Krispy Kreme Case Study

Published: 2021-09-13 13:15:10
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Company Overview:
Krispy Kreme is a retailer and wholesaler of "high quality doughnuts and packaged sweets" (2010 10-K report) as well as various beverages. Krispy Kreme consists of stores and franchises that include domestic and international franchises, company stores and the KK Supply Chain. Krispy Kreme is also the sole provider to all their stores and franchises of the ingredients and equipment needed for store operations via the KK Supply Chain. Notably, neither equipment nor ingredients can be purchased from any other vendor and thus the franchises/stores are completely dependent upon Krispy Kreme.
Vernon Rudolph acquired the Krispy Kreme recipe from a New Orleans chef and moved to Nashville and opened his own doughnut shop in 1937. Initially selling to grocery stores, he ended up cutting a hole in the building to sell to passersby who inquired about buying hot donuts directly from the bakery. Mr. Rudolph patented Krispy Kreme in 1939. Family members joined the bakery to help Rudolph meet rising demand for his doughnuts. Rudolph invented and built all his donut making equipment. To date, the company still uses only company made equipment. Other stores started popping up around the south in the 1950s and 1960s as the company quickly expanded.
Rudolph died in 1973 and as the company began to flounder, it was sold to Beatrice Foods in 1976. Original franchisees repurchased the company from Beatrice Foods in 1982. The new owners quickly turned the focus back to the "hot doughnut" experience. By the 1990s, KK had expanded to NYC and California making it a national franchise. At the sixtieth anniversary, Krispy Kreme inducted into the Smithsonian Institution National Museum of American History.

In April, 2000, the company went public and the stock was quickly embraced being a known product as opposed to internet companies. The stock did quite well - trading at nearly $50 a share by August 2003. Up until this time, the company had been enjoying rapid growth. However, in 2004-2009, the company saw the closings of 240 stores which in conjunction with questionable accounting practices that cause concerns for investors led to declining revenues and significant losses. This included almost "$300m in impairment charges and lease termination costs" due to the store closings and "goodwill write-offs from franchise acquisitions" (2010 10-K report).
The 2010 Annual Report indicates that currently Krispy Kreme is again enjoying franchise growth both domestically and internationally. They have also concluded all litigations and regulatory inquiries that had been made in the previous years. The hope is to continue to expand, regain popularity with brand awareness and improve profitability. Management plans to accomplish these goals through strategic initiatives that include cutting expenses, development and testing of small shop formats and operations, development of new products, increasing sales to "off-premise" locations, international growth, and improving franchisee support.
Krispy Kreme's Mission, Vision and Values:
Our Mission

 To touch and enhance lives through the joy that is Krispy Kreme.
Our Vision

 To be the worldwide leader in sharing delicious tastes and creating joyful memories

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