolio companies. So I can’t be the vision guy. You have to be that. Paula: More physical locations. Get the four that are in inventory back on the road. Potentially get into physical brick-and-mortar. Nathan: Also, energy drinks. At the brick-and-mortar, we had fun milkshakes with donuts and stuff. Paula: Right. Nathan: Some of that makes me a little nervous. I’m going, okay, I hope we can stay focused and just sell the hell out of these donuts because these things are going to sell. But if you’ve got other ideas, this is great too. My priority is going to be: how do we go from selling 100,000 donuts per year to a million? Nathan: I want to make you an offer. It’ll be $15,000 — exactly what you asked for to help open the Wimberley location. Even though you said you don’t necessarily need the money to do that, this is a way for us to start working together. I won’t ask for an equity stake in Wimberley since we’re just sort of testing. But what I do want is $1.50 per donut sold until I’m paid back $20,000. Based off the volume you’re doing here, I’m anticipating I get my money back in about a year to a year and a half. Paula: I think it would be faster. Nathan: You think it would be faster. Okay. Nathan: Do you feel like you make enough cash flow per donut to service that kind of $1.50 per donut back? Paula: I mean, I don’t think so. If you want the business to succeed, you would want to do a $1.50. Nathan: I’ll offer a $15,000 check to help you open that Wimberley location, get one of those four trucks in storage back out on the street. I’d like to get paid back $1.50 per donut sale until I make back $20,000. So I’m making $5,000, but really I want to be aligned with you on that third and fourth and fifth location and getting into retail and expanding together. Nathan: What do you think? Do we have a deal? Paula: I think we have a deal. Nathan: Give it to me. I — we should be eating donuts while we’re shaking hands. Are you excited? Paula: I am so excited. Nathan: When are we opening? Nathan: Are you a small business and want me to come to your town and check out your business? Like and leave a comment below.