Krispy Kreme

Krispy Kreme opened in Winston – Salem, North Carolina in 1937 after Vernon Rudolph, acquired the special recipe from a French chef in New Orleans. He started selling the doughnuts to supermarkets. They were such a hit, that he soon cut a hole into the side of his factory to sell directly to the customers. Vernon Rudolph, passed away in 1973, and Krispy Kreme was acquired by Beatrice Foods.

Beatrice Foods quickly expanded to more than 100 locations. Along with the expansion they also introduced new products, such as soups and sandwiches. The issue with doing that was they changed the appearance of the stores and they changed the original recipe. The regular ingredients started to be substituted with cheaper ingredients. By doing this, the business started to go under again. Beatrice Foods had to sell by the early 1980s.

A group of franchisees led by Joseph McAleer, bought out the company in 1982 for $24 million. He redid what Beatrice Foods did and brought back the original recipe. It took him a while, but he was able to get the company back on track around 1989. In 1998, Scott Livengood, became CEO. He was able to take the company to a public offering in April 2000. This initial public offering ended up being one of the largest in recent years. One day after the IPO, their stock had increased to $40.63.

A few ratios to look at in the Krispy Kreme case include Quick Ratio, Return on Equity, Cash Turnover, and Inventory Turnover Ratio. For FY2003, Krispy Kreme’s quick ratio is 2.72. Krispy Kreme is in a better liquidity position than any other quick service restaurant during this fiscal year. Their Return on Equity (ROE) is 12.62%. While some of their competitors are higher in this area, they are not doing so well in others. The Cash Turnover for Krispy Kreme is 32.79. This amount isn’t as high as some of their competitors but at the same time it isn’t as low as some of the others either. Lastly, their Inventory...