When Sarah Palin criticized President Obama’s State of the Union Address, she mentioned a little coffee shop called Spudnuts. Spudnuts sounded familiar, so I checked into it.

Turns out that Spudnut Shops were a franchised chain of stores selling potato flour donuts called Spudnuts. The parent company no longer exists, but independent stores, including the one Palin mentioned, remain. The original recipe is based on a folk recipe that traces back to Germany.

At one time, they were the largest doughnut franchise in the country.

Val Driver of The Spudnut Shop in Richland, Washington told USA Today that her father and uncle founded The Spudnut Shop there in 1948, after spending $50 on a franchise and 100 sacks of spudnut flour.

More on their history after the jump.

After brothers Al and Bob Pelton of Salt Lake City ate potato-based doughnuts in Germany, they tried a number of things, from wheat dough that was flavored with potato water to using mashed potatoes, before creating a dry potato mix that not only worked for them but made it possible to franchise the concept. They coined the word “sputnut”, and went into business in 1940.

In 1946 the company began establishing a nationwide chain of franchised Spudnut Shops. In 1948, one new franchisee opened a store after paying $50 plus the cost of 100 sacks of spudnut flour. By 1952, when the Peltons were on the cover of the April 1952 edition of Mechanix Illustrated (“Their Potatoes Make Dough”), a franchise cost $1,750, plus equipment and other costs, for an initial investment of about $5,000.

By 1948, over 200 Spudnut Shops had sprung up across the country. Spudnuts were advertised widely, with the slogan “Coast to coast…Alaska to Mexico”. The cartoon character “Mr. Spudnut” frequently appeared in ads, restaurants, and even in parades. By mid-1949, the number was over 225, in 31 states. By 1954, the count was up to more than 300 shops in 38 states.

In 1964, Spudnut shops were selling about 400,000 spudnut doughnuts per day. That year, the company announced that it had successfully designed a process of flash freezing its dough, and announced that it planned to increase its distribution centers. At that time, there were six metropolitan franchise dealer who made fresh dough for distribution to shops that did not want to make their own dough from the dry mix sold by the company.

In 1968 the Pelton brothers retired, selling their company, Spudnut Industries Inc., to National Oven Products, Inc., of Washington state, a wholly-owned subsidiary of Pace Industries, based in Vancouver, British Columbia. The annual sales of Spudnut Industries was $2 million. The sale prices was $550,000, payable over 5 years, plus 20,000 shares of Pace Industries (worth about $175,000). At the time, there were 315 franchise holders, with combined annual sales of $25 million, making it the largest doughnut franchise in the United States. In 1973, Pace sold the company, which they had kept as a separate entity. together with National Oven Products, for $1.3 million, to Dakota Bake-N-Serv, headquartered in Jamestown, North Dakota. Within a year of the purchase, the new parent company remodeled the Spudnut headquarters in Salt Lake City, and retired “Mr. Spudnut”, the company symbol, replacing him with a design showing a spudnut with a bite taken out of it. The mix for the company’s signature product continued to be produced at the company plant in Salt Lake City, available as 50 pound bags of dry ingredients or as frozen dough.

By the 1980s, the parent company had closed, leaving all the franchisees to fend for themselves. By late 1989, there were only 28 franchise stores open.

via Wikipedia.

Originally posted by Dane Carlson on February 2, 2011 in Featured / History.

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