🍩 The Billion-Dollar Doughnut Company

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Good morning! It's Thursday, April 11th. Today’s post looks at the doughnut chain seeing explosive growth from a recent McDonald's partnership.

THE FEATURE

🍩 The Billion-Dollar Doughnut Company

Some historians contest the idea that Krispy Kreme invented the glazed doughnut. But no one denies that Krispy Kreme is responsible for making glazed doughnuts one of America's favorite treats. 

Krispy Kreme was founded way back in 1937 by Vernon Rudolph, but the company made major headlines last month when it announced a McDonald's partnership. 

That partnership caused a 14% surge in Krispy Kreme shares, increasing the stock's market cap to $2.48B! 

The Founding Story

Despite founding Krispy Kreme during the height of the Great Depression, Rudolph's entrepreneurial wit caused the company to flourish and support North Carolina's state economy. 

He had purchased a secret recipe for yeast-raised doughnuts from a New Orleans-French chef and opened a bakery in Winston-Salem to sell the first Krispy Kreme doughnuts to local grocery stores. 

But selling to just grocery stores didn't last long. The smell of Rudolph's glazed doughnuts had people knocking on his bakery door. Seeing a potential business opportunity, he cut a hole in the wall and began selling directly to customers. 

The Business

Krispy Kreme has evolved quite a bit from being a literal hole in the wall. There are currently 357 Krispy Kreme locations in the United States, with approximately 2K internationally.

Krispy Kreme has maintained its high product quality for nearly a century and has now paired it with extensive investments in customer experience. For instance, Krispy Kreme's store in central London, the "Doughnut Theatre," has an influencer content studio and an open conveyor belt for its 6,600 daily doughnut production. 

How Krispy Kreme Makes Money

• Sales at company-owned stores

• Royalties and fees from franchise locations

• Sales at grocery and convenience stores via its Delivered Fresh Daily network

• Selling doughnut-making equipment and mixes

Last year, Krispy Kreme generated $1.7B in revenue, a 10% increase from the previous year. That revenue growth is expected to see a massive ramp-up as a result of its game-changing partnership with McDonald's

How They Win: Partnering with the Big Guy

On March 28th, Krispy Kreme and McDonald's issued a joint statement confirming they will begin a national rollout of three of Krispy Kreme's most popular doughnuts across McDonald's US locations. 

The two franchises expect the rollout to be completed by the end of 2026. 

McDonald's hopes to boost its breakfast and bakery selections by accessing Krispy Kreme's Delivered Fresh Daily network. But it's clear that Krispy Kreme benefits the most from this deal. 

McDonald's operates 13,500 locations in the US. While not all McDonald's franchise owners will agree to sell the new baked goods, enough will to exponentially increase Krispy Kreme's reach without the company having to purchase real estate to expand.

Krispy Kreme CEO Josh Charlesworth said he expects the partnership to more than double the company's points of access by 2026!

Some are skeptical about whether this partnership will become fully realized, citing past instances where McDonald's backed out of new menu items. However, if it all works out, Krispy Kreme will likely soar to new heights. 

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