Krispy Kreme Doughnuts Case Study

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 most critical opportunity is the location(s) of expansion. Focusing on long-run profit potential would be expanding in a familiar ‘home-base’ region. From the alternatives, a location(s) that could achieve all key success factors coupled with a strong Franchisee base (that meets required criteria) would be the first step to the desired goal of the revenue growth process. From this foundation, a critical path to overcome market entry obstacles would need to be addressed.

Analysts are predicting that Krispy Kreme will be able to perform highly effectively andcontinue to grow rapidly in the coming two years. Do you agree with their analysis? If so, why? If not,why not?

From the “Management Discussion & Analysis” section, it is evident that Krispy Kreme is facing many risks that are being faced by almost all companies in the market. Those risks include:

The UK headquarters are based in Camberley,Surrey. The Krispy Kreme Doughnuts opened their first store location in the United Kingdom in October 2013. According to their website, Krispy Kreme no longer has franchise opportunities or development right available in United Kingdom. Krispy Kreme Doughnuts offer sixteen types of doughnuts in the UK combined with occasional feature

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.

By August 2003, Fortune magazine was calling Krispy Kreme the "hottest brand in the America", and KKD was trading almost at $50. But after the company failed to file its financial reports on the very beginning of the year 2005, KKD was trading less than $10. It seems to be the ideal time for share repurchase program, and this can also help to signal to the market that the stock is perceived as undervalued, so it can somehow boost up the demand of the stock. However, even though the company has only small amount of the excess cash but still the stock repurchase is way more attractive and right thing to do than repurchase underperforming franchisee’s

The principle business of KKD is high-volume sales and production of over twenty varieties of the finest quality doughnuts; including the signature Hot Original Glazed Krispy Kreme 's commitment to quality and consistency has created a long-standing devoted customer base. The doughnut-making stores, quality ingredients, and vertical integration are part of what makes Krispy Kreme capable of differentiating itself from competitors.

Their outside growth and saturation in various outlets are results of each other. Krispy Kreme became a publicly traded company in April 2000, with their initial public offering. At the time they had 144 stores and in their five year plan had a projection of over 500 stores (427 stores in August 2004) in addition to over 32 international stores. Upon this expansion, Krispy Kreme, have expanded their reach outside of their factory store, as seen in calculation 1, where nearly 75% of revenues come from sources other than factory stores. This high reliability on outside sources of revenues leads into another issue facing Krispy Kreme. The additional issue, is the correlation of their profits due to the growth of franchised stores, (see calculation 2 for initial fees).

Investors have a decision to invest in a franchise or have complete control over the business, products and employees by creating one’s own business. Many people find franchises carry less risk than the average small business and that it requires far less of their attention (Meaney, 2004). Franchises also offer the familiarity that mass advertising of big brands accomplishes. Small business owners instead must pay for their own advertising and build their own brand image which can take years and cost thousands. Some find this to be reinventing the wheel and choose franchising instead.

Sometimes the costs we spend for the franchising may be huge than if we begin our own one from the scratch. Because we may have to pay for marketing, advertising and agreed percentage of our sales than the initial cost. Then sometimes they will go for loans for further development. If the franchise go for down. It will

Founded in 1937, Krispy Kreme operates a chain of 218 shops in 33 states and Canada that offer its signature doughnuts, including its best-known offering, the Hot Original Glazed. Each shop has the capacity to produce from 4,000 dozen to over 10,000 dozen doughnuts daily. Shop sites are located worldwide

Krispy Kreme Doughnuts is known to be the producer of doughnuts that they sell traditionally warm in public. The company’s success is widely known by the consumers in differents countries which makes them to be one of the outstanding companies in the business industry. But they encounter conflicts that results them to decline in some other ways.

First getting its corporate bearings on July 13, 1937 in Winston-Salem, North Carolina, Krispy Kreme Doughnuts have seen the many stages of financial gain and loss. Through the 1930’s and 1940’s the company saw regional growth and by the late 1950’s Krispy Kreme had opened 29 shops in 12 states. 1960 marked an era where management Vernon Rudolph and Mike Harding began to emphasize corporate standardization through its brand image. All Krispy Kreme shops were made with a green roof, a red-glazed brick exterior, a viewing window inside, an overhead conveyer for doughnut production, and bar stools. Original owner Vernon Rudolph in 1973, so

Franchising has been an influential economic engine and is vital in the expansion and growth of the business for nearly half a century (Ekelund, 2014). The inherent benefits of franchising as a business model are the key influencers of the decision of entrepreneurs opting for franchising instead of establishing a new business (Oni, Sekwele, Matiza & Pelser 2014). Beredo and Mendoza (2013) said that in order to survive in this kind of business, capital, skill, positive attitude, good location, good management and best service should be considered. Furthermore, that every franchise system revolves around its franchisees’ quality and the personal decisions that the management make with respect to their work. Understanding the cost and returns are essentials which franchise companies must work in their programs to the market and be straightforward in the assessments, with these, returns can be generated over the period (Kong & Zwisler, 2007).