Krispy Kreme Doughnuts, Inc. /ˈkrɪspi kriːm/ is a doughnut company founded on July 13, 1937. Krispy Kreme founder Vernon Rudolph bought a secret yeast-raised recipe from a New Orleans chef, rented a building in what is now historic Old Salem in Winston-Salem, NC, and began selling to local grocery stores.[2]
Products are sold in Krispy Kreme stores, grocery stores, convenience stores, gas stations, Wal-Mart, and Target stores in the United States. Internationally, doughnuts are sold in Loblaws supermarkets, Petro-Canada gas stations[citation needed], and as freestanding stores in Canada, along with BP Service Stations and BP Travel Centres and Seven Eleven stores in Australia.[3] In the United Kingdom, Tesco supermarkets, Tesco Extra, and most service stations carry Krispy Kreme products.[4] The company's growth was steady prior to its initial public offering but profits have decreased in recent quarters.
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On April 5, 2000, the corporation went public on the NASDAQ at $21 using the ticker symbol KREM.[6] On May 17, 2001, Krispy Kreme switched to the New York Stock Exchange, with the ticker symbol KKD, which is its current symbol. The stock reached what would be its all-time high of $50 on the New York Stock Exchange in August 2003, a gain of 235 percent from its IPO price. For the fiscal year ended in February 2004, the company reported sales of $665.6 million and operating profits of $94.7 million from almost 400 stores (including international locations). The market initially considered the company as having "solid fundamentals, adding stores at a rapid clip and showing steadily increasing sales and earnings." [7] Since then it had lost 75-80% of its value by 2005, amid earnings declines, as well as an SEC investigation over the company's alleged improper accounting practices.[8]
In May 2004, the company missed quarterly estimates for the first time and suffered its first loss as a public company. Chairman and CEO Scott Livengood attributed the poor results to the low-carbohydrate diet craze. This explanation was viewed with skepticism by analysts, as "blaming the Atkins diet for disappointing earnings carried a whiff of desperation",[7] and as rival donut chain Dunkin' Donuts has not suffered from the low-carb trend over the same compared period.[9]
Besides royalty payments from new stores, the parent company also enjoyed significant profits by requiring franchisees to purchase mix and doughnut-making equipment from the parent's Krispy Kreme Manufacturing and Distribution (KKM&D) division. KKM&D earned $152.7 million in 2003, which made up 31 percent of sales, with a reported operating margin of 20 percent or higher, but these mark-ups were largely at the expense of its franchisees. By comparison, rival chain Dunkin' Donuts generally avoids selling equipment or materials to its franchisees which "keeps company and franchisee interests aligned", as well as having a royalty stream based on same-store sales.[7]
Krispy Kreme has been accused of channel stuffing by franchisees, whose stores reportedly "received twice their regular shipments in the final weeks of a quarter so that headquarters could make its numbers".[7] The company was also dogged by questionable transactions and self-dealing accusations over the buybacks of franchisees, including those operated by company insiders.[9] A report released in August 2005 singled out then-CEO Scott Livengood and then-COO John W. Tate to blame for the accounting scandals although it did not find that the executives committed intentional fraud.[10]
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.
