Krispy Kreme

A Recipe For Success?

Case Study: Krispy Kreme Doughnuts, Inc.

Table of Contents

Executive Summary: pg 3

Analysis: pg 4

Discussion: pg 5

Alternatives: pg 6

Recommendation: pg 6

Implementation: pg 7

Conclusion: pg 7

Appendices: pg 8 

Krispy Kreme Doughnuts Inc. (KKD)

Executive Summary

Operations:

Krispy Kreme Doughnuts operates as a branded retailer and wholesaler of a variety of doughnuts, beverages and packaged sweets. KKD also manufactures and distributes proprietary product mixes and equipment to their franchisees through their Manufacturing and Distribution Unit (KKMD).

Financial Profile:

Their primary revenue streams consist of: off-premises sales (40%), manufacturing and distribution of product mix and machinery (29%), on-premise retail sales at company stores (27%) and franchisee royalties and fees (4%).

Approximately 43% of their total assets are fixed, consisting mainly of store buildings, custom manufacturing equipment and delivery trucks. Having built a reputable brand since 1937, and having acquired a series of companies with considerable goodwill, a large attribution of KKD’s assets are intangibles (27%). KKD has established their licensed name, neon red and green logo and business concept as one well recognized by customers and envied by competitors. Given the nature of their operations, only 4% of assets are inventory and approximately 10% represent trade receivables (off-premise sales and franchise income). The company holds only 3% in cash, however their short-term debt obligations are insignificant, resulting in extraordinarily high liquidity ratios. KKD’s quick and current ratios are 2.72 and 3.25 respectively, compared to 0.76 and 1.52 for Starbucks. Furthermore, KKD also has a relatively low long-term debt/equity ratio of 11.26.

Recent Events:

Recently, KKD has worried investors with a...