krispy kreme equity report final
TRANSCRIPT
Krispy Kreme DoughnutsEquity Report
Jordan Knauer, Gavin Hession, Kian Maghsoodnia,
Tyler Paratte, Chris Chequer
Despite Americans’ concerns with health and obesity, doughnut store revenues are still projected to increase due to expanded product offerings. In the United States, 2 in 3 adults are considered overweight and 1 in 3 adults are considered to be obese. Per capita consumption of sugar is expected to grow slowly at an annualized rate of 1.1%. Doughnut stores are expected to offer more health conscious choices such as low fat doughnuts and fruit. Within Krispy Kreme stores approximately 55% of retail transactions include one or more dozens of doughnuts. As companies, expand menus, they will now directly compete with other quick serve breakfast restaurants like McDonald’s. Krispy Kreme will combat these other industry giants by offering more in-between meals allowing consumers to not only be limited to breakfast foods
Krispy Kreme aims to increase visitation by owning valuable locations in highly populated areas to increase foot traffic and ease of access for customers. Krispy Kreme plans to become more predominate in markets they are already represented in by increasing franchise partners and growing out company owned markets. This will allow Krispy Kreme to take advantage of supply chain efficiencies and strengthen brand awareness. Krispy Kreme plans to increase market footprint into unpenetrated markets. Third Krispy Kreme looks to enter uncharted markets where they have little or no market presence. Today Krispy Kreme has 1,100 shops in over 26 countries stating, “Our goal is to achieve annual double-digit percentage growth in our systemwide unit count over the next several years.”
Sugar Consumption by Country
Headquartered in Winston-Salem, North Carolina, Krispy Kreme first began serving customers in 1937. Its hallmark product, the “Hot Light Doughnut” is its biggest money maker and accounts for more than 85% of its total revenues. KKD has captured a unique product and prides itself on providing a one-of-a-kind customer experience.
KKD is a franchise based company with over 1,100 stores in over 26 countries. KKD is well known for its consistency in each of its franchises and for providing excellent customer service.
KKD’s unique product supplemented by its excellent customer service is what keeps customers coming back again and again. Making itself a destination chain keeps fixed costs down and its superior product has driven consistent revenue growth in the last few years.
With the old-fashioned diner atmosphere and a theatre to view the doughnut making process Krispy Kreme makes itself an exciting destination for customers. Signals telling the consumer when hot, fresh doughnuts come out of the oven simply add customer value. Comparably, other competitors like Starbucks and Dunkin’ Donuts don’t provide such a quality experience.
Domestic 28%
Inter-national
72%
# of Stores
Domestic ; 89%International; 11%
% of Revenue
Industry Overview & Competitive Positioning
Industry Overview & Competitive Positioning
Business DescriptionBusiness Description
Due to increased consumer confidence and spending and decreased unemployment the demand in the donut industry has increased with projected revenues of 14 billion. With increased consumer spending, people are more likely to buy small luxuries and treat themselves to a quick snack while being busy during the work week. The estimated 14 billion in projected revenues is a 3.5% increase from 2015 in an industry, dominated by a few large chains including, Dunkin Brands with 61.1% of market share, Tim Hortons with 5.6%, Krispy Kreme with 4.9%, and other smaller players. Independent doughnut stores have lost market share from aggressive corporate expansion of major franchises allowing the he number of donut stores are predicted to expand by 2.6% per year from 2016 to 2021. Corporate Expansion has been fueled by expanding menu options, maximizing brand awareness, leveraging new technologies, and accelerating global growth.
Doughnut stores have been able to continue growth by diversifying and expanding their beverage menu in order to generate revenue different ways.
KKD is overvalued because the announcement of the merger agreement with JAB at $21 per share created an arbitrage opportunity which led to significant stock price appreciation. After DCF analysis of KKD, our target price is $18.43, which is 12.26% below the acquisition price. The current price for KKD stock is $21.41. Given this, KKD stock is a HOLD as shareholders should remain confident that the merger with JAB will proceed as planned. Although KKD has high levels of brand recognition and customer satisfaction, the company faces high competition from Dunkin’ Doughnuts and Tim Hortons which will be difficult to overcome amidst falling doughnut revenues as the company transitions its product mix toward coffee and non-doughnut snacks. Krispy Kreme’s aggressive expansion plans to open 133 domestic franchise shops and 437 international franchise shops through FY 2026 will drive future revenues if its plans are successful.
Despite Americans’ concerns with health and obesity, doughnut store revenues are still projected to increase due to expanded product offerings. In the United States, 2 in 3 adults are considered overweight and 1 in 3 adults are considered to be obese. Per capita consumption of sugar is expected to grow slowly at an annualized rate of 1.1%. Doughnut stores are expected to offer more health conscious choices such as low fat doughnuts and fruit. Within Krispy Kreme stores approximately 55% of retail transactions include one or more dozens of doughnuts. As companies, expand menus, they will now directly compete with other quick serve breakfast restaurants like McDonald’s. Krispy Kreme will combat these other industry giants by offering more in-between meals allowing consumers to not only be limited to breakfast foods
Krispy Kreme aims to increase visitation by owning valuable locations in highly populated areas to increase foot traffic and ease of access for customers. Krispy Kreme plans to become more predominate in markets they are already represented in by increasing franchise partners and growing out company owned markets. This will allow Krispy Kreme to take advantage of supply chain efficiencies and strengthen brand awareness. Krispy Kreme plans to increase market footprint into unpenetrated markets. Third Krispy Kreme looks to enter uncharted markets where they have little or no market presence. Today Krispy Kreme has 1,100 shops in over 26 countries stating, “Our goal is to achieve annual double-digit percentage growth in our systemwide unit count over the next several years.”
Six of the company’s top management positions have been replaced including, president, CEO, CFO, Senior VP of Human Resources, Senior VP of International operations, and Senior VP of Supply Chain Operations. The new executive members have an average of 21 years of experience giving the previously struggling company a fresh start. This management team is accompanied by a more than capable board of directors. The directors have a wide range of experience in other industries giving Krispy Kreme diverse outlook for decision making. With the shorter average life time on the board, new directors are brought in more frequently to prevent a stagnant working environment.
Tony Thompson President and CEO Mr. Thompson has served as President and Chief Executive Officer since June 2014. He joined Krispy Kreme from Papa John’s International, Inc., where he most recently served as President and Chief Operating Officer. At Papa John’s, he previously held the positions of Executive Vice President, Global Operations; Executive Vice President, North American Operations; Senior Vice President, PJ Food Service; and Vice President, QCC Operations. Prior to joining Papa John’s in 2006, Mr. Thompson worked for The Scotts Miracle-Gro Company for six years as Plant Manager, Director of Marysville Operations and Director of Lawn and Controls Operations. Before joining the Scotts Company, he spent four years with ConAgra Grocery Products Company and seven years in various roles with Gulf Coast Coca Cola. Mr. Thompson is a highly respected professional with more than 25 years of food service, grocery products and beverage experience.
Due to increased consumer confidence and spending and decreased unemployment the demand in the donut industry has increased with projected revenues of 14 billion. With increased consumer spending, people are more likely to buy small luxuries and treat themselves to a quick snack while being busy during the work week. The estimated 14 billion in projected revenues is a 3.5% increase from 2015 in an industry, dominated by a few large chains including, Dunkin Brands with 61.1% of market share, Tim Hortons with 5.6%, Krispy Kreme with 4.9%, and other smaller players. Independent doughnut stores have lost market share from aggressive corporate expansion of major franchises allowing the he number of donut stores are predicted to expand by 2.6% per year from 2016 to 2021. Corporate Expansion has been fueled by expanding menu options, maximizing brand awareness, leveraging new technologies, and accelerating global growth.
Doughnut stores have been able to continue growth by diversifying and expanding their beverage menu in order to generate revenue different ways.
Management
Six of the company’s top management positions have been replaced including, president, CEO, CFO, Senior VP of Human Resources, Senior VP of International operations, and Senior VP of Supply Chain Operations. The new executive members have an average of 21 years of experience giving the previously struggling company a fresh start. This management team is accompanied by a more than capable board of directors. The directors have a wide range of experience in other industries giving Krispy Kreme diverse outlook for decision making. With the shorter average life time on the board, new directors are brought in more frequently to prevent a stagnant working environment.
Tony Thompson President and CEO Mr. Thompson has served as President and Chief Executive Officer since June 2014. He joined Krispy Kreme from Papa John’s International, Inc., where he most recently served as President and Chief Operating Officer. At Papa John’s, he previously held the positions of Executive Vice President, Global Operations; Executive Vice President, North American Operations; Senior Vice President, PJ Food Service; and Vice President, QCC Operations. Prior to joining Papa John’s in 2006, Mr. Thompson worked for The Scotts Miracle-Gro Company for six years as Plant Manager, Director of Marysville Operations and Director of Lawn and Controls Operations. Before joining the Scotts Company, he spent four years with ConAgra Grocery Products Company and seven years in various roles with Gulf Coast Coca Cola. Mr. Thompson is a highly respected professional with more than 25 years of food service, grocery products and beverage experience.
Price Cooper: Executive VP CFO and Treasurer: Mr. Cooper has served as Executive Vice President, Chief Financial Officer and Treasurer since April 2015. He joined Krispy Kreme in January 2015 as Executive Vice President. Mr. Cooper has over 15 years of restaurant industry experience. Prior to joining Krispy Kreme, Mr. Cooper was employed by Texas Roadhouse, Inc. from 2006 to 2015, serving as Chief Financial Officer from August 2011 to January 2015. For approximately eight years before joining Texas Roadhouse, Mr. Cooper held various financial and accounting positions at Ruby Tuesday, Inc. Before working in the restaurant industry, Mr. Cooper worked in public accounting for over five years, serving a variety of clients in the financial, construction, retail, and other industries.
Daniel L. Beem: Senior Vice President and President - International: Mr. Beem has served as Senior Vice President of the Company and President – International since February 2014. Mr. Beem has over 20 years’ experience in the restaurant industry. He most recently served as President of Cold Stone Creamery and Kahala Corp. International, where he directed all international development, operations and franchise development for Kahala’s 14 brands and over 3,000 stores worldwide, including over 1,500 Cold Stone Creamery locations in 25 countries. Prior to joining Cold Stone in 2003, he held executive and management positions with Planet Hollywood, T.G.I. Fridays, Gordon Biersch Brewing Company and NASCAR.
The current ownership revolving around KKD are institutions, mutual funds and insiders. Institutions account for about 83.85% of the total $1.337 billion of the total ownership with T. Rowe Price Associates, Inc leading the category at 16.09%. The next 4 top institutions account for another 18.09%. Vanguard Group Inc accounts for 6.98%, Wells Fargo Bank accounts for 4.85%, Dimensional Fund Advisors owns 3.38% and Stephens Inv Mgmt Group brings up the rear of the top 5 with 2.88% of the shares held. Combined, these top 5 institutions account for 34.18% of all the institutions invested in shares of KKD. Looking at mutual funds, this category accounts for 15.31% (after removing overlap from institutions) of KKD’s share. The smallest category, investors, accounts for .84% ($ 11.23 million).
Ownership
Management
Source: Google Finance
Shares of Krispy Kreme Doughnuts were down more than 25% leading up to the most recent earnings announcement on March 22nd, and down over 5% in after-hours trading that day alone. The subsequent share weakness and uncertainty from lower expectations allowed potential suitors to circle the company for a possible takeover. On May 9, 2016, Krispy Kreme announced plans to enter into a definitive agreement with JAB Beech Inc. to be acquired by the company for $21 cash per share ($1.35 billion). JAB owns controlling stakes in Keurig Green Mountain, Jacobs Douwe Egberts, Jimmy Choo, Bally, Belstaff, Peet's Coffee & Tea, Caribou Coffee, Einstein Noah Restaurant, and Espresso House. Jim Morgan, chairman of the board for Krispy Kreme, said, “For nearly 80 years, our iconic brand has been touching and enhancing lives through the joy that is Krispy Kreme. This transaction puts us in the best possible position to continue to spread that joy to a growing number of people around the world while delivering significant value to Krispy Kreme shareholders. I am confident the JAB team is the right partner with whom to continue building upon our incredible legacy.”
The subsequent rapid share price appreciation leading up to and on May 9th can be attributed to the dissemination of information related to the merger announcement between KKD and JAB Beech Inc.
There appear to be various synergies involved in the deal, and Krispy Kreme is expected to compliment JAB's numerous consumer brands including Keurig, Peet's Coffee, Caribou, Einstein Noah, and Espresso House. JAB has been building a global coffee powerhouse over the years with a host of brand name companies in their portfolio; Krispy Kreme should fit into that portfolio very well. Krispy Kreme's growth characteristics undoubtedly attracted JAB to the company. In addition to being a leader in the doughnut market, Krispy Kreme has also tried to bolster its coffee business by offering new coffee drinks and products, such as coffee treats (coffee flavored snacks).
For the five years to 2015, Krispy Kreme revenues grew at 6.44% CAGR to $518.71 million. During this time period, KKD’s ROE has increased from 7.65% (FY12) to 12.22% (FY15). This is due to increases in sales (6.44% CAGR, store volume growth (Appendix 1) and increases to operating margins from 6.34% (FY11) to 10.04% (FY15).
We forecast growth of KKD revenues over the next 5 years at 5.40%, attributable to difficulties with healthy conscious consumers and establishing a more diverse product mix in a highly competitive market. In anticipation of increasing revenues, falling costs of goods sold and falling selling, general, and administrative expenses, EBITDA margin will increase from 10.0% to 11.5% over the 5 years to 2021.
Revenue growth will be fueled by new store expansion, increased product offerings, and international opportunities through JAB Holding Company’s acquisition of the firm.
In addition, ratio analysis of KKD reveals positive signs pertaining to the company’s liquidity, efficiency, leverage, and return metrics. We find that KKD is competitive with its peers in the quick-service doughnut and coffee industry.
Financial Analysis
FY2011 FY2012 FY2013 FY2014 FY2015 FY20160.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
2.34
2.892.75
2.58
2.01 2.061.94
2.622.39
2.21
1.68 1.76
KKD Liquidity Ratios
Current Quick
Liquidity
The two most common measures of liquidity are the quick ratio and current ratio. These liquidity ratios demonstrate Krispy Kreme’s ability to turn current (short term) assets into cash to cover debts. KKD’s current and quick ratios declined from FY 2011 to FY 2015, indicating a relative increase of current debt compared to current assets. This indicates that the company became riskier to creditors, a sign of reduced company health. Despite the decline in both liquidity ratios, figure xx demonstrates that as of FY 2015, KKD had higher current and quick ratios than its three main competitors, Dunkin Doughnuts, Tim Hortons, and Starbucks. We forecast stable liquidity ratios for KKD from FY2016 to FY2020, with current ratio of 2.06 and a quick ratio of 1.76, up from 2.01 and 1.68 respectively.
Activity
Activity ratios such as receivables turnover, inventory turnover, days inventory, and total asset turnover measure a company’s ability to generate revenue through the assets on its balance sheet. These ratios are good indicators of how efficient a firm is at using its assets to grow top line revenues. KKD’s receivables turnover and inventory turnover increased over the 5 years to 2015, indicating operational improvements in the firm’s ability to collect receivables, and sell its inventory.
The increased inventory turnover is reflected in the decreased days inventory which measures the number of days it takes the company to sell all of its inventory.
Relative to its peers, KKD has the highest inventory turnover, second highest receivables turnover behind SBUX, and lowest days’ inventory, positive signs of the company’s efficiency (figure 2).
Fixed asset turnover, in contrast, decreased as net PPE growth outpaced revenue growth from FY2011 to FY2015. However, total asset turnover increased, reflecting KKD’s increasing ability to source revenue from the assets on its balance sheet. Fixed asset turnover ratios were not recorded for KKD’s comparables, but KKD has the second highest total asset turnover of its peers. We anticipate that KKD’s activity ratios will remain constant over the five years to 2021, as shown in figure 1.
Financial Analysis
Financial AnalysisLeverage
Figure 1 shows that about 25% of KKD’s capital structure is debt. The company’s debt to assets and debt to equity ratios fluctuated minimally from FY2011 to FY2015. KKD uses less debt than its peers and is more than able to cover its interest payments, as is shown in its times interest earned of 40.96 as of FY2015. We do not anticipate a significant change to management’s use of debt and thus we forecast a small increase to these ratios given KKD’s agreements to open 133 domestic franchise shops and 437 international franchise shops through FY 2026 (January 2016 company 10-k filing).
Profitability
KKD is less profitable than its peers in terms of gross margin, operating margin, and net profit margin. This can be attributed to the company’s relatively high costs of goods sold. Despite this, the company did see progress in this area, as gross margins increased from 14.08% (FY11) to 20.09% (FY15). We predict that cost of goods sold will remain at about 80% of revenues over the next five years, leading to a consistent 20.09% gross margin going forward. Net profit margins, driven by revenue growth are projected to expand to 7.25% for the next five years.
Market
Market ratios such as earnings per share, and price to earnings help investors gauge the value of a company’s stock. KKD has the lowest EPS of its peer group at $0.48 as of 2015. We forecast an increase in earnings per share to $0.78 by 2020 as revenues continue to increase, margins widen, and management engages in approved share repurchases. At the current price of $21.41, with forecasted FY16 EPS of 0.63, KKD’s price to earnings ratio will be around 34.07, which is well within the range of industry peers DNKN, THI, and SBUX.
Figure 1
Figure 2
We used a discounted cash flows method to value KKD’s equity on a per share basis, to come to a target share price. Since the industry is dominated by one large competitor, Dunkin Brands, we used comparables to perform financial analysis on KKD, but avoided valuation based on comparables. Thus we relied on fundamental analysis of KKD’s free cash flows, discounted at an appropriate cost of capital, and then divided equity value by shares outstanding. We arrived at a target price of $18.43, a 13.94% downside from the current share price of $21.41 and 12.26% downside from the announced merger price of $21.00 per share. We performed sensitivity analysis of KKD share price to changes in discount rate and terminal growth rate to determine potential target price volatility. Our base case assumes 5.40% annual revenue growth, cost of goods sold as 79.91% of revenues, and a terminal growth rate of 2.50%. Annual revenue growth and the terminal growth rate were obtained from the IBIS world report of the Doughnut-making industry. Given this base case, our target share price is $18.43. Given KKD’s aggressive plans to expand its international presence, there is uncertainty around our forecasted revenue growth, costs of goods sold, and terminal growth rate. Scenario analysis of increasing cost of goods sold as well as lower than expected revenue and terminal growth are displayed in exhibit xx. Our discount rate of 4.42% reflects an industry asset beta of 0.26, obtained from Google Finance data on DNKN. We used a 7.0% market premium in anticipation of higher risk free rates in the future and mid-single-digit market returns. For more detail into the WACC calculation, please refer to Appendix XX.
Valuation
Security Risks for Individuals
Krispy Kreme has gathered a substantial amount of personal information from guests, web-site users, and its very own team members. Although security and privacy measures are taken, they are subject to leaks of said information which often times leads to litigation and penalties. Leaks may cause people to look to alternatives to Krispy Kreme.
Analysis:Like any company or organization that gathers a database of personal information, Krispy Kreme is just as vulnerable to leaks and hackers.
Reliance on Franchisees
In fiscal 2015, 34% of total revenues came from Krispy Kreme’s franchises. In the same fiscal year franchises opened 147 stores nationwide. Their reliance on franchises, which are all independent contractors, can hinder their revenue and their image as they put their trust in these franchises to make the right decisions on their behalf.
Analysis: Relying on franchises is a high-risk high-reward decision that many companies knowingly take in order to boost revenue. Although there are sometimes conflicts between franchise and headquarters, Krispy Kreme stands by their business plan and reaps its benefits.
Investment Risks
Investment Risks
Analysis: The instabilities in the price of fuel and raw materials directly affect Krispy Kreme’s costs. Average gasoline prices over the last 5 years have ranged from a low of 2.45 to a high of 3.80. Some things are simply not in Krispy Kreme’s hands, therefore they have found and will continue to find ways to adjust to any changes.
Cost of Fuel and Raw Materials
In recent years, the price of gasoline and raw materials has been volatile. Fluctuations in price can increase cost and affect the company’s profits. In addition to gasoline to fuel delivery vehicles, the most important ingredients are flour, shortening and sugar. Krispy Kreme utilizes forward and future contracts whenever they see fit but even those to do not ensure long term protection from changes in price.
Sensitivity to Changes in Sales
Historically, as well as presently, many factors have affected and continue to affect Krispy Kreme’s sales results. Factors affecting sales include; consumer trends, competition, regional or national economic conditions, seasonality conditions, as well as whether or not Krispy Kreme executes their business strategy effectively. All of these factors may or may not cause significant fluctuations in the common stock.
Analysis: Krispy Kreme is no different than any company in that they are unable to control a few of the factors mentioned above such as general economic conditions but what they can control is executing their business strategy effectively. As long as they do so, they can limit risk and potential damages.
Investment Risks
Litigation/Public Concern
Krispy Kreme’s costs could rise further with litigation, regulation, or public concern with food quality and health. Class action lawsuits have been filed alleging that food service businesses have failed to disclose health risks associated with high fat foods and that certain marketing practices have encouraged obesity. Lawsuits such as this can be very damaging to the image of Krispy Kreme and can have a negative effect on profitability.
Analysis: Over the last 10 years the world has become a much more nutrition-conscious place that has damaged the image of the food industry, especially foods high in sugar such as donuts. Although their image has been slightly tainted, Krispy Kreme fortunately has not yet been involved in any noteworthy lawsuits concerning food quality or health.
International Risks
As of February in 2015, 709 Krispy Kreme stores operated outside of the U.S. which equals 72% of the total store count. International franchises are exposed to distinctive risks including political, economic, as well as currency risks. Specifically risks such as; political instability, currency exchange rates, local economic conditions, taxes, tariffs, and transportation costs.
Analysis: Expanding internationally is a great success for any company, but in turn they face new risks. Krispy Kreme will absolutely continue to support their international franchises and find more ways to improve efficiency, as they compose of 72% of the total store count.
Currency Risk
More specifically, currency risk is a major factor when it comes to international business as Krispy Kreme is exposed to changes in the exchange rate between the U.S. dollar and foreign currencies. In fiscal 2015, a hypothetical 10% change in the average rate of exchange would result in a royalty revenue change of about $2.7 million.
Analysis: As seen above, a change in the rate of exchange could result in major changes in revenue. For example, the rate of exchange over the last 5 years between the U.S. and Australia (the first country to open a Krispy Kreme store outside of North America) ranged between a low of 0.90645 AUD/USD and a high of 1.45800 AUD/USD.
Appendix 1: Income Statement
Appendix 2: CS Income Statement
Appendix 3:
Balance Sheet
Appendix 4: CS
Balance Sheet
Appendix 5: Cash Flow Statement
Appendix 6: DCF
Appendix 7:
Comparables
Appendix 8:
Ratios
Appendix 9: Sensitivity Analysis
Appendix 10: WACC Calculation
Name Title Years on Board
Background
Tony Thompson
President and CEO June 2014- Present
President & Ceo Papa Johns; 2006- 2014
Plant Manager at Scott’s Miracle-Gro; 2000-2006
Con-Agra Grocery; 4 yrs. Gulf Coast Coca Cola; 7 yrs
Price Cooper
Executive VP, CFO & Treasurer
April 2015- Present
CFO: Texas Roadhouse; 2006-2015
Financial/ Accounting positions for Ruby Tuesday; 8 yrs.
Public accountant; 5 yrs
Cathleen D. Allred
Senior VP of HR & Organizational Development
May 2014- Present
Corporate Human Resources; 2008-2014
Served in HR at Polo Ralph Lauren, LifeStyle Furnishings & American Technical Resources
Daniel L. Beem
Senior VP & President (International)
Feb. 2014- Present
President Cold Stone Creamery & Kahala Corp.; 2003-2014
Management Positions at Planet Hollywood, Nascar, T.G.I Fridays
Steven J. Ellcessor
General Counsel & Secretary
Aug. 2015- Present
Frost Brown Todd LLC; 2003-2015
Executive officer positions at J.M. Smucker Company; 1986-2003
Tom Kuharcik
Senior VP of Supply Chain Operations
Aug. 2015- Present
VP of Supply Chain at Scott’s Miracle-Gro; 2001-2015
Special chemical industry at National Starch; 7 yrs.
Appendix 11:
Management
Name
Title Background
Charles A. Blixt
General Counsel
General Counsel for Krispy Kreme from 2006-2006 (Thorough understanding of Krispy Kreme’s culture, values and business
Lynn Crump-Caine
Independent Director
Extensive experience in the quick-service restaurant industry via her long executive tenure at McDonalds
Carl E. Lee, Jr.
Independent Director
Held various sales and marketing positions with Frito Lay. COO of Snyder’s-Lance Inc.
C. Stephen Lynn
Independent Director
Mr. Lynn brings strong leadership, franchising, strategic-planning, and business-development skills to the Krispy Kreme Board through his vast experience in the quick-service and casual/family-dining restaurant segments of the industry.
Tim E. Bentsen
Independent Director
Over his 37 years with KPMG, he served as an audit partner for financial, technology, and other public companies and served in a variety of leadership roles, including Southeast Area Managing Partner and Atlanta office Managing Partner.
Robert S. McCoy, Jr
Independent Director
Mr. McCoy brings to Krispy Kreme extensive leadership, risk-management, and financial experience gained in his 42-year business career, which included roles as an accountant and as the chief financial officer of two public bank holding companies
James H. Morgan
Chairman of the Board
Past CEO of Krispy Kreme
Andrew J. Schindler
Independent Director
Mr. Schindler brings to the Krispy Kreme Board strong leadership, risk-management, marketing, operations, strategic-change, and personnel-development skills.
Appendix 12: Board of Directors
Tony Thomson
President and CEO
Current president and CEO of Krispy Kreme. Previously President and COO of Papa John’s
Strengths:
“One-of-a-kind Taste Hot Doughnuts Now sign efficiency
Weaknesses: Overexpansion in U.S. 4 grams of trans fat per donut misreports
Opportunities: Foreign markets Gas Stations Supermarkets
Threats: Trans fat bans across U.S. Dunkin market share
Appendix 13:
SWOT Analysis
$14 Billion in projected revenue in 2016 3.5% increase from 2015 Market Share: Dunkin Brands: 61.1% ,Tim
Hortons 5.6%, Krispy Kreme 4.9% Number of donut stores expected to
increase by 2.6% per year until 2021 More than 50% of sales come from products
other than doughnutso With exception of Krispy Kreme: 88%
of Sales come from doughnuts o 10% of sales come from beverages
Increased consumer spending increases demand for donuts
So does low unemployment , since people have less time to prepare meals
o Doughnutts are instant gratification o
Appendix 14:
Industry Overvie
w
⅔ Americans are overweight ⅓ Americans are obese Sugar consumption per capita will increase
by 1.1% Within Krispy Kreme stores approximately
55% of retail transactions include one or more dozens of doughnuts
Within Krispy Kreme stores approximately 55% of retail transactions include one or more dozens of doughnuts
Appendix 15:
Population
Trends
Maximizing brand recognition Leveraging new technologies Expanding menu options Accelerated global growth
o 1,100 shops in 26 countries One-of-a-kind taste. Doughnut Theater Hot Krispy Kreme Original Glazed Now
sign Sharing and Connection. Community relationships Heritage
Appendix 16:
Positioning
