Krispy Kreme

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Josh Hayden Jason Craig Ronnie Jacko
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History

• 1937 Founded by Vernon Rudolph, KK opens first
  store in North Carolina.
• 1940s-1950s - Build own mixing plant and
  distribution system.
• 1960s-1970s - Krispy Kreme begins to expand their
  stores.
• 1990s - Continue expansion that include stores in
  New York and California.

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Krispy Kreme Profile

• Founded In 1937
• Headquartered in Winston-Salem, North Carolina
• Products Doughnuts (30 kinds), soft drinks
  (espresso, chillers), hot drinks (coffee)
• Revenue 510.21 million USD (2006)
• Net Income - 88.45 million USD (2006)
• Employees 4,250

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Store Locations

• Krispy Kreme have stores located all over the US
• Stores have not been limited to only the US
  (Canada, United Kingdom, Mexico, and Australia)
• Krispy Kreme can be found in grocery stores
  (Wal-Mart Target), convenience stores, and gas
  stations

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Two Locations in Oregon

• Beaverton16415 NW Cornell RoadBeaverton, OR
  97006 US
• Clackamas9950 S.E. 82nd AvenuePortland, OR
  97266 US

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Store Layout/Design

• Freestanding Most free-standing Krispy Kreme
  stores are constructed with a long window between
  the customer area and the kitchen, allowing
  customers to watch the operation of the
  doughnut-making machines.
• Smaller Stores Most of the smaller stores get
  their donuts from other locations rather than
  producing them on-site.

• Atmosphere Very welcoming, with bright lighting.
  Seating is limited but available. Factory tends
  to pull curious customers inside.

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Advertisement / Marketing

• Free doughnut strategy Hot Now free doughnut
  while waiting in line.
• TV ad campaign
• Gifts/Accessories shirts, sweatshirts, hats,
  boxers, coffee, mugs, toys.
• Fundraising helped schools raise over 30
  million last year (selling doughnuts, coffee,
  certificates, and partnership cards).

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Distinguishing Aspects

• Store Layout Factory inside the store where you
  can watch how the donuts are made.
• Reputation Krispy Kreme has always been known as
  and has had a reputation of being the best.
• Hot Now When the Hot Now sign outside the store
  is lit you can get hot and fresh original glazed
  donuts.

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Recent Activity

• KK went public in April 2000 at 21/share, and
  within a year that number doubled.
• All seemed well for a couple of years, in spite
  of a few renegade analysts declaring KK stock
  too high, given its modest quarterly net
  income.
• Merrill Lynch downgraded stock to sell in
  October 2002 J.P. Morgan cut the rating to
  underperform in August 2003.

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Downward Spiral

• Many credible Wall Street names held on til May
  2004, when KK stock fell 29 in one day after KK
  issued a profit warning (they blamed the low-carb
  craze seizing the nation). By Sept 04, the
  stock had plummeted 77.
• Shares took another hit in late July 04, when KK
  announced federal regulators were investigating
  the company.
• KK failed to file its SEC reports for over a year
  (failure to meet accounting and financial
  reporting obligations).

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. . . and it gets worse . . .

• defaulted on loans
• unable to borrow more money
• two important franchises bankrupt (owed lots to
  KK)
• class-action lawsuit by stockholders
• CEO, COO CFO unloaded shares at peak
• caught boosting profits by extorting franchises
• sold equipment and booked the revenue before
  payment was received cooking the books
• sweetheart deals
• independent auditors refuse to sign off on KKs
  financial statement
• CEO and six key officers fired
• rumors of de-listing on the NYSE

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Below Stock price of KK on the NYSE (name KKD)
from initial opening in April 2000 at 21 per
share, to its high of 49.74/share in August
2003, to its lowest of less than 4/share in
early 2005, to its current of 8.41/share.
To The Right Graph of KKs number of retail
outets. As the number of stores nationwide
increases, sales decreases.
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What next?

• Krispy Kreme is struggling back into the market
  eye after a desperate tussle with near
  extinction.
• January 29th, 2007 KK announced it has finally
  become current in its SEC filings, and has since
  maintained that status.
• February 2007 introduction of a new whole-wheat
  doughnut made with 100 whole wheat . . . and,
  to make it even better, the doughnut is ONLY 180
  calories!
• April 2007 announces change in its board of
  directors and names new corporate officers.
• May 2007 Files its UFOC (Uniform Franchise
  Offering Circular), essentially declaring that it
  is once again, finally, licensing franchises.

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Sources

• http//www.businessweek.com/2000/00_44/b3705148.ht
  m
• http//www.businessweek.com/2000/00_44/b3705148.ht
  m
• http//www.cfo.com/printable/article.cfm/4007436
• http//www.krispykreme.com (. . .duh. . .)

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