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Krispy Kreme: Coulda, Woulda, Shoulda

I haven’t had a Krispy Kreme doughnut since around 2005. A few weeks ago, on National Coffee Day, I saw an article that gave a run-down of all the company’s promotions going on…and the feeling of neglect slowly crept back.

Illinois currently only has only 4 Krispy Kreme locations; whereas, in its heyday, I knew of a several in Chicago and its suburbs that I could visit. Those sweet, sugary, hot-from-the-fryer doughnuts are now just a memory. With that being said, I apologize for seeming a bit harsh on this company later on in this post. I guess you could say it’s a case of scorned lover syndrome. They left without saying goodbye and quite frankly, I’m glad they did (sniffle, sniffle, sniffle).

For all inquiring minds out there that have also wondered where Krispy Kreme went, you are not alone. There are several reasons why they are where they are, and because I feel rejected by their departure I thought I’d share some “coulda, woulda, shoulda” tips with you all. Hopefully, it will help me get over them once and for all.

1. Under Pressure

"Do I build somewhere where there's already 3 locations? I don't know!"

Problem: According to Steven P. Clark, who is an assistant professor of finance at Belk college of Business at the University of North Carolina at Charlotte, “there was enormous pressure, as there is for all companies, to grow very quickly and sustain growth quarter after quarter after quarter.”

Krispy Kreme thought that adding locations would increase their sales, but this move can just as easily flip franchisees in one market from profitable to unprofitable.

My commentary: Yeah, great that you’re expanding, but when you’re making other locations obsolete, what are you really gaining?

2. Getting Greedy

Problem: Krispy Kreme focused their efforts on growing revenues and profits at the parent-company level, while its outlets struggled. They required all franchisees to buy equipment and ingredients from the headquarters at marked-up prices. While this strategy isn’t uncommon, it can greatly hurt franchisees in the long run.

My commentary: Don’t bite the hand that feeds you, especially in the beginning stages of expanding your business.

In search of fried dough

3. The Thrill of the Chase Is Gone

Problem: “They became ubiquitous,” says Jonathan Waite, an analyst for KeyBanc Capital Markets in Los Angeles. “Not just in sheer numbers of restaurant units, but also roughly half of their sales started going to grocery stores, gas stations, kiosks. Anywhere that consumers could be found, you could find a Krispy Kreme.”

You could find stores that offered their doughnuts, but they were made off-site and therefore not as fresh as in one of their traditional outlets. The “doughnut-making theater” that had made them famous was no longer apart of the equation in their success.

My commentary: Stick to the shtick that made you famous.

Problem: In May 2004 they announced that they were in the works of creating a sugar-free doughnut in response to the popularity of the low-carb diets, thus straying farther from their key product which made them famous in the first place.

My commentary: People love brands, products, restaurants, etc. for specific reasons, don’t go altering it to stay “hip” or “current” if no one is asking you to.

4. Inconsistency Where it Matters

"Hmm, carry the two, divide by five, multiply by six. Mhmm, yes, correct."

Problem: During the period of 2000 to 2004, Krispy Kreme employed three different Chief Financial Officers. While there’s no law against this, it does seem fishy to stockholders and consumers. It’s been theorized that the CFOs tried to raise red flags about the company’s struggling financial state. Chief Analyst at governance watchdog The Corporate Library, Ric Marshall says, “to me, this says the real numbers the CFOs were coming up with were numbers that the rest of management didn’t want to hear. They were looking for a CFO who was going to tell them good news.”

My commentary: Your company’s numbers never lie – when done correctly and ethically. If you don’t like them, then start brainstorming ways to increase return business (loyalty cards, coupons, free doughnuts – oh wait, they already did that).

Takeaways from Krispy Kreme Doughnuts:

  • Their woes surfaced in May 2004 when then-CEO Scott Livengood blamed the low-carbohydrate diet trends for Krispy Kreme’s first-ever missed quarter and first loss as a public company. It’s important and vital to look ahead at trends and don’t just sit and try to react when things change.
  • Don’t let your stomach be larger than your eyes (or wallet) and don’t over expand before you’re really ready and the market can support you.
  • Don’t be everything to everyone, but rather be something special to some. Stick to what you know best and improve on that instead of overstretching to please everyone.
  • When you don’t like the numbers staring up at you from that spreadsheet, get to thinking of ways to improve them for next quarter.

Remember: Do what you do best. Even if you aren’t as successful as you think you should be, remain patient and keep working on it. You’ll get there!

Are you surprised by Krispy Kreme’s troubles? Are there any other companies that you’ve noticed have gone missing? Sound off below!



Amy Swanson

Amy is one of Quality Logo Products’ content developers and social media coordinators. She is a self-professed newspaper nerd and thoroughly enjoys reading business and financial news and having impromptu discussions about it. Oh yeah, she’s “one of those” people! A true Midwestern girl by nature, she loves riding her bike, photography, and the Chicago Cubs. You can connect with Amy on

Comments

  1. david k waltz

    Amy,

    1.) I too miss the old Krispy Kreme. For awhile they were the darling of Wall Street. Part of the issue for company leadership is to manage investor’s expectations of the business, because when results begin diverging from this the shares get pummeled. They did not seem to manage this process very well, and thus began to want the finance information to reflect this anyway – probably had some options that needed to be exercised that year or something (to your greedy point).

    2.) “They were looking for a CFO who was going to tell them good news” – where was Andrew Fastow when they needed him?:)

    3.) I once did a blog post titled “Why You Need a Finance Person” – the post above reinforces two things from a “finance guy or gal” perspective: a) the numbers provide a truth that needs to be listened to, and b) shooting the messenger is not a viable long-term strategy!

    • amy

      Thanks for reading and commenting, David. I’m glad I’m not the only one missing them :)

      1) I agree with your point about managing investors’ expectations, it’s a crucial process that when not done correctly can have lasting results.

      2) Hahaha, hadn’t heard Andrew Fastow’s name in quite a while. I’m sure he could have done some real “creative” accounting for them ;)

      3) It has to be hard for some finance people out there trying to get the point across that the numbers don’t lie to someone who refuses to listen. I can’t imagine running the numbers and then having someone tell me, “That can’t be right. Try again!” The figures are all there and there’s only so many ways to run them (ethically and honestly that is). All they’re doing is reporting how the business is running currently, and constantly hiring and firing accountants is not going to get you anywhere.

  2. JPorretto

    I’m so glad you brought up over expansion. So many times when a company fails it’s because it collapsed under its own weight. But the media will explain it away as “no one wants this” or “trends change” or “they should do this differently”. When in reality it’s as simple as they just got too big for their britches.

    Excellent-Grade-A-Top-o-the-line post!

    • amy

      I hate when that’s what analysts say too! Let’s call a spade a spade and recognize that the reason a company failed is because they over-saturated their markets to a point where consumers no longer saw the “novelty” in their store/products/whatever. It’s frustrating.

      Thanks Jeff for the kind words, it was fun to research :)

  3. Rachel

    “Don’t be everything to everyone, but rather be something special to some. Stick to what you know best and improve on that instead of overstretching to please everyone.”

    This is solid advice for many companies. While some products appeal to wide audiences, not all do. And if you form your brand around one niche, don’t neglect that niche if you decide to branch out!

    Also, is it sad that I’m pretty sure I’ve never been to a Krispy Kreme store? I think I’ve only ever gotten them at a grocery store. As such, they didn’t seem that special to me, since they were just another doughnut (albeit a tasty one) out of a box. Just goes to show you that, like you said, ubiquity diluted the doughnuts’ appeal. Now I really want to try one all warm and gooey right out of the oven … but without having to drive to Elk Grove Village. :(

    • amy

      I’m so sad you’ve never been to a Krispy Kreme location :( I think that’s a QLP field trip for sure! Their doughnuts are amazing fresh from the fryer and still hot from the sugar glaze waterfall (drool). Their over expansion into grocery stores, gas stations, and convenience stores (in my opinion) is what killed them. Their original glaze doughnuts were only good fresh, but once they sat in a cardboard box they were pretty bad – like eating stale cotton candy. Yuck! This isn’t the reaction a company wants customers to have regarding their products, at least a company looking to be successful ;)

  4. Mandy Kilinskis

    I miss Krispy Kreme. And while I’d like to say “poor, poor, Krispy Kreme,” it’s clear that while yes, diet trends change, most of this fault was entirely their own. After all, Dunkin Donuts found a way to survive (and you’d have to check the numbers, but I’m willing to say thrive as well).

    Krispy Kreme, once you get a little more of your stuff together, try another brick and mortar store in the Chicagoland suburbs or Chicago itself. Midlothian and Elk Grove Village are way too far to get one of those delicious donuts. :(

    • amy

      Dunkin’ Donuts is able to survive (I think they’re doing okay, some say they’re thriving while others say they’re facing some problems, but I digress) is because they offer other items besides just doughnuts and coffee. They have breakfast sandwiches, quick snacks, specialty coffee drinks, etc. to offer throughout the day.

      Whereas KK only had doughnuts and coffee to serve, so there wasn’t much to keep customers coming back when their diet trends changed. If you’re going to cut out doughnuts, then chances are you’ll cut out the coffee at that location too so you aren’t tempted.

      I think they should try again, it seems that people’s diets are changing and they could play up the “all-natural sugar” and “wholesome” aspect of their doughnuts just being: flour, yeast, and sugar (and whatever else is in doughnuts, I have no idea really). Also, to go along with Jen’s post about the Lay’s Potato Chip vending machine, people want to see where their food is coming from and how it’s made. That’s what Krispy Kreme was built on with their “doughnut-making theater”.

      Obviously I’m not over Krispy Kreme :( Shucks!

  5. Joseph Giorgi

    “Don’t be everything to everyone, but rather be something special to some.”

    Very well put! If there was ever a case of a company whose reach exceeded its grasp, this would be it! Like so many others, I distinctly remember the days when I’d see those little Krispy Kreme counter-top displays at just about every gas station and grocery store in the world. Fast forward five years — and it’s been quite some time since I’ve seen one of those ultra-sugary doughnuts.

    Had the Krispy Kreme execs been more familiar with their Greek mythology, they might have chosen not to mirror the flight of Icarus so closely.

    Truth be told, though, I’m not the biggest fan of Krispy Kreme. ;) So, I’ll probably manage without them.

    Stellar post, Amy! (You should seriously turn this “Coulda, Woulda, Shoulda” post into a series. There HAS to be similar cases out there.)

    • Amy Swanson

      Thanks Joe, it was fun researching so I’ll be sure to keep my eyes peeled for some other companies :)

      Their doughnuts were everywhere, weren’t they? I think the Jewel by my house still sells them, but I know it won’t ever be the same. Oh well, time to move on LOL

  6. Jill Tooley

    Krispy Kreme doughnuts are the absolute best when they’re fresh out of the oven. That glaze just melts in your mouth, doesn’t it? Oh, how I miss the ones out by Fox Valley Mall and Geneva Commons…

    I knew they had closed a bunch of locations, but I wasn’t entirely sure why. Thanks for shedding some light on this, Amy! I’ve noticed that a lot of companies make the over-expansion mistake, even financial institutions. If you go to certain areas in Oswego, there will literally be 15 banks within a 2 or 3 mile stretch…and some are the same name! That hardly seems necessary, especially in this economy. But I suppose every company has its own prerogative.

    Great post! :)

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  8. Amy

    The only reason Dunkin Donuts is still floating is the fact that they merged with Baskin Robins. I have gotten a couple of donuts from one recently. Yea you can taste the factory made goodness. Dunkin Donuts use to make their donuts right on site. Now they are delivered in trucks to the retail shops. If you don’t believe me go to your local one in the dead of night, thats when they deliver, hence why they run out of food. Their choice in donuts is now way way less, and if they run out oh well. Their donuts now taste like they are two days old even at 10am.

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