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FDD Talk 2016: The Krispy Kreme Franchise Opportunity (Financial Performance Analysis, Estimated Costs, and Other Important Stuff You Need to Know)

by Franchise Chatter on August 15, 2016

in Donuts Franchise, FDD Talk 2017: Food Franchises, Franchise Earnings



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Krispy Kreme Photo by tinywookie042

In this FDD Talk 2016 post, you’ll learn the following:

  • Section I – Background information on the Krispy Kreme franchise opportunity, including relevant news updates
  • Section II – Estimated initial investment for a Krispy Kreme franchise, based on Item 7 of the company’s 2016 FDD
  • Section III – Presentation and analysis of Krispy Kreme’s financial performance representations, based on Item 19 of the company’s 2016 FDD, including information on the:
  • 2015 average net on-premises revenue by tier for all 174 Factory Stores that were in operation for 18 months or greater, consisting of 104 franchised Stores and 70 company-owned Stores
  • 2015 average net on-premises revenue by tier for all 17 Factory Stores with less than 3,000 square footage and containing a smaller line of production equipment, that were in operation for 18 months or greater, consisting of 2 franchised Stores and 15 company-owned Stores
  • 2015 average net on-premises revenue by tier for all 53 Tunnel Oven Shops that were in operation for 18 months or greater, consisting of 38 franchised Stores and 15 company-owned Stores
  • 2015 average net on-premises revenue by tier for all 12 Fresh Shop/Kiosk Stores that were in operation for 18 months or greater, consisting of 11 franchised Stores and 1 company-owned Store
  • 2015 average revenues; food, packaging, and freight cost; labor; benefits; gross profit; operating expenses; other expenses; royalties; marketing; and franchise EBITDAR by quintile for all 32 company-owned Retail Factory Stores (i.e. Factory Stores without off-premises routes) that were in operation for 18 months or greater
  • 2015 average revenues; food, packaging, and freight cost; labor; benefits; gross profit; operating expenses; other expenses; royalties; marketing; and franchise EBITDAR by quintile for all 15 company-owned Tunnel Oven Shops that were in operation for 18 months or greater

Section I – Background Information

Krispy Kreme Going Private Again as Chain Is Acquired by JAB Holdings Company

Krispy Kreme Doughnuts agreed in May 2016 to be acquired by JAB Beech, a subsidiary of JAB Holdings Company, and go back to being a private company.

In the deal, valued at $1.35 billion, JAB Beech will pay $21 per share in cash for the doughnut chain, whose stores will continue to be operated independently. The deal is expected to close in the third quarter.

Krispy Kreme went public in April 2000, and its stock went as high as $49.37 in August 2003 before dropping significantly. The company, though, has done strong business in recent years.

JAB is tapping the breakfast market at a time when the morning meal is one of the few growth drivers within the restaurant industry. The company also acquired Keurig Green Mountain in 2015 for $13.9 billion and has controlling interest in other coffee companies, including Caribou Coffee and Peet’s Coffee.

Krispy Kreme opened its 1,000th store in February 2015 in Kansas City, Kansas, and today has more than 1,100 shops around the world, including 300 in the United States.

Doughnut Soda?

Krispy Kreme is pairing with the Carolina Beverage Corporation, which makes the Southern favorite Cheerwine, for a beverage that exudes doughnut flavor. The announcement was made in July 2016. Cheerwine Kreme combines the cherry flavor of Cheerwine with a hint of Krispy Kreme’s Original Glazed flavor.

From Original Glazed to Limited-Time Churro Doughtnuts

Vernon Rudolph opened his first doughnut shop in 1937 in Winston-Salem, North Carolina. Following expansion in the 1950s, Krispy Kreme was well known in the Southeast and began to expand into other areas.

Krispy Kreme Doughnut Corporation became a wholly-owned subsidiary of Beatrice Foods in Chicago. A group of franchisees bought the company back from Beatrice Foods in 1982.

Krispy Kreme opened its first international location in June 2010 in Sydney, Australia. In addition to Krispy Kreme stores, the company’s products are sold in grocery stores, convenience stores and Target, Walmart and Shaw’s stores.

Krispy Kreme’s most prolific product is its doughnuts, which range from Traditional Cake Classic and Original Glazed Doughnut to more inventive fare such as Glazed Blueberry Cake and Dulce De Leche.

Limited-time offerings as of July 2016 are the Churro Doughnut, Creme Brulee Doughnut, Tiramisu Doughnut, Strawberry Shortcake Doughnut and Baseball Doughnut. Krispy Kreme also sells a variety of bagels and oatmeals as well as coffees and cold drinks.

Section II – Estimated Costs

  • Please click here for detailed estimates of Krispy Kreme franchise costs, based on Item 7 of the company’s 2016 FDD (updated).

Section III – Financial Performance Representations (Item 19, 2016 FDD) and Analysis



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