Krispy Kreme expanded across the country at a rapid pace following its public offering,
and the losses from overexpansion outweighed the benefits. Stores were closed in many
markets during the company’s stock decline, including Canada, New York, Chicago, and
the Southwest. Multiple lawsuits have been filed against the company, some even by the
Securities & Exchange Commission, for misreporting profits and “channel stuffing”
(delivering more doughnuts to suppliers than ordered at the end of a reporting period,
while still booking the increased revenue, then taking the unsold doughnuts back at the
beginning of the next reporting period).
In 2003, 31% of Krispy Kreme’s total company sales came from its Supply Chain
division, which sells the required mix and doughnut-making equipment. KK Supply
Chain can have operating margins of 20 percent or greater, which are exceptionally high
for their field1. Conversely, competitor Dunkin' Donuts doesn't sell its own equipment to
its franchisees. They instead have a strong royalty stream based solely on store sales,
keeping company and franchisee interests aligned. KK Supply Chain should consider
Krispy Kreme expanded across the country at a rapid pace following its public offering,
and the losses from overexpansion outweighed the benefits. Stores were closed in many
markets during the company’s stock decline, including Canada, New York, Chicago, and
the Southwest. Multiple lawsuits have been filed against the company, some even by the
Securities & Exchange Commission, for misreporting profits and “channel stuffing”
(delivering more doughnuts to suppliers than ordered at the end of a reporting period,
while still booking the increased revenue, then taking the unsold doughnuts back at the
beginning of the next reporting period).
In 2003, 31% of Krispy Kreme’s total company sales came from its Supply Chain
division, which sells the required mix and doughnut-making equipment. KK Supply
Chain can have operating margins of 20 percent or greater, which are exceptionally high
for their field1. Conversely, competitor Dunkin' Donuts doesn't sell its own equipment to
its franchisees. They instead have a strong royalty stream based solely on store sales,
keeping company and franchisee interests aligned. KK Supply Chain should consider
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