Krispy Kreme!
|
|
Krispy Kreme Overview
While Krispy Kreme serves up a variety of doughnuts, it is most famous for its traditional glazed doughnut, a very heavy four feet of glaze, aromatic doughnut covered in glaze and often served warm. They have a neon sign that, when lit, tells the customers that hot, fresh doughnuts are coming off the line at that moment, and the customer will get a free original glazed sample doughnut as they wait in line. Select varieties are also carried in many grocery stores, convenience stores, and gas stations. Krispy Kreme doughnuts can also be found in some larger Wal-Mart and Target stores in the United States, Wal-Mart, Loblaws supermarkets, and Petro-Canada gas stations in Canada and Tesco Extra hypermarkets in the United Kingdom. Although growth of the chain was steady before the company went public, profits have decreased substantially due to over-expansion, bad loans, and increased costs in upper management. Because of over-expansion many Krispy Kreme locations have now shut down due to un-profitability, including most of its outlets in Canada. Though Krispy Kreme has blamed the low-carb craze that is only reasonable compared to krispy kreme others more critical point to their relatively high prices for a product that consists mostly of air.Most stores are constructed with a long window between the customer area and the kitchen allowing the patrons to watch the operation of the doughnut making machines, which automatically produce rings of dough, yeast raise, bake, deep-fry, flip, and glaze the doughnuts. These stores have neon "HOT" signs to indicate when fresh hot doughnuts are available. Some smaller locations, however, bring in their doughnuts by truck from other locations rather than producing them on-site. Krispy Kreme's competitors include Dunkin' Donuts, Winchell's Donuts, Southern Maid, The Whole Donut, and in Canada, Tim Hortons, Coffee Time, Country Style Donuts and Robin's Donuts.
Krispy Kreme History
Krispy Kreme delivery van, circa 1939The founder, Vernon Rudolph, worked for his uncle, Ishmael Armstrong, who purchased a secret recipe for yeast-raised doughnuts and a shop on Broad Street in Paducah, KY from Joseph LeBeouf of Lake Charles, LA (although company mythology tells a story whereby Rudolph won the recipe from a New Orleans baker in a Poker game in Paducah). Rudolph began selling the yeast doughnuts in Paducah and delivered them on his bicycle. The operation was moved to Nashville, TN and other family members joined to meet the customer demand. Rudolph sold his interest in the Nashville store and in 1937 opened a doughnut shop in Winston-Salem, NC and began selling directly to customers. The first Krispy Kreme store was located in a rented building on South Main Street in Winston-Salem in what is now called historic Old Salem.By the 1960s, Krispy Kreme was well-known throughout the southeastern United States, and it began to expand into other areas of the country.
In 1976, Krispy Kreme Doughnut Corporation became a wholly owned subsidiary of Beatrice Foods Company of Chicago, Illinois. The headquarters for Krispy Kreme remained in Winston-Salem.
A group of franchisees purchased back the corporation from Beatrice Foods in 1982.
In 2003, a pilot project in Mountain View, California to sell doughnuts through car windows and sunroofs at a busy intersection (with wireless payment) failed.
On June 3, 2005, National Doughnut Day in the US, participating franchises gave away free doughnuts. One free doughnut was given to each customer in recognition of the often-ignored holiday.
Krispy Kreme Growth
Krispy Kreme doughnuts being made at a restaurant in Sydney, Australia Krispy Kreme began another phase of rapid expansion in the 1990s, opening stores outside the southeast United States where most of their stores were located. Then, in December 2001, Krispy Kreme opened its first store outside the U.S. in Mississauga, Ontario, Canada, just outside Toronto. As of 2005, Krispy Kreme has further expanded its international doughnut sales throughout Canada and to locations in Mexico (28), the United Kingdom (28), Australia (19), Hong Kong (2), Indonesia (3), Philippines (2)and South Korea (10).Krispy Kreme Doughnuts have recently announced that development rights have been awarded to Kuwait, the United Arab Emirates and Egypt.
On April 5, 2000, the corporation went public on the NASDAQ using the ticker symbol KREM. On May 17, 2001, Krispy Kreme switched to the New York Stock Exchange, with the ticker symbol KKD, which is its current symbol.
On January 18, 2005, Krispy Kreme announced Stephen Cooper, chairman of financial consulting group Kroll Zolfo Cooper LLC, as interim CEO. Cooper replaces Scott Livengood, who the company said has retired as chairman, president, CEO and a director. The company also named Steven Panagos, a managing director of Kroll Zolfo, as president and COO.
Krispy Kreme first opened in Australia in 2003 at Penrith, Sydney ('coincidently' Australia's fattest suburb). Before opening they gave away 300,000 free donuts for publicity.
Krispy Kreme Melbourne, Australia opened on 22 June 2006 at 6.30 am in the suburb of Narre Warren at Fountain Gate Shopping Centre, and features a 24-hour drive-through service. Though most store-locations outside of Australia usually operate with a long schedule including both early mornings and late nights, the twenty-four hour operating model is unique to Sydney and Melbourne. The store is currently hugely popular amongst Melburnians, some of whom queued for several hours during the store's first few weeks running. The drive-through queue during this period was often over 500 metres long and has been controlled by hired security guards and Narre Warren police, who directed traffic and calmed customers. When the store first opened, people had waited for 3 days creating a drive thru line over 2 kilometres long. The drive through line did not stop until about three weeks after the opening and the internal store was constantly forced to remove people from the building after closing hours.
Krispy Kreme opened its second Melbourne store in the central business district of Melbourne on Collins Street. The store opened on September 26, 2006. Unlike the Fountain Gate store, doughnuts are not produced on site, but rather delivered many times during the day from both Fountain Gate and Dandenong. The Fountain Gate store is the only manufacturing (or factory) location in Victoria. A third store opened at the Chadstone Shopping Centre, on the 2nd November 2006.
Krispy Kreme Problems in Canada
On April 15, 2005, KremeKo, the company responsible for bringing Krispy Kreme to Canada, filed for bankruptcy. Seven weeks later, after closing more stores and being charged with violating the Occupational Health and Safety Act, its assets went up for sale. Two stores in Toronto (on Yonge Street in Richmond Hill, and near the Scarborough Town Centre in Scarborough) closed. KremeKo is attempting to re-structure to remain in business in Canada. Besides the Mississauga, Ontario store, Krispy Kreme still has stores in Delta, British Columbia; Montreal, Quebec (2 locations); Laval, Quebec; Quebec City, Quebec and Calgary, Alberta. All seven Canadian stores are now controlled directly from the United States.Krispy Kreme doughnuts are still available in Walmart, select Petro-Canada and Loblaws location in Canada.
In regions without a nearby Krispy Kreme store, prepackaged doughnuts are available from time-to-time at local grocery stores or gas station, usually coming from stores in the US.
Krispy Kreme Problems in New York
Dynamic Doughnuts out of Buffalo, who operates all New York State locations outside of New York City has, within the past year, closed many of its owned locations. These include: East Meadow, Albany, Amherst, Gates, and Middletown. For now, the locations in Syracuse, Henrietta, and Cheektowaga are still open, as well as the locations in New York City.Krispy Kreme Further Problems in Arizona and New Mexico
On August 11, 2006, all 11 Krispy Kreme stores in Arizona and New Mexico closed without warning when the Rigel Corporation, the franchisee responsible for all Krispy Kreme stores in the two states filed for chapter 11 bankruptcy. There was little statement from Rigel's corporate offices regarding the closures and no word was given regarding a possible reopening of the stores. The closing was further controversial due to the fact that store owners did not provide any warning of the closing, with an undisclosed number of employees being notified the day before, and some claiming to have not known until they came to work only to find the location closed. The total number of employees is not known, but a local report indicated 55 employees alone were without work in Tucson, Arizona.Krispy Kreme has indicated they are working to repoen the stores, but it is not known when or if they will be reopened.
Krispy Kreme Great Circle Lawsuit
In January of 2006, Krispy Kreme terminated the franchise license of Great Circle Family Foods LLC, alleging non-payment of required fees. At the time, they were one of the largest franchisees, operating 28 stores in Southern California. Preceding this action was a financial dispute by Great Circle, culminating in their September lawsuit filed against Krispy Kreme. The lawsuit was settled in July of 2006 and led to the reinstatement of Great Circle's license.Krispy Kreme International Operations
Besides stores in the United States, Canada and the United Kingdom, Krispy Kreme operates stores in Mexico, South Korea, Australia, Indonesia, Hong Kong, and as of November 2006 the Philippines.Krispy Kreme Australia
In Australia Krispy Kreme has found much success with 12 stores in New South Wales, three stores in Victoria, and one in the A.C.T.Krispy Kreme controversies
Krispy Kreme has been criticized for their accounting methods. Livengood, and former CFO and COO Jeremy Wearn, as well as current CFO Michael Phalen, and former CFO Randy Casstevens, are currently embroiled in U.S. Securities and Exchange Commission and class action lawsuits about misreporting profits and failing to issue a profit warning as soon as they knew they would fall short of predictions. In addition, the corporation is accused of manipulating earnings through a practice known as "channel stuffing" delivering more doughnuts to suppliers than ordered at the end of a reporting period, while still booking the increased revenue, then taking the unsold doughnuts back at the beginning of the next reporting period. The company initially blamed the low-carbohydrate craze to explain the loss in earnings. (Mad money host James Cramer, not a fan of the stock, has poked fun at the "channel stuffing" practice on his shows by asking if anyone has discovered "the warehouse full of Krispy Kreme doughnuts that the company took back".)In July 2005, Krispy Kreme announced the appointment of a new Chief Accounting Officer, Mr. D. Muir, to be paid a salary of US$300,000 per year. He is to assume the accounting responsibilities of Michael Phalen, currently focused on issues related to the many class action suits and the SEC and DOJ investigations.
Each Krispy Kreme original glazed doughnut has 4 grams of trans fat. Some have more, up to 7 grams (Apple fritters).
