Krispy Kreme Doughnuts, Inc.: A Hot Brand in America

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 “Coffee Wars – The Big Three: Starbucks, McDonald’s and Dunkin’ Donuts” article focuses on the company analysis of the Starbucks brand and how its main competitors, McDonald’s and Dunkin Donuts, has affected their brand and driven competition higher. Even though there are many companies trying to enter the specialty coffee market, these three companies own the majority of the market share. With Starbucks’ top quality and above average prices they hold a different market than the fast coffee/food market of Dunkin’ Donuts and Starbucks; yet the competitive moves Dunkin’ Donuts has made over the years in order to compete with Starbucks and surpass McDonald’s has driven competition up between all three companies. The competition has stiffened ever more in the past ten years due to the changing economy. This led to “the big three” to come up with different techniques to gain competitive advantage over the other. Although the competition between these companies is to gain most of the market share, consumers are still loyal to a certain brand; this makes it difficult to gain each other’s clientele. McDonald’s continues to appeal to customers who want value and speed, Dunkin’ Donuts focuses on the middle-class, while Starbucks a customer who desires a higher quality product along with being recognized for using the brand.

Doughnut Time (2016) is a Brisbane based company, specialising in a variety of premium desserts that capitalise on the use of social media, unique locations and offerings (refer to table 1). Despite desserts being considered non-essential, high levels of competition and healthy eating trends (refer to table 1), the business has successfully established itself within the fast food and dessert industry, which is set to grow in the next five years (Tonkin, 2016). The company has a distinctive vintage flair, yet modern take on doughnut names and designs, becoming popular on social media (Doughnut Time, 2016). It’s vintage vans and small ‘hole in the wall’ stores make the company sort after, and appear unique from a large number of competitors

Starbucks financial statements were analyzed for the fiscal year ended September 27, 2015. Like all public companies, annual and quarterly financial statements are required to allow regulators and other interested parties to analyze the financial status and management decision making of the company. This analysis focuses on the results of Starbucks most recent published annual report containing their balance sheets, statement of earnings and cash flows. These statements will be analyzed against the results of one of its competitors, Dunkin Donuts, to investigate how the two companies compare to each other. It was noted that Starbucks and Dunkin Donuts do not have corresponding fiscal year ends. The data therefore is not directly comparable since the reports do not reflect the same time period of data but should provide additional insight. The paper will attempt to provide a brief analysis of Starbucks operations in terms of its liquidity, leverage, activity, profitability and growth ratios used by analysts in the industry.

The growth at the time was credited by the massive new store openings. The sales for new stores for the first week where huge in between $400,000 and $480,000 however over time they expected the sales to drop around $75,000-$100,000 a week because that is the average at the time of older stores. Finally the last section of Krispy Kreme manufacturing and distribution, was expected to grow. KKM&D had just opened a large distribution center on the west coast and had plans to open another one in Illinois. Since sales at the time for KKM&D were about 16.6% of total sales, they were expected to keep up with the franchises in growth. For the year of 2003 their assumptions were correct. The stock price grew (see chart) and Krispy Kreme expanded just as they planned. Then in 2004 the stock dropped, due to allegations of Krispy Kreme padding their shipping earnings for the two prior years. This event skewed the outcome of the forecast. KK is still doing well however, and has slowed down its growth but is still expanding.

KRISPY KREME, one of the successful companies in the food-service industry, began as a single doughnut shop in the early 20ths. The rapid expansion of its business scale made the corporation suffer its first economic crisis by the early 1980s. A group of franchisees later took charge of the heavily-debt company bringing new management ideas which helped the KRISPY KREME find way back to the game and become the role model in the industry. KK generated revenues through four primary sources: on-premises retail sales, off-premises sales, product mix and

The brand expanded into Canada after receiving success in America, and later opened their first store outside of America on December 2008 in London. They have expanded from one location, to now having five hundred and seventy eight locations across the globe.

Krispy Kreme has experienced dramatic growth over the past 5 years based on their income statement. Every line on the income statement has grown rather impressively. Revenues have grown from $220M to $666M and net income has grown from $6M to $57M. Based on the income statement, Krispy Kreme is doing very well.

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.

Dunkin’ Donuts was established by Bill Rosenberg in 1950 in Quincy, MA. Dunkin’ Donuts started license franchises in 1955. It is the world’s leading baked goods and coffee chains serving more than 3 million customers per day. Dunkin’ Donut sells 52 varieties of donuts and more than a dozen coffee beverages as well as an array of bagels, breakfast sandwiches, and baked goods. At the end of 2010, there were 9,760 franchises all over the

Dunkin’ Donuts are famous for their many varieties of doughnuts and their wide range of bakery products - muffins, bagels and munchkins® donut hole treats. Their products are represented by more than 6,590 worldwide points of distribution, including approximately 4,815 units in the United States alone.

Even though Dunkin Donuts is an international business, each individual store has its own set of goals and missions to achieve success. This is also known as the value chain, which is “the process or activities by which a company adds value to an article, including production, marketing, and the provision of after-sales service.” (Oxford) After observing and working for Dunkin Donuts, the business’ success is primarily based off the happiness of their loyal customers and smooth teamwork of their employees. This particular Dunkin Donuts on Western Avenue in Peoria, Illinois is faced with a lot of challenges, but with the right approach to these challenges can make their business even more successful.

The company under analysis in this report is Dunkin Donuts. The brand of Dunkin Donuts originated in 1950 when Bill Rosenberg opened the very first outlet in Massachusetts, USA. Today Dunkin' Donuts is the world's leading baked goods and coffee chain, serving more than 3 million customers per day worldwide. It sells about 52 varieties of donuts and more than a dozen coffee beverages as well as an array of bagels, breakfast, sandwiches, subs and other baked goods. Dunkin Donuts is a subsidiary company of Dunkin Brands Inc that owns companies like Dunkin Donuts, Baskin Robins etc. Dunkin Donuts is a multinational company with its presence in more than 32 nations. By the end of 2011, there were 10,083 Dunkin' Donuts stores worldwide that included 7,015 franchised restaurants in the United States of America and 3,068 international outlets in more than 32 countries across the globe employing more than 9000 people. According to the financial report published by Dunkin Brands Inc, the parent company of Dunkin Donuts the net sales worldwide totaled up to $8.77 billion, up 5.2 percent from the previous year and the Net income for the year was $108.3 million, up 214.5 percent as reported by the company.

KKD's business model provides the company three sources of revenue: (1) Sales at company-owned stores; (2) Royalties from franchised stores and franchise fees from new stores; and (3) Sales of doughnut mixes, customized doughnut-making equipment, and coffees to franchised stores.

Krispy Kreme Doughnuts Incorporates principal activity is to produce and market doughnuts and related items. The operations are carried out through three segments, company stores operations, franchise operations and Krispy Kreme Manufacturing and Distribution. The stores are both retail outlets and highly automated producers of over twenty varieties of doughnuts. The company is a branded specialty retailer, and produces more than three million doughnuts a day. In addition to its Krispy Kreme stores, the company sells its doughnuts in supermarkets, convenience stores and other retail outlets throughout the country. The Krispy Kreme Manufacturing and Distribution segment sells doughnut-making equipment, mix, other ingredients and supplies