... Ethics-Krispy Kreme Introduction The purpose of this case study is to analyze the accounting scandal at Krispy Kreme. "The Krispy Kreme story is one of a newly public company, experiencing rapid growth, that failed to meet its accounting and financial reporting obligations to its shareholders and the public,"(as cited in Maremont & Brooks, 2005). The senior managers were the ones who profited from this accounting scandal and the shareholders and the public suffered as a result. There are several prevention methods that can be taken to prevent this from occurring in the future. It will benefit Krispy Kreme to hire internal auditors who can report to management any regulations. Analysis Company Overview Krispy Kreme opened its first store July 13, 1937 in Winston-Salem, NC (Krispy Kreme). According to the Krispy Kreme website, “Vernon Rudolph bought a secret yeast-raised doughnut recipe from a New Orleans French chef, rented a building in what is now historic Old Salem in Winston-Salem, NC, and began selling Krispy Kreme doughnuts to local grocery stores”(Krispy Kreme). Krispy Kreme donuts can be found at many grocery stores with sixty personal stores around the United States. Krispy Kreme offers a fundraiser program for schools and churches. Krispy Kreme has expanded its business internationally “celebrating the 100th shop in Mexico” in 2013 (Krispy Kreme). Accounting Scandal “Former executives at Krispy Kreme Doughnuts Inc. who...
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...of Krispy Kreme Donuts MBA 6154 - Dr. Plath By: Jon Plyler Luke Sagur Introduction Since its IPO in April 2000, Krispy Kreme grew to be a top pick of Wall Street Analysts. The company’s growth seemed unstoppable and Krispy Kreme was able to beat Wall Street’s expectations. Krispy Kreme continued to outperform until 2004 when some accounting woes were brought to light and analysts starting noticing other anomalies that indicated that things were not quite as good as they seemed. The firm’s stock price quickly plummeted from its peak and lost more than 80 percent of its value in only 16 months. This case study focuses on the use of financial statement analysis, and other factors that an equity analyst would use to gauge the health of a firm, to help identify symptoms that demonstrate things where not as good as they seemed at Krispy Kreme. The report starts by introducing Krispy Kreme, their history, structure and strategy. We will then discuss Krispy Kreme's financials and other tell tales that were available to predict the demise of the firm. To wrap up the report we will conclude by summarizing all the signs that demonstrated things were amiss and answer the question: "Can financial statement analysis predict the future?" Krispy Kreme History Krispy Kreme began as a small business in Winston Salem, North Carolina in 1937 shortly after the company’s founder, Vernon Rudolph, purchased a doughnut recipe from a French chef from New Orleans. Krispy Kreme...
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...KRISPY KREME DOUGHNUTS, INC. Teaching Note Synopsis and Objectives Suggested complementary cases in financial statement analysis: “The Financial Detective, 2005,” (UVA-F-1486); “Deutsche Brauerei,” (UVA-F-1355); “The Battle for Value, 2004: FedEx Corp. vs. United Parcel Service, Inc.,” (UVA-F-1484) This case considers the sudden and very large drop in the market value of equity for Krispy Kreme Doughnuts, Inc., associated with a series of announcements made in 2004. Those announcements caused investors to revise their expectations about the future growth of Krispy Kreme, which had been one of the most rapidly growing American corporations in the new millennium. The task for the student is to evaluate the implications of those announcements and to assess the financial health of the company. This case is intended to be introductory as it can provide a first exercise in financial statement analysis and lay the foundation for two important financial themes: the concept of financial health, and the financial-economic definition of value and its determinants. Suggested Questions for Advance Assignment to Students 1. What can the historical income statements (case Exhibit 1) and balance sheets (case Exhibit 2) tell you about the financial health and current condition of Krispy Kreme Doughnuts, Inc.? 2. How can financial ratios extend your understanding of financial statements? What questions do the time series of ratios in case Exhibit...
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...selling Krispy Kreme doughnuts to local grocery stores in Winston Salem, N.C. People would pass by these stores smelling the delicious scent of Rudolph’s doughnuts and ask to buy hot doughnuts, so Rudolph cut a hole into the wall of his rented building and began selling the Original Krispy Kreme doughnuts to customers who walked by on the sidewalk (History, 2012). By the 1950s Rudolph and Krispy Kreme were doing well with a few family owned chain stores but the business was not consistent. The doughnuts were made from scratch which took up a lot of time and therefore Rudolph decided to invest in technology that would make the doughnuts for them using a dry doughnut mix that would prove to make the perfect doughnut every time. This innovation sustained the company through the 1960s and 70s until Rudolph died in 1973. After Rudolph’s death, Krispy Kreme took a downturn as the company reorganized for sale to the Beatrice Foods Company in 1976 (History, 2012). In 1982, a few of the first franchisees bought Krispy Kreme back from Beatrice Foods and decided to put focus back on the hot doughnut experience. These business owners also branched outside of the southeast region and opened the first store in New York 1996. Krispy Kreme became an American icon having been in business for 60 years in 1997 and donated artifacts from the company to the Smithsonian Institution’s Natural Museum of American History (History, 2012). Today Krispy Kreme is a publicly...
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... II. Situation Analysis (Denise Merritt)(pgs__-___) A. List each part III. Problems Found in Situation Analysis (Charles Monu-Azinge) IV. Strategic Alternatives for Solving Problems(Charles Monu-Azinge) V. Selection of Strategic Alternative and Implementation (Charles Monu-Azinge) VI. Summary (Jannie Noels) Executive Summary Situation Analysis-Environment The business environment of Krispy Kreme deals with economic conditions, cultural and social values, and political and legal issues. The doughnut industry has generated five to six billion dollars in the years 2003-2004. The estimated sales at outlets specializing in doughnuts rose nine percent in 2002 to $3.6 billion. In 2002, worldwide sales were at $2.7 billion. According to these recorded results, the expected earnings per share in 2004 were expected to be between $1.16-$1.18. Due to lower than expected off premises sales, Chief Executive Officer, Scott Livengood said the company is lowering earnings guidance to .23 per share. During July and August of 2004, system wide sale increased 14.8%, company revenue went up 11.5%, and company store sales rose by 18.7%. Americans consume an estimated ten to twelve billion doughnuts annually. This social trend was a great benefit to Krispy Kreme. Today, most of society...
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...inefficiency in the management of Krispy Kreme Doughnuts, Inc. in terms of its operations, marketing, accounting, and investment planning. III. OBJECTIVES a. To gradually gain back analysts’, investors’ and lenders’ confidence in the company in the succeeding months. b. To increase sales and profitability in terms of its core business, selling of doughnuts. c. To regain and increase stock price therefore increasing shareholder value. d. To correct inaccurate entries in the financial statements of KKD and to present a clean and unbiased reports. e. To extend further reach to consumers strategically to achieve significant growth in the next five years. f. To implement extensive marketing measures for its brand and products and investment strategy for both on and off premise operations. IV. AREAS OF CONSIDERATION • Fortune magazine had dubbed Krispy Kreme Doughnut, Inc. “the hottest brand in America.” With ambitious plans to open 500 doughnut shops over the first half of the decade. • The company generated revenues through four primary sources: on-premise retail sales at company owned stores (27% of revenues), off-premises sales to grocery and convenience stores (40%); manufacturing and distribution of product mix and machinery (29%); and franchise royalties and fees (4%). • Roughly 60% of sales at a Krispy Kreme store were derived from the company’s signature product, the glazed doughnut. • On May 7, 2004, Krispy Kreme announced adverse results. The...
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...Krispy Kreme Strategic Analysis: Introduction In 2003 Krispy Kreme was named by Fortune Magazine as “America’s Hottest Brand” and in 2004 they reported net income of $50 million. However over-expansion, an expensive store network, revelations of falsified financial reports and changing trends in diet have meant that Krispy Kreme revenues have declined by 50% between 2005 and 2010 The strategic problem considered is to analyse Krispy Kreme’s current operations and suggest recommendations for how this may be tailored for the UK market for long-term profitability given cultural and retail differences. Current strategy Krispy Kreme operates 582 stores (including franchised) in 18 countries worldwide. Stores range from 4,000 to 8,000 square feet and are generally located in freestanding suburban locations. They also operate smaller satellite stores, kiosks and sell directly through large retailers such as Tesco. Krispy Kreme is a vertically integrated business. Starting with their secret recipe, they make fresh doughnut mix each day, which is distributed to all stores. They manufacture their own doughnut and coffee machinery. Doughnuts are freshly made; they have a simple product line focused on doughnut variations and their own branded coffee (developed from the acquisition of Digital Java in 2001).In the UK Krispy Kreme operates a subsidiary (with a 34% equity interest) with an exclusive development licence to the franchise in the UK. Competition analysis Krispy Kreme operates...
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...Krispy Kreme Doughnuts, Inc. 1. What can the historical income statements (case Exhibit 1) and balance sheets (case Exhibit 2) tell you about the financial health and current condition of Krispy Kreme Doughnuts, Inc.? The company’s financial performance looks quite good at the end of Feb 1, 2004. From the exhibit 1, income statement, we can see that Krispy Kreme was growing from the year ended Jan 30, 2000 to the year ended Feb 1, 2004. Total revenue increased significantly 202% from US$ 220,243 thousands in Jan 30, 2000 to US$ 665,592 thousands in Feb 1, 2004. Net income increased 858% from US$ 5,956 in Jan 30, 2000 to US$ 57,087 thousands in Feb 1, 2004. The balance sheet in exhibit 2, looks as good as the income statement in exhibit 1. The total assets increased significantly around 529% from US$ 104,958 thousands in the fiscal year ended Jan 30, 2000 to US$ 660,664 thousands in the fiscal year ended Feb 1, 2004. Long-term liabilities increased 453% from US$ 27,617 thousands in the fiscal year Jan 30, 2000 to US$ 152,641 thousands in the fiscal year ended Feb 1, 2004. Total shareholders’ equity increased 847% from fiscal year ended Jan 30, 2000 to fiscal year ended Feb 1, 2004. Increasing in total assets, total liabilities and shareholders’ equity because the company expanded its business. We can see in exhibit 3 that the factory stores have increased more than two fold. However, the company’s financial performance became worse for three months period ended May...
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...Running head: KRISPY KREME DOUGHNUTS, INC.: A CASE ANALYSIS Krispy Kreme Doughnuts, Inc.: A Case Analysis Presented to By October 09, 2009 Table of Contents II. Table of Contents 2 III. Executive Summary 3 IV. Situational Analysis 5 A. Environment 5 B. Industry Analysis 5 C. The Organization 7 D. The Marketing Strategy 9 V. Problems Found in Situational Analysis 10 A. Statement of primary problem. 10 B. Statement of secondary problem 12 C. Statement of tertiary problem. 13 VI. Formulate, evaluate, and record alternative course(s) of action 14 A. Strategic Alternative 1 14 1. Benefits 14 2. Costs 15 B. Strategic Alternative 2 16 1. Benefits 16 2. Costs 19 C. Strategic Alternative 3 19 1. Benefits 19 2. Costs 21 VII. Selection of Strategic Alternative and Implementation 22 A. Statement of Selected Strategy 22 B. Justification of Selected Strategy 23 C. Description of the implementation of strategy. 23 VIII. Summary 28 IX. Appendices 29 A. Financial Analysis and Selected Tables 29 B. Reference List 32 Executive Summary Krispy Kreme Doughnuts, Inc., began as a family-owned business back in 1937, as an expansion of a pre-existing business, when Vernon Rudolph purchased a doughnut shop along with the now-famous secret recipe for making yeast-raised doughnuts. His doughnuts, which he delivered to grocery stores in the Winston-Salem, North Carolina area, quickly became...
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...KRISPY KREME SCANDAL LaVeta Reed Brandman University ACCU 620 November 15, 2015 Introduction Krispy Kreme is a leading international branded specialty retailer of premium quality doughnuts. Headquartered in Winston-Salem, NC, the company has offered the highest-quality doughnuts and great-tasting coffee since it was founded in 1937. Today, Krispy Kreme and its one-of-a-kind Hot Light can be found in over 1000 shops around the world. Currently, Krispy Kreme can be found in 24 countries, including the United States, Australia, Bahrain, Canada, Colombia, Dominican Republic, India, Indonesia, Japan, Kuwait, Malaysia, Mexico, the Philippines, Puerto Rico, the Republic of Korea, Russia, Qatar, the Kingdom of Saudi Arabia, Singapore, Taiwan, Thailand, Turkey, the United Arab Emirates, and the United Kingdom (Overview, 2015). Krispy Kreme differentiates themselves by combining quality ingredients and a vertically integrated production process with a unique retail experience featuring their stores' fully displayed production process, or doughnut making theater. The Krispy Kreme brand has several unique elements that have helped them create a special bond with their customers. Their doughnuts, which are made from a secret recipe that has been in their company since 1937, have a one-of-a kind taste that generations of loyal customers have grown to love. Their Hot Doughnuts Now sign, when illuminated, is a signal to our customers that our signature product, hot Original Glazed®...
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...ASSIGNMENT #1: KRISPY KREME SUBMITTED BY: Amper, Shiela Mae Eslao, Brian Jarabe, Paolo Jao Sabijon, Kenneth Tagotongan, Geneva SUBMITTED TO: Ms. Tracy June Dy BA40 – A | FRANCHISING April 21, 2015 I. SHORT BACKGROUND Krispy Kreme is an international retailer of premium-quality sweet treats, including its signature hot Original Glazed® doughnut. Headquartered in Winston-Salem, NC, the company has offered the highest-quality doughnuts and great-tasting coffee since it was founded in 1937. Today, Krispy Kreme and its one-of-a-kind Hot Light can be found in more than 980 locations around the world. Currently Krispy Kreme can be found in 24 countries. II. ANALYSIS A. Location Krispy Kreme has stores located all over the United States of America but stores have not been limited to only the US (Canada, United Kingdom, Mexico, Australia and etc.) Krispy Kreme can be found in grocery stores (Wal-Mart & Target), convenience stores, and gas stations. In the Philippines, there are more than 15 branches of Krispy Kreme and that includes the Krispy Kreme Limketkai and Centrio. Krispy Kreme Limketkai and Centrio is such a big advantage for the franchisee because basically it is located on malls. Large, usually enclosed shopping centers containing a mix of different types of businesses, malls are terrific, as they usually service a large area or market and are accessible from major thoroughfares. Malls are natural traffic draws, and the good ones can attract...
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...Krispy Kreme Case Study FINA 470-01 Strategic Financial Management Company Overview: Krispy Kreme is a retailer and wholesaler of “high quality doughnuts and packaged sweets” (2010 10-K report) as well as various beverages. Krispy Kreme consists of stores and franchises that include domestic and international franchises, company stores and the KK Supply Chain. Krispy Kreme is also the sole provider to all their stores and franchises of the ingredients and equipment needed for store operations via the KK Supply Chain. Notably, neither equipment nor ingredients can be purchased from any other vendor and thus the franchises/stores are completely dependent upon Krispy Kreme. Vernon Rudolph acquired the Krispy Kreme recipe from a New Orleans chef and moved to Nashville and opened his own doughnut shop in 1937. Initially selling to grocery stores, he ended up cutting a hole in the building to sell to passersby who inquired about buying hot donuts directly from the bakery. Mr. Rudolph patented Krispy Kreme in 1939. Family members joined the bakery to help Rudolph meet rising demand for his doughnuts. Rudolph invented and built all his donut making equipment. To date, the company still uses only company made equipment. Other stores started popping up around the south in the 1950s and 1960s as the company quickly expanded. Rudolph died in 1973 and as the company began to flounder, it was sold to Beatrice Foods in 1976. Original franchisees repurchased the company...
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...Benefits, Costs, Risks Analysis of opening a Krispy Kreme Franchise in Sweden Mia T. Barton Norma Chapman Carissa Godsalve Tina Ricketts BMGMT 102 Professor MacKaben November 12, 2013 Table of Contents Introduction Barton, MT Summary of Findings Barton, Chapman, Godsalve, Ricketts Benefits Costs Risks Final Analysis Benefits, Costs, Risks Analysis of opening a Krispy Kreme Franchise in Sweden Introduction July 13, 1937 marked the day that Vernon Rudolph opened his doors in Winston Salem, North Carolina and started selling Krispy Kreme doughnuts. Initially his business plan was to sell to grocery stores but there was a customer demand for his hot doughnuts so he started selling directly to people on the streets. From that one store, Krispy Kreme has now expanded to 789 stores, here in the Continental United State and 22 foreign countries. The company has seen some highs and some lows. Since its original IPO on the NASDAQ the price of shares has fluctuated to as much as $50 and as low as $1.15. They are now traded on the New York Stock Exchange at approximately $25.74 a share. This summary details the benefits, costs and risks of an American and a Swede doing a joint venture to open a Krispy Kreme franchise in Stockholm, Sweden. Summary Findings Benefits For the business partners, Sweden is a very attractive...
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...case teaching note | 14 Krispy Kreme Doughnuts, Inc. Overview With 181 Krispy Kreme stores in 28 states, Krispy Kreme Doughnuts in 2001 was rapidly building something of a cult following for its light, warm, melt-in-your-mouth doughnuts. Sales were on an impressive climb, exceeding 3.5 million doughnuts a day. The company’s business model called for 20 percent annual revenue growth, mid-single digit comparable store sales growth, and 25 percent annual growth in earnings per share. Krispy Kreme had created a flurry of excitement with its expansion into metropolitan markets outside the Southeast—its grand openings in newly entered markets attracted long lines of customers and created traffic jams around its store sites. The first new store in San Diego racked up $365,000 in sales the first week, with 5 TV crews covering the opening day event. The first store in Denver produced first-week revenues of $369,000, drew 50,000 visitors, and had $1,000,000 in sales the first 22 days; the crowds were so large that three off-duty deputy sheriffs were hired to direct traffic from 5 a.m. to 11 p.m. during the Tuesday-Saturday period of grand opening week—one night there were 150 cars in line at the drive-thru window at 1:30 a.m. But despite the enthusiastic reception that Krispy Kreme stores were getting, a number of securities analysts were dubious whether the company’s strategy and growth potential merited a stock price nearly 70 times projected 2002 earnings...
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...case teaching note | 14 Krispy Kreme Doughnuts, Inc. Overview With 181 Krispy Kreme stores in 28 states, Krispy Kreme Doughnuts in 2001 was rapidly building something of a cult following for its light, warm, melt-in-your-mouth doughnuts. Sales were on an impressive climb, exceeding 3.5 million doughnuts a day. The company’s business model called for 20 percent annual revenue growth, mid-single digit comparable store sales growth, and 25 percent annual growth in earnings per share. Krispy Kreme had created a flurry of excitement with its expansion into metropolitan markets outside the Southeast—its grand openings in newly entered markets attracted long lines of customers and created traffic jams around its store sites. The first new store in San Diego racked up $365,000 in sales the first week, with 5 TV crews covering the opening day event. The first store in Denver produced first-week revenues of $369,000, drew 50,000 visitors, and had $1,000,000 in sales the first 22 days; the crowds were so large that three off-duty deputy sheriffs were hired to direct traffic from 5 a.m. to 11 p.m. during the Tuesday-Saturday period of grand opening week—one night there were 150 cars in line at the drive-thru window at 1:30 a.m. But despite the enthusiastic reception that Krispy Kreme stores were getting, a number of securities analysts were dubious whether the company’s strategy and growth potential merited a stock price nearly 70 times projected 2002 earnings per share of $0.69 and 85 times...
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