...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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...Financial Analysis: Krispy Kreme Doughnuts, Inc. operates as a branded retailer and wholesaler of doughnuts and coffee. It engages in the ownership and franchising of Krispy Kreme doughnut stores, which make and sell approximately 20 varieties of doughnuts. These stores also offer a wide variety of coffees and other beverages. As of January 31, 2010, there were 224 Krispy Kreme stores operated domestically in 37 U.S. states and in the District of Columbia and 358 shops in other countries internationally. Of the 582 total stores, 268 were factory stores and 314 were satellites stores. Krispy Kreme stores are classified as either a factory store or a satellite store. The traditional factory store has the capacity to produce from 4,000 dozen to over 10,000 dozen doughnuts daily. Commissaries, which are production facilities used principally to serve off-premises customers domestically and to supplement factory stores focused on on-premises sales internationally, have the highest production capabilities of Krispy Kreme factory stores. As of January 29, 2006, there were 11 commissaries system wide, five of which were owned by Krispy Kreme. Satellite stores consist primarily of the fresh shop, kiosk and tunnel oven store formats. Tunnel oven stores contain doughnut heating technology that allows customers to have a hot doughnut experience throughout the day. The fresh shops and the free-standing kiosk locations do not contain doughnut heating technology. In each of these formats...
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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’s Dilemma Preston Bass David Braziel Tyler Bullock Adam Hefton Ryan Tarrant Corporate Finance 4360 Dr. Steve Rich Table of Contents Executive Summary 3 Introduction 4 Purpose, Scope and Limitations 4 Sources and Methods of Literary Search 5 Report Organization 5 Krispy Kreme’s Dilemma 6 Krispy Kreme’s Current Solutions 9 Recommendations 11 Appendix 1: Corporate Overview 14 Appendix 2: Graphs 17 Appendix 3: Income Statement 18 Appendix 4: Revenue Chart 19 Bibliography 20 EXECUTIVE SUMMARY The purpose of this report is to evaluate the current situation of Krispy Kreme Doughnuts, Inc. and to discuss the reasons for such status. We will also look at current strategies the company is taking to better the situation, and finally, submit some of our own recommendations for ways to maximize potential at Krispy Kreme. Currently, Krispy Kreme faces many obstacles in operations and capital structure. Recent SEC filing discrepancies have added to the existing lack of optimism among stockholders. In addition, it appears that the money from loans made by the company to franchises has not been repaid at any type of acceptable rate. One major reason for the decline in franchise sales is that Krispy Kreme has oversaturated the market. This is made evident by nearly a 20% decrease in same store sales for the last quarter of fiscal 2004. Also, the company has doubled...
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...Financial Statement Analysis Case Analysis: Krispy Kreme Doughnuts 1. Analysts are predicting that Krispy Kreme will be able to perform highly effectively and continue to grow rapidly in the coming two years. What are the key factors underlying the growth (at least 2)? Do you agree with their analysis? What are some potential concerns (at least 2)? Analysts are predicting that Krispy Kreme will be able to perform highly effectively and continue to grow rapidly in the upcoming two years. Several factors can be the result of this rapid growth. Krispy Kreme’s brand is based on high quality products. They continue to excel in their field of providing top quality doughnuts to satisfy the needs of the consumer. Furthermore the fact that competition is fragmented with less brand recognition, this places Krispy Kreme up there, making it a leader in it’s industry. Krispy Kreme also carries strong and sold opportunities to expand their network of stores geographically. Having shops located in different regions and areas, makes the shop easily accessible to its consumers. The more Krispy Kreme stores found out there, the higher the profit margin is for the corporation with increased sales and thus greater revenue being generated. Just like Starbucks for example, one can clearly see how they’ve successfully expanded geographically with shops found on the corner of every street. This increases the accessibility to consumers, as well as the company’s overall corporate image....
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...Case Study: Krispy Kreme Doughnuts, Inc. Case Study: Krispy Kreme Doughnuts, Inc. Problem The problem in this case deals with the loss in value of Krispy Kreme Doughnuts’ stock. Was the main reason for the fall in stock price due to article posted in the Wall Street Journal about the SEC investigation? Were there deeper issues within the company that caused the loss in earnings per share? Analysis In April of 2000, the CEO of Krispy Kreme Doughnuts took the company public and had one of the largest IPO’s in recent years. After Krispy Kreme went public, they stated that they were planning to expand from 144 to 500 stores over the next five years. The company grew rapidly for the next few years, and stock prices rose well above the S&P 500. On May 7, 2004 the company reported adverse results and told investors to expect earnings to be 10% lower than originally anticipated. Krispy Kreme’s reasoning for the decrease in expected earning was the growing trend in America toward a low-carbohydrate diet. On May 25, 2004 the Wall Street Journal published an article on the aggressive accounting treatment used by Krispy Kreme during a franchise acquisition. A franchisee owning seven stores in Michigan owed the company several millions of dollars. They asked him to close two underperforming stores and pay Krispy Kreme accrued interest on past-due loans. In return, the franchisor promised to raise the purchase price of the franchise. Krispy Kreme accountants recorded the interest...
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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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...Krispy Kreme was a successful manufacturer of Doughnuts that was established in 1937 by a young entrepreneur named Vernon Rudolph. Rudolph was an industrious man who found clever ways to market and sell his unique confections to the American public. By the 1950’s Rudolph’s business had expanded to twenty-nine shops within twelve different states. Each shop featured pick-up windows (early versions of drive thrus) and possessed the capability of producing 500 dozen doughnuts per hour. In 1954, Mike Harding joined Rudolph as business partner in order to facilitate the expansion of the company. Both men realized that the quality of their products stemmed from having control over each aspect of the doughnut making process. If each item included the set amount of ingredients, was baked to perfection, and served hot to hungry customers, then all Krispy Kreme shops were to meet great success. Harding became the company’s president in 1958, and then went on to become chief executive officer after Rudolph’s death in 1973. Under both men, Krispy Kreme’s revenues grew from less than $1 million in 1958 to $58 million by 1974. In 1976, the company was bought by Beatrice Foods who decided to change the recipe, the 1950’s look of the doughnut shops, of course, the logo. Beatrice foods decision to modernized Krispy Kreme was received negatively by customers. In an effort to revive the company, a group of franchisee’s bought Krispy Kreme from Beatrice Foods for $22 million in a leveraged buyout...
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... 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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...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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...A weakness of Krispy Kreme is that it continues to try and grow when all financial dataindicates that franchisees are competing with each other rather than rivals. When stores arelocated near each other, they affect the sales volume of the other store. When the first KrispyKreme is put up in a new market, obsessed consumers camp outside for days to be the first tohave a fresh doughnut. As more and more stores are introduced into an area, this frenzy fadesand the craze dies out.Krispy Kreme could explore is further expansion into the global market. The majority of Krispy Kreme sales come from cult-like followers that will do anything for a Krispy Kremedoughnut. This following could be extended into other foreign markets besides Canada andEngland. There are opportunities to expand their coffee company, Digital Java Inc., and createnew ways to provide fresh doughnuts to the public.Threats that Krispy Kreme faces are competitive pressure from Dunkin Donuts andincrease interest in low-calorie and low-carbohydrate diets. Americas recent health interest hashad a major impact on companies such as Krispy Kreme. Analysis of Krispy Kreme shows thatalthough there is a strong loyalty towards the product, there could be a drop in revenues due tothe recent craze.After quantitatively analyzing the current market with a weighted competitive strengthassessment, it can be concluded that Dunkin Donuts has a few distinct advantages over KrispyKreme that will allow more lasting power for Dunkin Donuts...
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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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...Case #6: KRISPY KREME DOUGHNUTS, INC. Synopsis and Objectives 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 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. Questions 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 7 raise? What questions do the ratios on peer firms in case Exhibits 8 and 9 raise? 3. Is Krispy Kreme financially healthy at year-end 2004? 4. In light of your answer to question 3, what accounts for the firm’s recent share price decline? 5. What is the source of intrinsic investment value in this...
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...meals, 70% of consumers eat dessert at least once a week, with 36% twice or more; mid-evening snack (54%), afternoon (42%), late at night (40%), mid-morning (33%). According to the International Dairy-Deli-Bakery report "What's in Store?" - 2011 instore sales reached $10.2 billion, a 2.2% increase - with the most popular products including: cookies (84%), doughnuts (80%), special occasion cakes (79%), Danish/pastries (72%), muffins (71%), pies (68%), brownies (61%), and cupcakes (59%). Supermarket center aisle sales include: cookies ($3.7 billion), pastries/doughnut ($1.7 billion), baking mixes ($1.1 billion), and prepared pies and cakes ($1 billion). ("Digging into Desserts," in Food Technology, November 2011 (Vol. 65, No. 11), p. 17) Krispy Kreme is an international doughnut and coffee brand that is best known for its Original Glazed Doughnuts and Signature Coffee. The brand is present in more than 20 countries worldwide including the United States, Australia, Korea and the Philippines. Vernon Rudolph bought a secret...
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...TO: John Ivankoe FROM: Gussie Rhodes DATE: January 5, 2005 SUBJECT: Krispy Kreme Doughnuts Financial Analysis and Stock Recommendation Krispy Kreme Doughnuts, Inc. recently announced a restatement of last year’s financial statements. Since its peak in August 2003, KKD stock has declined more than 80% in price as the result of the restatement announcement and allegations of accounting misrepresentations. It seems that this would be a good opportunity to buy KKD stock while the price is below $10 for such a fast-growing company. However, careful examination of the company’s financial data and its business strength reveal that this stock is not superior enough to other investments or in a position to continue to grow at a rate to make it an attractive investment for J.P. Morgan. Krispy Kreme’s financial statements report extremely strong growth from 2000 to 2004; revenue grew 31.8% annually, and net income grew 71.6% annually. Although overall sales increased from 2003 to 2004, this growth was largely from new stores. The income from operations in quarters ending May 2, 2004 and August 1, 2004 indicate a $79.6 million run rate, which is a 22% decline from $102.1 million for year ending February 2004. Income from existing stores continues to decline, as new growth comes from new store openings. The number of new store openings cannot remain high forever; Krispy Kreme’s strategy does not provide for sustainable growth. The balance sheet shows an increase of long-term...
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