case study
Krispy Kreme Doughnuts
In 1937, Krispy Kreme Doughnuts (KKD) was a successful privately business owned by Vernon Rudolph located at Winston-Salem, North Carolina. In 1982, a group of franchise bought back the company for $24 million, from Beatrice Food after Rudolph death in 1973. However, they start reintroduce the old recipe of doughnuts and their “Hot doughnuts now” system. In 1998 Scott Livengood became the new CEO, and by 2000 he took the company public, which led the company to high share price and market capitalization of approximately $500 million. Therefore, the investors and analysts start began asking a question on how KKD’s stocks plummeting so high so quickly?
One of the biggest factors creates the problem for KKD, because after they went public they start to follow aggressive strategy to expand. Early of 2000 they almost tripled their store with 144 stores to 500 in five years, they had 427 stores in 45 states and four foreign countries. Also they went international in 32 locations, plus many of them they were in really bad locations. I also believe that KKD when they went international, they never met those culture needs of those countries which cause shut down stores in Mexico, Canada and Australia. The second factors that KKD lost them promises of “hot doughnuts now “where the customer could watch the doughnuts be made to factory stores shipping pr-cooked doughnuts to cover the older for all those franchises, they were just reheat and sell stores.
There is one of the key ratios that I can see with KKD, when I looked at the one of the profitability ratios, like Return on asset (ROA) from (2000-2004) we can see that hesitant trend. This ratio showing how wills the company using their asset to generate profit. Moreover, if we compere Krispy Kreme ROA with Starbucks ROA (8.64% to 10.75%) we will see how will Starbucks use their own asset to generate profit. Which back to the company decided of expand too
In 1937, Krispy Kreme Doughnuts (KKD) was a successful privately business owned by Vernon Rudolph located at Winston-Salem, North Carolina. In 1982, a group of franchise bought back the company for $24 million, from Beatrice Food after Rudolph death in 1973. However, they start reintroduce the old recipe of doughnuts and their “Hot doughnuts now” system. In 1998 Scott Livengood became the new CEO, and by 2000 he took the company public, which led the company to high share price and market capitalization of approximately $500 million. Therefore, the investors and analysts start began asking a question on how KKD’s stocks plummeting so high so quickly?
One of the biggest factors creates the problem for KKD, because after they went public they start to follow aggressive strategy to expand. Early of 2000 they almost tripled their store with 144 stores to 500 in five years, they had 427 stores in 45 states and four foreign countries. Also they went international in 32 locations, plus many of them they were in really bad locations. I also believe that KKD when they went international, they never met those culture needs of those countries which cause shut down stores in Mexico, Canada and Australia. The second factors that KKD lost them promises of “hot doughnuts now “where the customer could watch the doughnuts be made to factory stores shipping pr-cooked doughnuts to cover the older for all those franchises, they were just reheat and sell stores.
There is one of the key ratios that I can see with KKD, when I looked at the one of the profitability ratios, like Return on asset (ROA) from (2000-2004) we can see that hesitant trend. This ratio showing how wills the company using their asset to generate profit. Moreover, if we compere Krispy Kreme ROA with Starbucks ROA (8.64% to 10.75%) we will see how will Starbucks use their own asset to generate profit. Which back to the company decided of expand too