Case Study

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Date Submitted: 03/13/2011 05:16 AM

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Title of the Case: “KRISPY KREME”

Time Context:

Summary/Abstract:

Krispy Kreme began in the mid-1930s when a doughnut maker named Vernon Rudolph bought a secret recipe for yeast doughnuts from a French pastry chef out of New Orleans. Rudolph moved from to Winston-Salem and, on July 13, 1937, he opened up a wholesale business selling to local grocery stores. People walking by Rudolph’s plant began requesting hot doughnuts, so he cut a hole in the factory wall and sold them out on the street (the first drive-through).

Over the next few decades, Rudolph opened other stores—some his, some franchised—in north and South Carolina, and a regional chain was started. Rudolph soon chose the red, white, and green colors as well as the wide scripted logos and the “walking KK” letters. As for the name, it simply came on the recipe from the French chef.

Rudolph died in 1973, and Beatrice, the Chicago conglomerate that owned companies ranging from Tropicana orange juice to Samsonite luggage, bought the company in 1976. One year later, Scott Livengood (current CEO, President, and Chairman) graduated from Chapel Hill and joined the company as a trainee in personnel.

These were the years where Krispy Kreme was struggling to stay open. The franchisees, as well as many others, did not match well with Krispy Kreme’s idea of growth and a good quality doughnut. Livengood later said that Beatrice made the company cheaper. In response to this, franchisers led by Joe McAleer, acquired Krispy Kreme for $24 million.

When McAleer retired, his son Mack took over, and he soon asked Scott Livengood to become his partner. The two decided to get out of debt, so they needed to concentrate on bringing marketing to the fore of the company, including concepts such as the “doughnut theater” and increasing the size of the doughnut by 40 percent.

Although their marketing strategies were working, Livengood faced another major problem with Krispy Kreme—employees were clamoring for stock, while old...

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