More Federal Donuts? Investors hope to grow to 150 locations

A decade since it opened on a South Philadelphia corner selling the quirky combination of fried chicken, doughnuts, and coffee, Federal Donuts has sealed an investment deal with a Main Line private-equity firm to grow the company nationally, well beyond its 11 locations.

The expansion, starting locally, could yield 150 locations nationwide within a few years, said Satya Ponnuru, a founder of the Radnor-based NewSpring Franchise.

The deal, announced officially Tuesday, pairs three of Federal Donuts’ founders — chefs-restaurateurs Michael Solomonov and Steve Cook (partners in Zahav, Laser Wolf, Abe Fisher, Dizengoff, Goldie, K’Far, and Merkaz) and its chief executive, Tom Henneman — with three new board members from NewSpring: Ponnuru, industry veteran Patrick Sugrue, a former chief executive of Saladworks, and Jeff Benjamin, Marc Vetri’s business partner in restaurants such as Vetri Cucina, Fiorella, and a forthcoming steak house in Bryn Mawr.

Two Federal Donuts cofounders, Felicia D’Ambrosio and Bob Logue, have left the company.

Terms were not disclosed. Solomonov, Cook, and Henneman will continue to have “significant ownership of the business and will be very involved,” Ponnuru said. Henneman will remain CEO and will be advised by Benjamin, who remains active in the Vetri restaurants and is senior adviser to the Fitler Club.

» READ MORE: Goodbye thighs: Federal Donuts switches to chicken tenders

Ponnuru said Federal Donuts was an attractive partner because it is a brand with ”a differentiated menu offering,” helped along by Cook and Solomonov’s James Beard Award-winning food.

Private-equity investment is considered a logical and necessary next step for many small- and midsize businesses, particularly restaurants, that want to grow. NewSpring also works with Turning Point, a chain of breakfast-and-lunch restaurants. Iron Hill Brewery took on private-equity funding from a New England firm in 2016, while Spread Bagelry began working with another Main Line firm in 2018.

Federal Donuts had grown through bootstrapping. With its Solomonov-Cook pedigree, the company was a hit from its first location, which opened Oct. 11, 2011, at a former pizzeria called Messy Jesse’s at Second and Manton Streets.

In the early days, customers routinely lined up before the opening hour for doughnuts in such flavors as Appollonia (apple-cinnamon), honey-glazed, and chile lime. At precisely 11:45 a.m., fryers started turning out batches of Korean fried chicken. The New York Times cited FedNuts’ “hipsterish fried chicken” in 2013, launching the sale of T-shirts.

A second location, at 1632 Sansom St., followed in 2012. (It was torn down in 2021 to make way for a high-rise, and a new store at 1909 Sansom St. fills that gap.)

Next were shops in University City and North Philadelphia in 2014. Then came an ill-starred venture in summer 2017, alongside a Dizengoff location, in Miami’s Wynwood neighborhood. Construction that made Wynwood such a popular area, however, limited access to the eateries, and they closed in early 2018. “That was a humbling experience and an expensive lesson,” Cook said last week.

That same year, the partners released a cookbook, giving out the recipe. (Warning: Doughnut-making can get messy.)

Also in 2017, Federal Donuts spun off a charitable venture in Center City called Rooster Soup Co., a restaurant that converted its unused chicken backs into soup and other dishes. The restaurant, a collaboration with Broad Street Ministries, closed in 2019 and briefly became a Jewish deli called The Rooster.

Meanwhile, more Federal Donuts locations followed, including East Market, Ben Franklin Parkway, stands inside the Whole Foods Markets in Spring Garden and Wynnewood and kiosks at Citizens Bank Park and the Wells Fargo Center.

As part of the NewSpring deal, D’Ambrosio and Logue were packaged out. Logue, a construction worker, had founded Bodhi Coffee with Henneman and, like D’Ambrosio, was not involved recently in day-to-day operations. Logue, still the owner of Bodhi, is developing a local oat milk with partners.

D’Ambrosio, who now lives in Michigan, called it “a great, fair deal” and said she was happy that Federal Donuts had received “a boost of confidence” from NewSpring.

“They’ll take this right to the moon,” she said.