How a David vs Goliath Battle Over Donuts is Developing in Vandalia, Ohio [e268]

Full Podcast Transcript

NASIR: Welcome to our podcast where we cover business in the news and add our legal twist.
My name is Nasir Pasha.

MATT: And I’m Matt Staub.

NASIR: What are we doing today, Matt?

MATT: Well, I’ve never been to this place or this city but I’m going to give a little bit of background and then we’re just going to kind of take it from there, I guess.
By the way, for the listeners, I feel like this is close to where you’re from so I think there’s something in here that you’re not telling me but, anyway, Vandalia, Ohio – I think that’s how you pronounce it.

NASIR: Vandalia, Ohio. You got it.

MATT: Okay, got it. So, Jim’s Donut Shop, from what I can tell, it sounds like they’ve been there quite a long time by kind of what this public backlash has been.
Anyway, Jim’s Donut Shop has been up and running. It seems like a pretty small town. But, apparently, Dunkin’ Donuts – as it did in San Diego, I think they’re still only the one location but they’re expanding out – they want to put not only a new location in the city but very close to, in close proximity to where Jim’s Donut Shop is located. I think I’ve seen differing numbers but it seems like the farthest it would be is a few hundred feet.

NASIR: Yeah.
First of all, you did get the name right. This is the town that I grew up. Jim’s Donuts, I think we need to span at least the first twenty minutes of this episode just on Jim’s Donuts.

MATT: Okay.

NASIR: I think it’s very important to understand that, yes, I mean, literally, my family talks about going to Jim’s Donuts on a Sunday morning to get donuts. It’s funny because this place actually has this feel. You know, there’s a lot of older people that seem to go there and I don’t know if they still do this. They used to smoke in there and I think a lot of people would go there for the coffee and maybe truck drivers. You know, it’s a stop. Vandalia, Ohio, is basically Highway 75 and Highway 70 Intersection which are two very long highways that, if you’ve ever traveled cross-country, you’ve probably rode on one of those.

MATT: You said 70?

NASIR: Yeah, Interstate 70 and 75. When I moved to San Diego, I literally got on with my high school buddy, Nathan, and we drove from Vandalia, Ohio, all the way to Las Vegas, I think, on Highway 70 and then got on Highway 15. But, anyway, you know, I don’t know if they still do but the donuts there – it sounds derogatory but, trust me, it’s not – it had this taste to it, almost as if some of the cigarette smoke would get into the batter but it was part of it, you know? What’s funny about this story is I’m very torn and the reason is because, you know, I can’t talk some of it but the property that Dunkin’ Donuts is planning on buying us actually owned by my dad. I’m actually very familiar with the transaction so, obviously, I can’t talk about some things but, obviously, if somehow the city mixes this deal, then we’re not going to be able to sell that property so it’s kind of a big deal for us. But I do like Jim’s Donuts!

MATT: I knew there was something secret you had planned for this. You wanted me to give a background on a story where you seemed much more familiar with than I did.

NASIR: It’s just so weird that Dunkin’ Donuts would be built on 34 and 42 East National Road which, of course, 42 East National Road is where my dad’s office used to be before he retired.

MATT: Oh, well, we should have had him as a guest.

NASIR: I know, I was thinking about calling him. It’d be funny. I already know his take, luckily. So, I can speak on his behalf as his attorney.

MATT: It seemed like there was a couple of things or there’s things – some legal, some non-legal – preventing Dunkin’ Donuts from moving into this space. Kind of the non-legal side of it which is the backlash of the local citizens not wanting this big donut company to move in, especially really close to where Jim’s Donuts is. But, on the legal side, it seems like there’s some zoning issues as well. It said there was a meeting to be held May 2nd which was two days ago as we’re recording this. But I’m guessing it just wasn’t zoned for restaurant purposes.

NASIR: Yeah. I mean, there is a variance that they needed to get. And I forget what the commission is called, it’s some kind of underlying body that basically recommended the city council to approve, I think it was the planning commission. I think that’s the proper one. In order to get to that level – again, this is all public record – in order to get to that, traffic studies and a tremendous amount of money had to be put in in order to invest in this kind of thing. And so, keep in mind the planning commission from a traffic perspective which is really the basis that they should be deciding this, they gave the recommendation to approve.
And so, frankly, it’s kind of become a little bit of a kangaroo court a little bit because, if you see the things that they’re talking about, I mean, they’re talking about competition and so forth, and I think even the franchisee that was at the hearing talked about how we don’t have 100 percent of the market. It’s not possible, he says, to have 100 percent of the market – which makes sense. if we have 20 percent of the market, that would be phenomenal. There’s plenty of business for everybody which is totally true.
Again, I’m torn on this because, you know, I understand it. Out of all people, you know, frankly, I did leave the town so I don’t know if that’s a point against me. But, frankly, you know, I understand. It’s a local business that’s been around there since I lived there, since I was born, and I know my brother and sister, when they were in town used to sneak off when they had curfews and go to Dunkin’ Donuts to eat donuts.

MATT: You mean Jim’s Donuts.

NASIR: Oh, yeah, I’m sorry – Jim’s Donuts.

MATT: You didn’t mention, this is the 34th Dunkin’ Donuts to be in the one-mile radius.

NASIR: Oh, yeah, I forgot about that.

MATT: Well, let me ask you, do you know roughly the population of the town right now?

NASIR: Oh, don’t ask. I have no idea. I’m going to look. You said it was a small town.

MATT: That’s what I’m saying. How small is small in this case? I

NASIR: I mean, growing up in Vandalia, Ohio, I thought it was the biggest town in the world. It depends who you ask.

MATT: It’s close to Dayton, right? You probably had to think Dayton was bigger.

NASIR: Who knows? By the way, in 2013, 15,000 people. At that time, Dayton and Vandalia, it’s all the same to me. Frankly, Dayton was across the world. It’s literally six miles away. It might as well have been, you know, Colorado. It was so far.

MATT: Well, I wanted an idea to see what we’re working with. My other question was how long has this Jim’s Donuts been there? A long time?

NASIR: I mean, you walk in there as if you’re like the 60’s.

MATT: Okay, a long time.

NASIR: Definitely before I was born as far as I remember. Again, 1960’s, I was born about – not really.

MATT: Because I think the zoning thing, that gets worked out. But, I mean, from the citizen’s perspective, you know, the two big things are they don’t want competition coming in and shutting down Jim’s Donuts. I have my own opinions on that. But the traffic thing – that’s why I ask these questions – the traffic thing is more legitimate in my opinion. I just don’t know. You know much better than me. Is it really going to be that big of an issue? I understand with small towns, if it’s two-lane roads, stuff like that, but traffic is never that bad and maybe just because you and I both live in highly populated areas where traffic can be bad but I can’t see it being that big of an issue.

NASIR: Frankly, yeah, you know, as if Vandalia, Ohio has a traffic problem right now, you know? If anything, why wouldn’t you want more? It’s like you would want more traffic. That’s almost one of the objectives.
So, the location, first of all, I mean, there’s a reason why my father actually bought that property. It’s a great location. It’s literally in the center of town. It’s close to the corner of National Road and Dixie Drive which is a pretty main intersection. It’s not quite on that intersection but keep in mind that this same National Road pretty much has every fast food joint available. I mean, everything from just blocks away RB’s, Wafflehouse, Subway. I remember when the Taco Bell moved in. it was a pretty big deal. And McDonald’s.
And so, all these places have been there for quite a while. It’s like Burger King moving in next door to McDonald’s except the only difference here is that it’s a donut place. But keep in mind, for example, just down the street is a place called Airline Dairy Queen which is a local business. What they do is they sell hamburgers. It’s basically a fast food joint. But the taste that you can get from there, you can’t get from McDonald’s just as the smoke taste that you get from Jim’s Donuts, you can’t get from Dunkin’ Donuts.

MATT: That’s ultimately my take here is this. People that are concerned about the competition, they’re still going to go to Jim’s Donuts if that’s what they like.

NASIR: Absolutely. When I go to Vandalia, Ohio, and I get donuts, there’s no way I’m going to Dunkin’ Donuts. I’m going to Jim’s Donuts.

MATT: Yeah. I mean, the people that might veer off or if they go to Jim’s Donuts and it’s too long of a wait and they want something quicker – assuming price is about the same – yeah, all these people that are up in arms about it, they’re still going to go to that spot. They’re still going to be patrons. I don’t see Jim’s Donuts closing down because of that and it’s not like this is a big – I assume it’s not a big – tourist town either where you’re going to have the…

NASIR: Hey! Hold on. Be careful about bashing Vandalia.

MATT: No, it’s not bashing it. I’m just saying it’s…

NASIR: I’m just saying.

MATT: You know, my hometown is four times the size of that and there would be no tourists to ever stay there other than for concerts or close to Downtown Indianapolis, things like that. But this reminds me – and I think you’re familiar with where I live – it’s a lot of independently owned stores and they have this one big area, the grocery store closed down, they were putting in what they call like a Target Express – basically, a Target. People went crazy over this saying, “This does not fit the ambiance of this neighborhood, blah blah blah.” My wife included was not happy about it. I go, “I guarantee, if you need something quick from a store where you have to go to Target, it’s going to be very convenient.” And what happened two nights ago is exactly that. She’s like, “Oh, I need this.” I was like, “Where are you going to go?” She was like, “Target.” I was like, “The real Target or the Target Express?” That’s really close to Target Express. I go, “Exactly! It’s convenience.” I got a little bit off-track here.

NASIR: No, it totally relates.
I mean, frankly, Vandalia, Ohio, no offense, we’ve sold out a long time ago as far as local businesses. You know, just like a lot of Midwestern towns. Everything just got bought up and sold to other franchises. But, you know, you still have those staples – the ones that are good – like, Jim’s Donuts and Airline Dairy Queen and Original Rib House and these kind of local businesses and they’re going to probably continue to be there until people stop going.

MATT: Yeah, that’s the thing with these old staples and generations of families going there. I mean, they’re going to stick around as long as they can afford to pay the rent, I guess. I assume it maybe stays family-owned, I don’t know.

NASIR: Hopefully, yeah, they probably own the property. Well, actually, Jim’s Donuts, I don’t know. That’s a good question. I mean, they’ve been in that for so long. Again, I can talk about Vandalia, Ohio – by the way, you said, as far as it being a tourist town, when I was growing up, there was two big events every year. It was the Dayton Trap Shoot where they basically throw discs and shoot at it. It was pretty huge. It was I think the biggest in the country. I don’t know if it still is. I remember all my high school friends in the summer used to work there. Also, the Dayton Air Show which, again, used to be pretty big but not as big. Anyway!

MATT: I found their Yelp page – which I was surprised they have one – usually smaller places don’t. I mean, some of these places, they must sell a lot of donuts. I mean, there’s photos with just hundreds of donuts ready to go in one day.

NASIR: Yeah, exactly. They make it fresh and it’s right next to the Vandalia Barber Shop which is literally where I got my first haircut and a lot of my friends and everyone went there. That’s where they got their haircuts.

MATT: I’m looking at it right now.

NASIR: Used to go to Tony.

MATT: Well, there’s a photo of outside Jim’s Donuts. It’s next door to this barbershop.

NASIR: It looks so small. It looks smaller than I remember.

MATT: Well, you probably got bigger from when you were a kid.

NASIR: That’s true. I’m also looking at it very far away.

MATT: We didn’t talk too much about…

NASIR: All right, let’s talk about the law. Here’s the thing. When you’re leasing, whether you’re buying or leasing your business, this is not uncommon. In any kind of real estate, people that are in real estate, you’ll see this quite often. You go in there. Okay, you need a little bit of rezoning or some variance or you need to combine two lots or something like that to make it work. It just takes a little finagling and you’ll go through the process and you’ll spend money on these inspections, these reports, environmental reports, traffic studies, and you’ll spend a significant amount of money and everything will be good. You’ll give positive indications by these administrators. But then, when it gets approved, some neighbor or someone will complain and start a campaign against the project. It becomes really, really political and people get really heated about it and people that you wouldn’t think that, you know, it’s like, “Why is this a big deal? Why can’t I just put a donut shop next to where my dad’s office used to be or where my dad’s office used to be?” and you would think that’d be fine. Then, all of a sudden, people are throwing up arms of this old Jim’s Donut shop that’s been there forever. But, frankly, it’s the cost of doing business.

MATT: Yeah.

NASIR: So, how you mitigate that is very simple. You structure your transaction that allows you to roll things back and sometimes you have to take the risk and see what’s going on. Frankly, that’s also how certain property values go down. If the property is not zoned for that particular use and it has to be changed, it obviously becomes less marketable. But, if you’re able to rezone it, then, all of a sudden, jut by doing that alone may increase its value.

MATT: Right. Do you know what was there previously?

NASIR: Yeah, it’s two lots. It’s basically just an office. I think, if I recall correctly, they’re also buying the property behind the – or is it next to it? I don’t remember. Oh, I think it’s the one next-door. I’m not sure. I think that was also used as an office. But, if you look at the pictures, basically, you know, you’ve seen this, it’s basically a house that is an old, probably 1940’s or 1930’s house – or maybe later, I’m so bad with years – and they convert it to an office space. You can see a physician being there. It was perfect. My dad’s a psychiatrist. It was actually pretty good for him. I think the next-door was something similar to that.

MATT: Yeah. Like you said, it’s competition – healthy competition – sometimes ends up happening. If you have those restrictions in a lease – this is something you can tell me too, just help me figure out what I’m saying – how close are these two places? Because I saw differing numbers.

NASIR: Oh, it’s true. It is really, really close.

MATT: Okay.

NASIR: I’m looking at it now. First of all, these are not city blocks. It’s less than half a block away.

MATT: Okay.

NASIR: If you would walk there, it would take like two minutes, something like that.
I remember I used to go before school. I would be late and I’d get a doctor’s note from my dad which somehow worked for being excused to go late and then I would grab a donut and then I would go to school.

MATT: You heard it here first. You committed school fraud.

NASIR: Committed medical fraud – medical excuse fraud.

MATT: Yeah.
The most recent story I saw was May 2nd.

NASIR: That’s already been done but there’s two other readings before they make a decision on May 6th – next meeting on the proposed Dunkin’ Donuts location is May 16th. We’ll probably release this episode afterwards. So, cross your fingers. You can look it up now and see what happened. Is there going to be a Dunkin’ Donuts in Vandalia, Ohio? Only time will tell.

MATT: I’m not going to make you pick one or the other because I know what it’ll be.

NASIR: Exactly.
Look, let me be real for a second. I know I’m having fun with this but, really, it’s like I like Jim’s Donuts too but does that mean that, all of a sudden, it’s prohibited from anyone else moving next-door? I mean, that doesn’t really make sense either

MATT: Yeah.

NASIR: There’s been all these movies about that. Wasn’t there one – Meg Ryan and Tom Hanks? She owned a small local bookstore and Tom Hanks was bringing in this mega-bookstore? I think I may have just made this story up but it sounds like a good movie. In fact, I’m going to sell it.

MATT: I can’t think of anything else off the top of my head but I definitely know there’s been similar plots to movies and TV shows before.

NASIR: I want to say it’s “You’ve Got Mail.” Could that be correct?

MATT: Maybe.

NASIR: All right. Anyway…
Okay. Well, I just embarrassed myself especially if any of the Vandalia – I forgot what it’s called. Vandaliaites or Vandalians? I should know. I don’t know.

MATT: Vandals?

NASIR: Yeah, The Vandals. Actually, we were the Aviators, by the way. That was our mascot.

MATT: That’s pretty cool. I like that.

NASIR: I’m glad you think so. I’m not sure I thought so at the time.
All right. Thanks for joining us.

MATT: Yeah, keep it sound and keep it smart.