Financial Health of Krispy Kreme

In my opinion, Krispy Kreme will continue to grow rapidly in the coming two years.

Krispy Kreme executives no longer rush to implement new plans before the time is right. They carefully study each geographical location to make sure its market will support a full-scale doughnut operation. Also, management spends time checking out sites for individual stores. Potential franchisee and employees are required to maintain certain standards and are thoroughly screened.

The Krispy Kreme, Inc. case investigates the contributing factors that caused this particular darling of Wall Street’s stock to suddenly plummet more than 80% in 2004. In the year 2000, Krispy Kreme went to public and boasts iconic status by became the hottest brand in America. Less than a year after its initial public offering, the company’s shares were selling for 62 times earnings. However, in 2004 the market was shocked by the company’s stocks that plummeted more than 80% over the following 16 months.

Finances were examined in affective processing, in the context of figuring out who should the people invest in to get there profitable outcome. Both MCD and QSR are going to have their differences in what they each bring to the table, however, reviewing the cash flow, income statement and financial activities, this narrative research paper is going to explain what is going to have the greater advantage in the end. The bigger bang for your buck if you will. Processing all the information will give us the insight to figure out this great comparison.

What I find to be the biggest indicator of concern is that PepsiCo’s profitability is currently declining, despite its ever-increasing sales figures. It has lost 2% on both its profit margin, and return on assets. The return on common stockholder’s equity, has dipped by 4%, and they lost $.02 over every dollar invested in assets in 2005. This goes back to my assessment of their sales and net income figures. Here again, I see indications that their spending has increased dramatically, which is having a negative impact on profitability. Since the soft drink industry is a high-volume, low-overhead industry, controlling and minimizing expenses is of paramount importance. I find this trend to be very troubling, considering PepsiCo’s sales haven’t stopped climbing, yet they are starting to lose their profitability. Should their sales dip, they will be very hard put to maintain themselves.

The increase in cost of sales has significant impact on the total net revenues. Looking at the Starbuck’s reports the total net revenues have also increased. For example the total net revenues have risen from (in millions) $7,786.9, $9,411.5, to $10,383.0 in years 2006, 2007, and 2008 respectively. Unfortunately, in year 2009 the total revenue has dropped to $9.774.6, possibly result of the global economic downturn (Starbucks Corporation, 2009, Annual Report).

Total general and admin expenses show a constant increase. When expenses rise it is not always a negative trend as it could be justified by the fact that company grows. We can see that the total amount increased from $767,765 year 6 to $924,115 year 7, totaling 20% which can be considered a good change as company grew in its assets. Bigger company requires bigger expenses. From year 7 to year 8 company increase its general and admin expenses by only 1.2% which is a good thing. Again it seems that the executives came to realization that the company will not be as profitable as the year prior and that rise of expenses shall be tamed.

As we grow in number of employees, number of locations, amount of payroll, new expenses like 401k management and matching, 50% coverage for employees’ health care, bonus compensation, and increased marketing efforts, as well as large amounts of difficult to collect and overdue AR, we struggled to cover expenses. During this

Each of the individual components have been previously discussed, but it is interesting to compare them together to see how three of the most important aspects of the business have changed over time. Specifically it is worth noting that Profit Margin has increased significantly every year since 2000. What this means is that Krispy Kreme has gotten better every year at turning each sale dollar into net income.

Unlike other restaurant operators, KRISPY KREME does not amortize, or reduce the value of those assets, on its books over time. An enterprise shall amortize intangible assets from the time when it is available for use to the time when it is not confirmed as the intangible assets any more. 4 Not amortization means that the KK would not require its franchisees to pay any fees while using the intangible assets.

The question is what they do wrong for the business that is nearly more than 70 years, what makes them fall so quickly especially in year 2003 and 2004, there are at least 2,300 franchised businesses in Unites States, many that are successful, but there are difficulties in the franchise model, and Krispy Kreme with the combination of ambitions, greed, and inexperience in managed to stumble into most of them.

As Wall Street Journal stated, Krispy Kreme grew too quickly and diluted its cult status by selling its doughnut in too many outlets. They could not anticipate when the demand decreased due to low-carbohydrate diet trend issues. It can be seen clearly that interest expenses also increased for the year ended Feb 2, 2003 to the year ended Feb 1, 2004 as the debt increased.

The company that I am writing about is Starbucks, the international coffee shop chain. The company's financial statements for this analysis are from the FY2011 Annual Report and 10-K. The company has 10787 stores in the United States, of which 38% are franchised and the remainder are company-owned. The franchise model is more common when the company operates internationally. There are 6216 Starbucks stores internationally and of these 63% are franchises, with just 37% company-owned. The franchise model for international expansion has been utilized to help Starbucks expand quickly in foreign countries and to mitigate foreign political risk and to ensure that the product/service offering is tailored to local tastes (Thompson, 2012). The company is now in the process of buying back some overseas franchise stores in order to retain more profits for itself (Franchise Press, 2011). This paper will take a look at the company's most recent annual report to analyze the financial statements.

A shift in consumer demand to want healthier fast-food options has hit the industry hard. Dunkin’ Donuts and Starbucks have combated this shift by offering healthier menu items, something Krispy Kreme has failed to do. Dunkin’ Donuts offers healthy breakfast sandwiches and

Overall, we can say that Krispy Kreme has still a strong position in the market. Although it is a smaller company with less financial backing, it remains competitive as its breadth of products appeals across all major demographic groups (including age and income). Its doughnuts have also stirred a cult-like following. Yet its recent problems in strategies (over expansion, unethical accounting procedures) and management could