45368

8/3/2019 45368

1/7

Browse Essays Search Essays...

Full version Krispy Kreme Donuts

Krispy Kreme Donuts

This print version free essay Krispy Kreme Donuts.

Category: Business

Autor: reviewessays 02 March 2011Words: 3979 | Pages: 16

A. INTRODUCTION:On a hot July day in 1937, Vernon and two of his friends came to Winston-Salem, North Carolina, with $25. They rentethem ingredients to make their first doughnuts. Vernon promised to reimburse the generous grocer. Making the doughnulong hours in the sticky south without the luxury of air conditioning. Temperatures were also increased by the doughnutdifficulty, the first doughnuts were finally ready to go. However, the three realized that all they had to make deliveries ivan by removing the back seat and installing a rack.After the first day of doughnut making, people passing on the street would enter the doughnut shop, lured in by the smelKrispy Kreme doughnuts. Up to this point, the business had run on wholesale. Vernon decided to sell doughnuts by cuttibecame a wholesale and retail business, as it is today.By 1960, Krispy Kreme was recognized by the green roof and Marching Ks symbol. The addition of a cofcooking process. In 1973, Rudolph died suddenly and the company became a wholly owned subsidiary of Beatrice Foodproducts were used to make the donuts and performance was increased. Attention to detail and quality consequently decJoseph A. McAleer Sr., purchased Krispy Kreme and Krispy Kreme became an independent company once again. The fways of great doughnuts and coffee.B. SUMMARY OF THE BUSINESS AND CASE:Krispy Kreme Doughnuts operates through three segments: Company stores operations, Franchise operations, Krispy Kcurrently owns several large manufacturing and distributions factories that serve both franchised and company-owned stthe product mixes and machinery necessary make Krispy Kremes signature doughnuts and coffee. However, the unquestions about corporate management and accounting practices.Since May 2004, Krispy Kreme has closed a number of US franchises in order to minimize relative decreases in revenurecent acquisition, the Montana Mills Bread Company, purchased in fiscal 2003. Krispy Kreme intends to close a $4.6to overstock and declining revenues. Management has announced that it plans to shift the companys focus from topline growth through reduced expenses. This decision will prove extremely beneficial to the company because it will foc

helping them achieve optimal performance.C. INTERNAL ANALYSIS:MARKETING:Krispy Kremes marketing strategy is difficult to replicate. Not only is the companys proprietary recipe impossiexperimental nature towards various doughnut flavors, which requires creativity. Even after imitating these flavors, comKrispy Kremes strong reputation results from years of history that no competitor can quickly acquire. Dunkin Donubreakfast break every morning, but they have yet to acquire a reputation for selling The best doughnuts They do an excellent job publicizing new store openings etc. Napsteriazing their product (giving people samples as thefrom the book. KK has done a good job limiting the number of locations that they open. If they want to maintain the mygood thing. If they are on every fifth corner like their competitors, they will become a commodity easily unseated by a coutlets but make them spectacular experiences.

LoginPlease enter your username and password

Username:

Password:

Forgot your password? Login

Page 1 of 7Krispy Kreme Donuts - Business

10/8/2011http://www.reviewessays.com/print/Krispy-Kreme-Donuts/45368.html

8/3/2019 45368

2/7

MANUFACTURING AND DISTRIBUTION:Krispy Kreme owns and franchises its doughnut stores where the Company makes and sells over 20 varieties of doughnits traditional stores is a doughnut factory with the capacity to produce from 4,000 dozen to over 10,000 dozen doughnuand off-premises sales. The Company has two complementary business units: its company and franchised stores, whichOperations and Krispy Kreme Manufacturing and Distribution (KKM&D). At February 1, 2004, there were 357 Krispylocated in the United States. During the fiscal year ended February 1, 2004 (fiscal 2003), it acquired the remaining 33%already own.FINANCE:

The net profit margin at Krispy Kreme grew from below 10 to nearly 20 per cent between 2000 and 2003. Revenues grefranchise expansion, increasing volume, deployment of more space-effective equipment, and a growing number of two-iincreasing margins were due in large part to significant operating power. In 2001, operating expenses accounted for 83.The company was operating efficiently through 2003, with a persistently high 8.5% net profit margin, compared to the 5competitor; however, recent quarterly data makes the companys operating leverage all too evident.While the asset turnover ratios of Krispy Kreme and competitor Starbucks Coffee were equal in 2002, Krispy Kreme shwhile Starbucks remained steady. The companys declining ratio was caused in part by corporate policies that lead tKrispy Kreme turns over its inventory quickly, averaging only 20 days of inventory on hand. This is efficient because inprocess to the Krispy Kreme customer, reducing storage and spoilage costs. Krispy Kreme generally turns over its receipast three years. This is probably an unconventional behavior of the companys franchise system because such a fasCoffees turnover lies between 40 and 50 days. The recent decline in receivables turnover at Krispy Kreme may bedeadlines in an attempt to boost lagging sales.The accounts payable turnover for Krispy Kreme is high relative to competitor Starbucks Coffee but has been stable ove

two weeks, which helps Krispy Kreme maintain positive relationships with suppliers.SERVICE:All 150 Krispy Kreme stores make their doughnuts out in the open, where you can watch. An orderly parade of doughnhalfway through the cooking process. Then a conveyor whisks the doughnuts out of the hot shortening and into a glistendoughnuts. But what goes on at the store level is part of the mystery and the sleight of hand of Krispy Kreme becauKreme doughnut, what happens in each store is only the finale of a carefully choreographed process that is completely cThe doughnuts may be kneaded, fried, and filled in a store in Charleston, West Virginia, or Omaha, Nebraska, or Dothaand raspberry filling comes by truck from Ivy Avenue. Even the stainless-steel equipment used to turn the ingredients inconveyors, the proofing boxes are all handcrafted in the facility's metal shop.As a company, Krispy Kreme has one overriding goal: consistency. It wants a doughnut purchased in Scranton, PennsylVegas. Moreover, it wants a doughnut eaten on July 13, 1999 to taste exactly like a doughnut eaten on July 13, 1959. Hseems. It requires vigilance. It even requires change.Ivy Avenue is so obsessed with consistency that before each batch of wheat flour is allowed into the building, a sample i

does not depend on lab instruments alone. Adjacent to the lab is a full-scale doughnut-making kitchen. Here, all day lonlab technicians who also happen to be sisters -- make doughnuts. They make doughnuts from every single 2,500-poundblended correctly. "That keeps surprises out of the field," says Kathy Duncan, 25, who supervises the analytical lab andper month.Consistency requires patience as well: Krispy Kreme doughnuts do not taste quite right if the mix is used immediately.size of a Home Depot. In it is everything necessary to run a Krispy Kreme doughnut shop - from coffee stirrers and pricMostly, though, the warehouse contains doughnut mix that is seasoning in brown 50-pound sacks. There are nine aislesEach shelf contains two pallets, and each pallet contains 60 bags. It takes a lot of mix to make 11,000 dozen doughnutsD. EXTERNAL ANALYSIS:EXTERNAL FORCES The Atkins Diet Revolution:Since going public six years ago, Krispy Kreme has been a standout on Wall Street, where its stock price climbed in locFriday, when shares plunged nearly 30 percent after Krispy Kreme warned that profits were expected to fall 10 percent ilow-carb diets like Atkins and South Beach for driving down sales of its deep-fried, high-carb treats. With around 240 c

far one of the unhealthiest treats you can eat. As a result, the once-sweet Krispy Kreme is going sour in the mouths of thCOMPETITION - Dunkin Donuts:While Krispy Kreme's company literature cites Dunkin' Donuts, among Starbucks and New World Coffee, as its competParker says competition varies depending on the time of day. "Half of our business is done in the AM and the next half ianyone in the breakfast business. In the evening, we are seen more as a tasty dessert."According to Dunkin Donuts, it has no direct competition and turns to McDonald's as its closest indirect competition. WKrispy Kreme, Dunkin Donuts brand manager says, "We welcome the presence of Krispy Kreme as it will raise awarenHowever, Dunkin' Donuts may want to brew another cup of coffee to stay alert. Krispy Kreme appears to have somethinStreet-level buzz, celebrity buzz, in-store buzz. Buzz that makes people exclaim excitedly when the name is mentionedthe uninitiated as contrived retro-cool, but in fact, it is the original brand image, unchanged since 1937. The business itschanges over the last 64 years.


Username:

Password:




8/3/2019 45368

3/7

Although Krispy Kreme has a formidable opponent against which to measure its progress, it can also benefit from Dunkother cultures to the charms of the doughnut, Dunkin' Donut has laid the groundwork upon which Krispy Kreme can exregional tastes and local ingredients to achieve such local favorites as the fig doughnut in the Middle East, ube and kiwidoughnut in Latin America. Additionally, Krispy Kreme's current expansion into coffee roasting will allow it to attract sHowever, Krispy Kreme has active consumer devotion matched with a sturdy framework of quality control and internalcompany insists on weeks of rigorous training for managers and regularly monitors franchisees to ensure the brand is delayout. As long as the world does not plunge into a sudden fitness streak, it seems likely that there will always be roomTECHNOLOGY - mykrispykreme.com:

The concept of the portal has been around almost as long as the Web itself, with Yahoo! serving as the oft-cited archetyas the growth of the enterprise portal market has demonstrated. Despite the overall slowdown in software sales, this catehas mushroomed as well. Big-name companies such as BEA Systems, IBM, Oracle, PeopleSoft, and SAP are competinIn 2001, Krispy Kreme launched its own enterprise portal framework based on technology from Corechange (now owneeverybody to communicate to and fro in as homogenous a fashion as possible," says Frank Hood, the company's chief inKrispy Kreme also needed a way to modernize operations as it went public and expanded. With myKrispyKreme.com, acritical applications available to its franchises. One of the most useful is the Web-based order management system, basewas to take the basic ordering functions and business rules that Krispy Kreme had developed over the years and put theowners could easily use.The portal's lofty goal is to ensure franchisees, employees, and suppliers feel they are valued members of the Krispy Krmanagers to key suppliers, tap into myKrispyKreme.com. They retrieve email, order supplies, check financials, track stpractices. Moreover, they can customize the portal to include links to certain Web sites and have a single sign-on for theThe thinking goes that people will find better ways to use the technology in business simply by using it more in their dai

about wrapping people's everyday lives and transactions into the portal. For Krispy Kreme, making that utopian dream aGLOBALIZATION - over expansion:While Krispy Kreme continues its seemingly slow migration across the US (Boston only recently saw its first location),has stores in Australia, the UK and Canada, and recently opened a store in Mexico City (the company plans to open 20 slocalized its Web site for the new markets.In its quest for growth, Krispy Kreme also squandered some of its mystique. They were not just in sheer numbers of resgoing to grocery stores, gas stations, kiosks. Anywhere that consumers could be found, you could find a Krispy Kreme.In what amounted to an act of deviation to Krispy Kreme devotees, the company also added smaller "satellite" stores thstyle franchises where customers could watch as the pastries were showered in glaze "doughnut-making theater," thdoughnuts that had been made elsewhere. Other products were added to the menu, too, including a line of high-carb, higpeople dubbed them.By putting their prepackaged donuts in supermarkets, airports, and convenience stores, they have really hurt their brand.Anyone who has been to a KK store knows the magic is in the hot donut. However, when they are prepackaged and left

and that definitely hurts their brand. The DAMN these are good donuts response turns to Umm, I remembeE. SWOT ANALYSIS:STRENGTHS:o Product cost the cost is 85 cents per doughnut.o Long-standing company ethics the company has a strong internal brand loyalty, which has been built through a seo Strong customer base this active customer base has been built by good taste, consistency, good price, and good seo Creating Buzz - They manipulate supply and demand, and thereby create a buzz. When they enter a new market, theyplenty of free samples, they build the anticipation, and then, months later, a single store finally opens up.o Doughnut making theatres This is a unique concept. Half the fun is watching the doughnuts being made and goingo Strong community relationships this strong sense of community has been enforced by the mykrispykreme.com pointeract with each other and build a strong sense of belonging to the Krispy Kreme family.o One-of-a-kind taste the product is liked universally. It does not skew to any demographic changes.o Packaging the flat box works to keep the hot glazed doughnuts from sticking together.

WEAKNESSES:o Limited menu items - they have a very limited menu of items as compared to Dunkin Donuts and Starbucks, which hao High Calories this product has about 240 calories in each product and since the market is now becoming increasino Packaging - it is the most unruly, difficult to handle, balance, carry package possible.o Store design - The design of the stores is the greatest weakness of the brand experience. There is nothing special aboua neon sign in the front window that they light up when they are making doughnuts. It's a communication tool not a branOPPORTUNITIES:o Expansion into premium coffee lines - Krispy Kreme's current expansion into coffee roasting will allow it to attract soo Diversification of product offerings - To keep customers interested, Krispy Kreme plans to introduce new products, indoughnut rings, and a new line of frozen drinks.o Expansion into a more global marketplace they should try to penetrate the Asian market like their competitors Du


Username:

Password:




8/3/2019 45368

4/7

o Web based sales of Krispy Kreme merchandise this strategy could create even more sales since customers wouldbecause they are just a click away.THREATS:- Stiff competition from several similar companies - Competition from the more ubiquitous Dunkin' Donuts may also beadvertises the quality of its coffee in its advertising, sells a more diverse line of breakfast foods than Krispy Kreme doesaddition to its own doughnuts.- Substitute products - The threat of substitute products is high in the industry because many convenient choices are invtaste that is second to none, new consumer tastes leaning toward other products can pose a threat to Krispy Kre- Atkins, South Beach, and other Health fads - Obesity has reached epidemic levels in the world, and almost two-thirdsAtkins and related low carbohydrate, high protein diets have rocked restaurant operations throughout the world. PeUnited States, where recent reports suggest one in four Americans trying the diet, and more than 10 percent adhering toincreasing. In turn, that increased demand, has had a twofold affect on the franchise community. Thus, Krispy Kreme nin its menu.F. RECOMMENDATIONS:Firstly, Krispy Kreme needs to diversify their products. Once you have had that doughnut, you have had the Krispy Kreexperience becomes even more diluted with the volume of doughnuts being mass-produced and shipped out cold to allfrom any other doughnut on the shelf. To keep their businesses vibrant, Dunkin' Donuts and Starbucks have diversifieddestinations. Their emphasis on coffee gives Dunkin' Donuts and Starbucks locations much higher customer return ratesThey should try to reduce the amount of Krispy Kreme Stores opening in a particular city. The reason scarcity. If thcertain degree of scarcity is a good thing. If they are on every fifth corner like their competitors, they will become a comdriven product. Build only a few outlets but make them spectacular experiences.

They should change the packaging of their doughnuts. Even though the flat box keeps the doughnuts from sticking ontocarry. Thus, they should make them easier to handle and very colorful and eye-catchingThey should try to change the design of the stores. Even though their doughnuts are special, they are sold in the same olorder to create that KK experience they need to redesign their buildings into something more colorful and eye-catchinghence, more experience.These recommendations would certainly be a huge cost to Krispy Kreme but if Krispy Kreme wants to continue to buildneed to innovate and craft a huge experience to prepare them selves to face the market challenge they will be facing in tthe American culture. If not they will become a commodity and be forced to play the advertising and promotion game liglobally but if the brand wanes in its American home it will more rapidly wane overseas as well. If it thrives, it will thriG. EPILOGUE:In a little more than eight years, Krispy Kreme went from being a small, regional chain from Winston-Salem, N.C., to afewer than 100 to more than 430. The company also now sells its doughnuts in roughly 20,000 outside locations ranginSeduced by its early success, the company started to grow simply for growth's sake. With such widespread growth and d

it lost much of the buzz that surrounded it when it first started to expand. No more long lines at its late-night drive-throuUndaunted, Krispy Kreme has maintained that its best years lie ahead. If the company delivers the healthy growth in salindeed merit a high-calorie P/E. In the event, it misses a beat or two -- abracadabra! Krispy Kreme will become just anofootnote in a notoriously unforgiving market.


Username:

Password:




8/3/2019 45368

5/7


Username:

Password:




8/3/2019 45368

6/7


Username:

Password:




8/3/2019 45368

7/7


Username:

Password:



45368

Documents