Flipping thru Yahoo, found some interesting stuff.
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"I was surprised to find that the company only earns
2.7% on each dollar of revenue. Their franchisees pay royalties of 3 cents on revenues from donuts sold in-house and 1 cent on outside sales to other vendors."
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"The doughnut maker has come a long way since 1937, when founder Vernon Rudolph set up his bakery in what is now
Winston-Salem's historic district, using a secret recipe bought from a Louisiana cook. The wholesale outfit expanded into
retail by knocking a hole in the wall, creating Krispy Kreme's first take-out window. With a few franchisees, Mr. Rudolph
gradually expanded into other Southeastern states, growing to about 50 shops by the time he died in 1973. Three years later,
his family sold the company to Beatrice Foods of Chicago, which added sandwiches to the menu -- a move that rankled
longtime franchisees. The franchisees bought the company back in 1982 for about $22 million and spent much of the 1980s
paying off the debt.
Several years ago Krispy Kreme started selling franchise rights to add stores outside the Southeast. Now, there's a sugar
rush to new shops in New York and Los Angeles, where the 63-year-old formula is suddenly hip. Krispy Kreme has
mastered the art of product placement: The doughnuts were featured in segments on several television networks last week,
and have appeared on more than 80 television shows in the past few years, according to the company's prospectus.
One notable stumble: A few years ago, the company tried to increase sales during peak hours by adding smaller shops with
double drive-through windows. But the idea flopped because customers missed coming into stores where they can see the
doughnuts being made on conveyor belts, says Mr. Livengood, the CEO. The company took an $8.5 million restructuring
charge in late fiscal 1999 related to the closing of five double drive-throughs and the write-down of five other inactive double
drive-through stores and sites. "
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Peony Kao, an analyst for Renaissance Capital in Greenwich, Conn.,
which decided against investing in Krispy Kreme, says she considered the company's 14% same-store sales gain "very
decent, but I don't know if they can maintain that. ... New stores will generally have higher sales in the first three to four
years, and sales will drop off after that." |
