In 1937, Vernon Rudolph purchased a secret doughnut recipe that used yeast-raised dough from a New Orleans French chef. He set up shop in Winston-Salem, North Carolina, to sell his doughnuts to area grocery stores. But the scent of freshly baked doughnuts drew crowds who wanted to purchase hot, fresh doughnuts. Rudolph cut a hole in the front of his building and started selling his Original Glazed doughnuts directly to consumers.
It wasn’t until after WWII that he got the idea of creating an attractive display case for his doughnuts and other baked goods, the top of which would also serve as retail counter space. Anyone who has visited a Krispy Kreme store knows first-hand how central the display case is to the whole concept.
The company’s distinctive green and red “bow-tie” logo was trademarked in 1955, and remains the same today, giving the company a stylish “vintage” image that is both instantly recognizable and unforgettable.
There are 860 Krispy Kreme stores, with 600 of those located in countries other than the US, leaving just 260 locations in the domestic doughnut market. Among the 24 countries in which the company has locations, Mexico is the go-to growth market, with more than 100 stores.
While Krispy Kreme’s less than 5% share of the domestic doughnut market seems tiny compared to the 57.5% commanded by front-runner Dunkin’ Donuts (Franchise Chatter), Krispy Kreme has solid growth plans that solidify its #2 slot. And it hasn’t tampered with its tried-and-true doughnut recipe in 77 years.
Here are 7 must-read news stories about the Krispy Kreme franchise:
A New CEO Takes the Reins
New Krispy Kreme CEO and President Anthony “Tony” Thompson took office effective June 1. Thompson has a previously established record as a strong detail-oriented manager of the Papa John’s pizza chain, holding the company steady against such huge competitors as Dominos Pizza and Pizza Hut (CrazyJoys.com).
Thompson and his predecessor Jim Morgan, who is staying on as Executive Chairman, have laid out a number of ambitious plans for the company, including double-digit sales growth, creating a customer loyalty program, expanding menu choices, franchising more of its new smaller factory shops in the US, and adding brand licensing opportunities. They also emphasize how important it is that the company has achieved debt-free status.
Over the next three years, Krispy Kreme wants to reach 400 US stores and 900 international stores. That’s both exciting and ambitious for a company that has grown too fast in the past and had to pull back. (Winston-Salem Journal).
Switching up the Menu
Krispy Kreme will never give up its central item – the doughnut. The big question is whether or not doughnuts alone will suffice. When you’re up against Starbucks with its fancy salads and Dunkin’ Donuts with its bacon ranch chicken sandwich, a little menu diversification may be in order, and it looks like Krispy Kreme is considering all kinds of potential products. The company has an iconic and widely recognized brand, it just needs to make that brand more relevant.
One of the ways it plans to do that is by making use of social media to promote limited-time offers on specialty doughnuts, which younger consumers love. It’s also looking to expand both its coffee offerings as well as other beverage products, although details have yet to be provided.
Candies, cereals, ice cream and even cake mixes are all potential brand licensing ventures on the table.
The company is also looking at expanding beyond the breakfast market to create more sales during its slower part of the day, from 11 AM to 4 PM. That probably means some kind of sandwich offering, but mum’s the word on that as well (USA Today).
Stock Price Poised for Comeback?
Krispy Kreme stock (KKD on the NYSE) had its 52-week high of $26.63 per share back on November 21, 2013. Since then it has declined steadily, reaching a 52-week low of $14.82 per share on August 1, 2014.
The disappointing stock price in recent years has been attributed to poor overall financial performance as the company struggles to turn itself around from the fiscal and management problems that have plagued it the last couple of decades. When senior company officials are selling off shares (including Executive Chairman Jim Morgan and Senior Vice President of Human Resources Kenneth Hudson), it doesn’t do much for investor confidence (Barron’s).
However, two recent bright spots have sent the stock climbing several dollars, up to $17.24 (BidnessEtc). The first was an upbeat report from Wedbush Securities (Winston-Salem Journal), and the second was the company’s celebration of its 77th birthday with a limited-time offer to buy one dozen doughnuts and get a second dozen for just 77 cents, which was such a big hit with consumers that customers lined up to take advantage of it, significantly boosting sales (BidnessEtc).
The Great Doughnut Heist
Chris Rosati is dying of ALS (amyotrophic lateral sclerosis), otherwise known as Lou Gehrig’s disease, the condition without a cure that has garnered much attention of late on social media with the “ice bucket challenge.” Last fall, Rosati found himself addressing 400 students of his own high school alma mater, the Durham Academy, and happened to mention his long-held dream of robbing a doughnut truck and then passing the treats out to people Robin Hood-style.
Krispy Kreme stepped up to the plate to help make it happen, and in December Rosati was allowed to “hijack” a Krispy Kreme delivery truck and take it to a hospital and the school to pass out free doughnuts. The company went on to become a key donor in Rosati’s recently founded non-profit organization, Inspire Media, whose mission is to help people with ideas on how to make other people smile or raise awareness, implement their ideas, film it and share it with others (NewsObserver.com).
The C-Suite Shuffle
The new CEO at Krispy Kreme hasn’t been the only senior management change at the company. There have been other major shifts in 2014.
Bradley Wall, Vice President of Supply Chain and Off-Premises Operations, left the company on July 28, although no reason was given for his departure. It’s a significant shift, considering that “sales in the supply chain categories have become a key piece of Krispy Kreme’s growth strategy, representing the second-largest revenue source — $31 million — and largest operating income source — $12.7 million — during the first quarter of its fiscal year 2015.” Oddly enough, the job title has been eliminated and his duties “reassigned.”
The other big change this year was back in February, when Krispy Kreme’s President of its International Division Jeff Welch left the company after serving in that role since August 2008. Daniel Beem was hired that same month to replace him (Fox8WGHP).
Krispy Kreme K-Cups
Although bagged Krispy Kreme coffee has been available to consumers for several years, fans who like one-touch brewing can now purchase the company’s Smooth and Decaf blends in K-Cup packs at participating stores as well as online at www.Keurig.com.
Dwayne Chambers, chief marketing and innovation officer for Krispy Kreme, noted that celebrating the new product launch would include a chance for consumers to win a year’s supply of Krispy Kreme Coffee K-Cups.
In-store retail will consist of 12-count boxes, while online outlets will also have 24-count boxes available (QSRWeb.com).
The Perils of International Expansion
Krispy Kreme is making its mark around the world, and any time it opens a new store in the UK, it comes with a lot of consumer buzz and excitement. Not surprisingly, scammers are always on the lookout to exploit that kind of energy.
When news got out that a new store would be opening in Aberdeen, a Facebook page called Krispy Kreme Aberdeen sprung up and started running contests under the guise of being an official company site. Contest entrants were enticed with a potential prize of £100 worth of Krispy Kreme products of their choice just for “liking” the page. As it turns out, just about everyone was contacted as a winner, and then asked to provide detailed personal information, including their home address (stvAberdeen).
The Krispy Kreme franchise has had its share of troubles over the last couple of decades, and especially after the company went public in 2000. As often happens in the franchise world, the company expanded too rapidly, forcing franchisees to compete with one another. While the parent company reaped the financial benefits in the form of royalties from new stores, profitability at the franchise level was declining.
At the same time, the company also expanded into offering its doughnuts at supermarkets and gas stations. This served not only to further saturate markets, but also detracted from the brand’s previous novelty. In addition, those venues required premade doughnuts rather than its signature hot and fresh approach in its regular stores.
The situation was exacerbated by a series of accounting scandals in which the SEC had to make an unfavorable ruling and suggest remedial actions in 2009 (Wikipedia.org), a year in which the company’s stock hit an all-time low of $1.12 per share.
In spite of such challenges, the company has spent the last several years re-building its brand to iconic status, and news stories highlighted above show a company poised for success in coming years.