KRISPY KREME DONUTS INC.

Introduction
Brief History
 Started in 1933 when Vernon Rudolph bought a donut shop in Paducah, Kentucky.
 KKD were sold to grocery stores first but became so popular with customers, thus
launching the doughnut factory retail store and selling directly to the public.
 Headquartered in Winston-Salem, North Carolina.
 The company has locations in 23 different countries.

Organizational Structure

The company does not have a Chief Operating Officer (COO), Chief Administrative Officer
(CAO), and Chief Strategy Officer (CSO). Today, there is an accelerating trend in US where high
profile American companies are doing away with the COO position. So what does this mean to

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the companies, let’s say in driving growth? Public companies and large enterprises are primarily
focused on growing through mergers, acquisitions, and other transactional strategies. If they do

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plan to grow it is probably going to be made possible through extensive financing. In today's
environment, companies of all sizes almost universally agree that the business needs a

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dedicated Chief Financial Officer (CFO), or a controller or financial manager with similar
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responsibilities. However, in this case it is not applicable to KKD given it has a wide operations,
thus it is important that they should have a COO, which would head and oversee daily
operations in each divisions: company stores, domestic franchise, international franchise, and
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KKD supply chain. Also, generally there is a problem with organizational structure, as it only
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appears structurally functional. Its organizational structure is very much condensed given that
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the company is a huge company operating internationally in over 23 countries. Furthermore,

there is also a need for the company to have a CSO given its wide. The CSO would be very
important in leading the company to strategically position itself especially with the changing
lifestyle and demands of its target customers, also with the diversity of its customers given that
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it operates in different countries, and with its future ventures and acquisitions.
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Recommended Organizational Structure (put in slide)

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Business Vision, Mission

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Vision
The following is a proposed vision for the company since it has not established one, and
this is important to give a direction to the company. “Krispy Kreme strives to be the best
doughnut and coffee brand in the world.” A vision is very important not only for managers but
also for employees because it gives a foundation to which the firm strives to achieve in the long
run.

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 The current mission statement of KKD had the 6 elements of a mission statement
present, and these are: customers, products or services, self-concept, concern for public image,
concern for employees, and concern for survival, growth and profitability. Those elements are
enough to encompass the purpose of the company and its principles.

External Assessment
PESTLE Analysis
 Economic Forces - the US doughnut market is a $13 billion industry with about 25% of
sales coming from bulk doughnuts in the 1 dozen-size box and up.
o The outlook for doughnut shops remains positive, especially outside of North
America, where the market is not saturated.
 Social, Cultural, Demographic, and Natural Forces - a growing middle class in developing
countries has created many new customers.
o Many people around the world prefer eating healthier snacks, with reduced
calories.

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o Breakfast sandwiches are the new burgers: Breakfast sales at fast-food chains

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increased by 4.8% annually from 2007-2012.

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 Political, Government, and Legal Forces - growing familiarity of US products in Latin
America from advertising and immigration.

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o Some cities and other governments around the world are imposing laws that
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restrict portion sizes of soft drinks and other sugar-laden snack sizes.
 Competitive Forces - in 2014, international sales for Dunkin' Donuts decreased 2% and
Baskin Robbins decreased 1.2%.
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Competitive Analysis
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Porter’s Five Forces Model

 Rivalry among Competing Firms - barriers to entry are relatively low for the restaurant
industry, but rivalry (competitiveness) among firms is exceptionally high. Among KKD’s
competitors in the industry are Dunkin Brands, Tim Hortons and Starbucks.
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o Major rival Dunkin’ Brands reported $260 million more in revenue than KKD.
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o Competitors of KKD, including Dunkin’ Brands and Starbucks, have already

diversified their menu options to include healthier choices.
o There are over 850 Tim Hortons locations throughout the US that generated over
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$600 million in revenue in 2014.

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o Starbucks is the world’s largest specialty coffee retailer with over 18,000 stores in
60 different countries.
 Potential entry of new competitors – barriers to entry for the restaurant industry is low.
 Potential development of substitute products –
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 Bargaining power of suppliers –

 Bargaining power of consumers - in the restaurant industry, the bargaining power of
consumers is quite powerful, availability of restaurant options in most places is
abundant, and consequently there is intense price competitiveness among rival firms.

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 Industry Analysis
Competitive Profile Matrix

Weight Critical KKD Dunkin’ Donuts Starbucks

Success Factor
Weight Rating Weighted Rating Weighted Rating Weighted
Score Score Score
Store Locations 0.06 1.0 0.06 4.0 0.24 2.0 0.12

Customer 0.11 3.0 0.33 1.0 0.11 2.0 0.22

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Service
Product Quality 0.08 3.0 0.24 4.0 0.32 2.0 0.16

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Debt Ratio 0.10 2.0 0.20 3.0 0.30 4.0 0.40
Market Share 0.09 1.0 0.09 4.0 0.36 3.0 0.27

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Product Line 0.12
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Advertising 0.09 2.0 0.18 4.0 0.36 3.0 0.27
Price 0.05 1.0 0.05 4.0 0.20 3.0 0.15
Competitiveness
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Financial 0.07 3.0 0.21 4.0 0.28 2.0 0.14

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Position
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Customer 0.08 3.0 0.24 4.0 0.32 2.0 0.16

Loyalty
Global 0.11 3.0 0.33 4.0 0.44 1.0 0.11
Expansion
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Employee 0.04 3.0 0.12 4.0 0.16 2.0 0.08

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Dedication
TOTALS 1.0 2.17 3.57 2.44
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Internal Assessment
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Strengths
 Many KKD shops are factory shops where customers can watch doughnuts being made
and purchase fresh hot doughnuts.
 KKD has long prided itself on hot fresh doughnuts and a one of a kind taste.
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 KKD are sold in KKD stores, grocery stores, convenience stores, gas stations, Wal-Mart,
and Target stores in the US.
 The company is transitioning toward smaller factory shops that will focus on retail rather
than wholesale customers. In fiscal 2015, 51% of revenue is generated from wholesale.

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  KKD has plans to grow international stores to 900 by January 2017.

Weaknesses
 Sales in Mexico, Latin America, and South America declined slightly in 2015.
 KKD offers no breakfast sandwiches.
 KKD offers few healthy options such as whole wheat muffins

Financial Analysis
2015 2014 2013 2012 2011
Current Ratio 2.56 2.75 2.89 2.34 1.55
Quick Ratio 2.20 2.39 2.62 1.42 1.19
Long Term Debt/Equity 0.03 0.10 0.20 0.18 0.69
Fixed Assets Turnover
Total Assets Turnover 1.39 1.36 1.27 1.20 2.13
Net Profit Margin 0.06 0.07 0.05 0.41 0.02

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Return on Total Assets 0.08 0.10 0.06 1.20 0.04

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Return on Total Equity 0.11 0.13 0.08 1.62 0.10

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References:
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http://blog.wendtpartners.com/does-my-business-need-a-chief-operating-officer-coo
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http://top20mba.com/mba-cases/64-mba-business-strategy/1974-mba-strategic-management-
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case-study-guides-2017-krispy-kreme-doughnuts-inc-2015
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