BRUNSWICK, Maine — Shelby and Nels Omdal had lofty ambitions when they bought Frosty’s Donuts on a “hope and a prayer” in 2011.
After cobbling together a $5,000 deposit at the last minute to complete the deal, the couple knew the nearly 50-year-old Brunswick-based doughnut shop — considered an institution by many locals — had potential to grow beyond town borders and into a Maine brand. They just didn’t think it would happen so fast.
In less than three years under new ownership, Frosty’s has expanded to four retail locations and developed a growing wholesale business with 23 accounts that span from Scarborough to Waldoboro. One of those wholesale accounts alone places dozens of fresh doughnuts at 11 Hannaford supermarkets, Shelby Omdal said, and that store count is expected to nearly double by year’s end.
“For the little Brunswick doughnut shop, it’s pretty amazing,” Shelby Omdal told Mainebiz, speaking from the company’s new production headquarters at Brunswick Landing, where they expect to hire seven more full-time employees this summer, bringing the total workforce to 30.
Frosty’s wholesale account with Hannaford is by far the company’s most significant. Frosty’s produces nearly 2,000 doughnuts a day for stores in the greater Portland area, Boothbay Harbor, Waldoboro and Damariscotta — which represents approximately a third of its daily production volume. For Hannaford alone, Frosty’s is expecting to nearly double its production after signing a new contract in May for up to 10 additional stores, which means the doughnuts will be sold in more than a third of the supermarket’s 57 Maine-based stores by year’s end.
Like many small business owners in Maine, the Omdals relied on funding from family members and their own pockets to help reopen Frosty’s, which had temporarily closed after the death of June Frost, one of the co-founders. A key part of Frosty’s growth has been alternative sources of funding — funding that’s available to many qualified small businesses.
Shelby Omdal, who previously worked in real estate, said it’s still hard to convince most banks that a retail and wholesale doughnut business would be a worthwhile investment. So when Shelby and Nels Omdal heard a quasi-municipal organization called the Brunswick Development Corp. was lending to local businesses looking to create and retain jobs within town, they quickly jumped on the opportunity.
The Brunswick Development Corp., founded in 1995, was created with the purpose of encouraging economic development by providing incentives to businesses looking to grow or move within town borders. Enabled by state statute, economic development corporations are one of the many tools a municipality can use to encourage local business growth, but they can come in many different shapes and sizes across the state.
Organizations like BDC differ from regional economic development corporations like Aroostook County’s Northern Maine Development Commission and others that coordinate planning efforts between multiple communities. Instead, the ones formed by individual towns and cities typically have a more defined focus.
When Frosty’s Donuts was approved for a $137,500 loan from the BDC last November, it was a landmark deal that allowed the company to move its wholesale business forward with Hannaford. The loan helped Frosty’s renovate the kitchen at its 54 Maine St. location, purchase a delivery vehicle and switch to natural gas, which is expected to save hundreds of dollars annually.
The loan also included a job-creation component.
To encourage Frosty’s to create and retain new jobs, the BDC agreed to forgive half of the loan if Frosty’s creates five new full-time jobs within 12 months of receiving the funds, but only if those positions are retained for the next five years. Those workers must put in 30 hours a week.
Within just three months, Frosty’s has added not five but 11 full-time employees to meet the new demand from the Hannaford stores, which it has been supplying since the end of last year.
“That’s what it took to make it all work,” Shelby Omdal said. “[The BDC’s board members] were thrilled because that was their purpose, which is to get more people employed in Brunswick.”
Even now, she said Frosty’s has found it difficult to convince banks it is a worthy loan candidate. Shelby Omdal said she can’t imagine how Frosty’s could have moved forward without the BDC loan.
“The insane part was we were about to embark on this Hannaford thing on our own,” Shelby said. “It would have been bad, it would have been really bad, because without that financial support — that’s what made that happen for us.”
With a growing wholesale business and a plan to open a new retail store in Gardiner, Frosty’s projects gross sales of $1.1 million for the year, a big jump from $461,000 in 2012 and $766,000 in 2013, Shelby Omdal said. She added that Frosty’s has been profitable for its first two years under new ownership, and projections point to another profitable year in 2014.
Now that Frosty’s has opened its new Brunswick Landing headquarters, the Omdals hope to receive a $160,050 grant from the state’s Community Development Block Grant Program to renovate and outfit the production facility to be ready for its expanded wholesale-account business this summer. With an application that was expected to be filed by the Brunswick Town Council in late May, the funding announcement is expected to come by late June.
“We’re a Maine business, started from nothing to here and we’ve done that only with help of the community and the state and the support that we’ve received,” Shelby said. “So it really doesn’t feel like our success in any way shape or form — we’re just working it. We want people to feel proud that Frosty’s is from and made here, and that’s where our branding is going at this point.”