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Krispy Kreme Case Study

Are you ready for a Krispy Kreme Franchise?

A man named Vernon Carver Rudolph founded Krispy Kreme in 1937 with little more than a dream and doughnut recipe. Since 1937, Krispy Kreme has grown from a small-time doughnut shop into a multi-national business success with franchises around the world. Many people wonder what has made Krispy Kreme so successful, and if they have a strategy that will allow them to continue growing, and thriving, around the world. The time has come to examine the business practices of Krispy Kreme to see if they truly have the right plan for future success.

The entrepreneurial characteristics that the Krispy Kreme franchisees display are crucial to the continued success of Krispy Kreme. Krispy Kreme franchise owners are entrepreneurs in their own way, and each has the desire to succeed by running their own business. These owners are willing to take the risks required to achieve success.  They also have the self-confidence needed to know that they have a better chance for financial success if they are personally responsible. Krispy Kreme franchise owners need to have a high energy level in order to put in the time required to begin a successful business, and they need an optimistic outlook on their chances for future success. Krispy Kreme franchise owners are also encouraged to be creative.  In fact, one owner in Tennessee is responsible for the “Hot Doughnuts Now” sign that is displayed in many of the Krispy Kreme shop windows. (Boone & Kurtz, 216 & 379)

Because of the very nature of their product, a hot, freshly glazed doughnut, Krispy Kreme should not rely on e-commerce in their plan for future success. However, there are still ways that Krispy Kreme can utilize the Internet. The Internet is a very successful tool when it is used to get the word out there, and Krispy Kreme should continue to showcase their involvement in the betterment of a community, and any successes they achieve. The Internet spreads the word, and that should be used to their advantage. Krispy Kreme should also continue to expand their line of collectibles. These collectibles, ranging from hats to T-shirts to toys, are available through the company website. Krispy Kreme should continue to diversify these products in order to offer something that appeals to every taste. If successful, these collectibles could create a successful e-commerce venture.

The Krispy Kreme production system is one of the key elements to their success, and the “doughnut theatre” enhances the doughnut buying experience for every customer who walks through the door.  Room length windows overlook the doughnut making equipment, and doughnut lovers can watch from start to finish, as their favorite treats are prepared.  The “Hot Doughnuts Now” sign has become famous, and some say that biting into a Hot, fresh Krispy Kreme doughnut is a joyful experience every time. (Deck) This unique production process makes the customer feel like they are part of the process and has helped Krispy Kreme develop a special relationship with their customers. Krispy Kreme doughnut making theatres provide benefits for everyone involved. Customers enjoy a unique, and quite tasty experience, while Krispy Kreme enjoys the benefits of a satisfied, and loyal customer base. (Deck)

In these days of widespread technology, the decision-support system in place at Krispy Kreme is very important to the company’s continued success. A decision-support system is “one specifically designed to allow business end users to perform computer-generated analyses of data on their own.” ( At Krispy Kreme, approved managers have access to the company’s intranet where they can order supplies, obtain their own daily sales status to evaluate their position, and look at an overview of the company’s business operations. (Boone & Kurtz) The benefits to this type of empowerment are many, but one of the most important benefits is the ability to make crucial decisions when they are needed. Without this decision-support system, managers would not be able to communicate as effectively, and development in different areas would suffer. (; Boone & Kurtz, p 541)

We need to consider both tangible and intangible assets when we look at Krispy Kreme’s plan for future success. Just for clarification, a tangible asset is something that can be seen, touched, and in this case tasted, while an intangible asset is one that cannot be seen, nor touched, and it certainly cannot be tasted. I think you will agree with me when I say that the most tangible resource Krispy Kreme has is the doughnut they are famous for. Hot, gooey puffs of heaven that melt in your mouth are an experience that a customer will not soon forget. Intangible assets are a little harder to define, but I think I would have to choose the entrepreneurial characteristics of Krispy Kreme franchise owners as their most intangible asset. These men and women, who create the Krispy Kreme success story with their own hard work and dedication, are wonderful examples of the entrepreneurial spirit, and many would do well to follow their lead in growing a successful business.

Recently, there has been some question concerning the continued success of Krispy Kreme as a multi-national corporation. People are wondering if Krispy Kreme can continue to grow as a company in the face of these obstacles. In May of 2004, Krispy Kreme “slashed its profit forecast for the year by 10 percent, blaming the popularity of low-carbohydrate diets.” (Groom) The SEC (U.S. Securities and Exchange Commission) is currently investigating Krispy Kreme’s repurchase of franchises, and their lowered earnings outlook. The repurchase of these franchises has cost Krispy Kreme millions of dollars (Groom,) while the stock value has plunged to $13.35 per share. (Yahoo Finance) According to David Rocker in the article “Krispy Kreme Reveals SEC Probe” by Nichola Groom, “Krispy Kreme has strained its balance sheet in recent years by buying back franchises.”  In the same article, Rocker adds, “I would imagine that the SEC's concern relates to evaluating the appropriateness of acquisition accounting adjustments, which could have contributed to an overstatement of prior or future earnings.” (Groom; Yahoo Finance)

Considering these recent revelations, I would be concerned about the future success of Krispy Kreme, and I believe I would hold off until after the investigation before investing my money with them.  The recent scandals involving fraud, deceit, and illegal accounting practices in many large businesses make an investor wary, and it would be wise to wait until the end of the investigation before investing funds in a company that may have defrauded their way to success. If it turns out the company is on the up-and-up, there will still be time to invest, and if the company turns out to be a fraud, you might have saved yourself a lot of money.


Boone & Kurtz Krispy Kreme: Continuing Case Study Contemporary Business pub: Thomson; South-Western 2005. P.216, 379 & 541

Deck, Stewart A Krispy Kreme Doughnut is like no other donut in the world

Groom, Nichola Krispy Kreme Reveals SEC Probe Reuters

Yahoo Finance