Krispy Kreme Doughnuts, Inc.
oughnuts
Case #7
Krispy Kreme Doughnuts, Inc.
[pic]
FNCE 4620 - Financial Analysis and Policy
Dr. Gregory
Group 1
Chris Suggs
Alex Stephens
Florian Fourmanoy
Jonathan Colangione
Table of Contents
1. Executive Summary
2. Problem Statement
3. Data Analysis
4. Key Decision Criteria
5. Alternatives Analysis
6. Recommendations
7. Action and Implementation Plan
1. Executive Summary:
Krispy Kreme Doughnuts was a successful privately owned business since 1937. In 1982 a group of franchises bought back the company from Beatrice Foods for $24 million, and reintroduced the old recipe of doughnuts and their “hot doughnuts now” system. In 1998 Scott Livengood became Krispy Kreme’s new CEO and took the company public in April of 2000 with one of the biggest IPO’s in recent years. This led to a high share price and a market capitalization of nearly $500 million.
2. Problem Statement:
The problem was Krispy Kreme Doughnut’s (KKD) aggressive strategy of tripling their stores in 5 years after the company just went public in an attempt to impress investors. This is a problem because their franchises began to lose profits, and KKD adjusted their accounting practices in order to tempt investors into thinking the company was better well off.
3. Data Analysis
These issues arose from the number of new franchise openings caused by their over aggressive strategy to expand. This made new franchises open in areas that were not suitable for this type of business. KKD’s opening of new franchises quickly caused the new store managers to have little knowledge of operating their off-premises business which accounts for 40% of their total revenue. KKD shifted their focus from relying on on-premises sales where the customer could watch the doughnut be made to factory stores shipping pre-cooked doughnuts to franchises for them to reheat and sell. Off-premises sales to grocery stores, domestic retail locations,
Case #7
Krispy Kreme Doughnuts, Inc.
[pic]
FNCE 4620 - Financial Analysis and Policy
Dr. Gregory
Group 1
Chris Suggs
Alex Stephens
Florian Fourmanoy
Jonathan Colangione
Table of Contents
1. Executive Summary
2. Problem Statement
3. Data Analysis
4. Key Decision Criteria
5. Alternatives Analysis
6. Recommendations
7. Action and Implementation Plan
1. Executive Summary:
Krispy Kreme Doughnuts was a successful privately owned business since 1937. In 1982 a group of franchises bought back the company from Beatrice Foods for $24 million, and reintroduced the old recipe of doughnuts and their “hot doughnuts now” system. In 1998 Scott Livengood became Krispy Kreme’s new CEO and took the company public in April of 2000 with one of the biggest IPO’s in recent years. This led to a high share price and a market capitalization of nearly $500 million.
2. Problem Statement:
The problem was Krispy Kreme Doughnut’s (KKD) aggressive strategy of tripling their stores in 5 years after the company just went public in an attempt to impress investors. This is a problem because their franchises began to lose profits, and KKD adjusted their accounting practices in order to tempt investors into thinking the company was better well off.
3. Data Analysis
These issues arose from the number of new franchise openings caused by their over aggressive strategy to expand. This made new franchises open in areas that were not suitable for this type of business. KKD’s opening of new franchises quickly caused the new store managers to have little knowledge of operating their off-premises business which accounts for 40% of their total revenue. KKD shifted their focus from relying on on-premises sales where the customer could watch the doughnut be made to factory stores shipping pre-cooked doughnuts to franchises for them to reheat and sell. Off-premises sales to grocery stores, domestic retail locations,