Miscellaneous

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

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.

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 a part 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

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!