Concerns Over Krispy Kreme CEO’s Plans
By George Anderson
Daryl Brewster, the recently appointed chief executive of Krispy Kreme Doughnuts Inc., has extensive background in marketing packaged goods and that is what worries some investors and franchisees.
For those, Krispy Kreme’s future lies with its own doughnut shops and not by developing a ubiquitous presence supplying third parties such as convenience stores and supermarkets.
In an interview with The Business Journal of the Greater Triad Area, Mr. Brewster said that one of the things the company would need is to “do a better job of working with our supermarket and convenience store customers.”
Rich Reinis, a partner in Great Circle, Krispy Kreme’s biggest franchisee, said, “We’re invested in the retail business first and foremost, and it did concern me when looking at his (Mr. Brewster’s) credentials that he’ll be focusing on off-premises business. We have found that in its current format, it’s unworkable.”
According to Mr. Reinis, third party business only accounts for about $500 a week in extra sales for Great Circle and the accounts are difficult to service from an operational standpoint.
He would prefer to concentrate his efforts on developing a hub strategy where Krispy Kreme sets up smaller standalone shops that are supplied by a local factory store. Great Circle currently has two of these stores in operation and one has grown average weekly sales to between $12,000 and $14,000.
Analysts believe that Mr. Brewster’s transition to foodservice will be made easier by Krispy Kreme’s other recent hire, executive vice president of operations Jeff Jervik. He joined Krispy Kreme last October from Yum Brands’ Pizza Hut business.
Morningstar analyst John Owens wrote in a recent report, “We think this management duo has the experience and skills necessary to take on the considerable challenge of turning around Krispy Kreme’s business.”
Moderator’s Comment: What mistakes has Krispy Kreme made in the past and what will it need to do if the business is to get turned around?
George Anderson – Moderator