Case 4: Krispy Kreme Doughnuts, Inc.

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Case 4: Krispy Kreme Doughnuts, Inc. “Success is not forever and failure isn't fatal.” (Don Shula) The new millennium was a new era for Krispy Kreme Doughnuts. When it became public the shares were selling for 62 times earnings, and in 2003 fortune magazine call it “the hottest brand in America”. But in 2004 the company entered to a difficult phase when the share price decrease accompanied by several accounting reveals. The case six prepared by Sean Carr preset us with financial information about the company, and the point of this paper is to analyze it. Krispy Kreme Doughnuts, Inc., began as a family business in 1937 when Vernon Rudolph acquired a doughnut secret recipe from a French chef in New Orleans. He delivered doughnuts, to grocery stores in North Carolina, more specific in the area of Winston Salem; these doughnuts quickly became immensely popular with customers. He even cut a hole in the wall of his shop so that he could sell hot doughnuts to potential customers passing by sigh on the street. The company had great ideas such as the “Hot Doughnuts Now” neon sigh, so people knew when fresh doughnuts were made; the idea of making all of the shops look the same, which help people recognize the brand; as well as the viewing windows for watching the doughnuts being made; with this Krispy Kreme Doughnuts became an experience not just a Doughnuts store. The company had an aggressive strategy, the wanted to expand to different countries and the number of stores from 144 to 500 in just a few years. Principally the store growth was exponential, some were sell as franchises but a great amount was the production of more factories owned by the company. The assets almost were seven times bigger in just four years. Krispy Kreme Doughnuts generated revenues through four primary sources: on-premises sales, off-premises sales, manufacturing and

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