Krispy Kreme Doughnuts

Krispy Kreme Executive Summary

Background

Krispy Kreme Doughnuts, started in 1937, is a doughnut manufacturer and retailer that acquires its revenues through on-premise retail sales, off-premise sales to grocery and convenience stores, manufacturing and diffusion of product mix and machinery, and franchisee royalties and fees. Their main competitive advantage is the milling machinery store. Even operating out of franchise stores, they manage to sour their food on site. In April 2000, Krispy Kreme boasted a share worth of $40.63. By January 2005, it had fallen below $10.

Krispy Kreme managed to expand rapidly or so the turn of the millennium each time they opened a new franchise, they sold high profit margin equipment to the franchisee, and charged a high upfront fee, yielding lucrative one-time profits. As expansion slowed in 2003, so did their profits. Coupled with an accounting scandal, analysts pronto changed their recommendations from buy to sell, and the phoner found itself headed in the wrong direction.

digest/Assumptions
Possible but unlikely delisting from NYSE
Revenue grew an average of 32% annually between 2000 and 2004
Lost $2.



5 Billion in truth since 2003
Significant upfront, one-time charge for new franchisees artificially boosted profits
Decided to keep back for SEC investigation to file financial statements reducing 2004 pretax income
mischance to provide financial statements to lenders by January 2005 constitutes default under the companys $150 million credit facility

Conclusions

Krispy Kreme entered the new millennium with a positive outlook, but tried to expand excessively quickly, while claiming it would continue to boast high profits and growth. The company focused on gap new stores instead of opening them well analysts claim that the company was not focused on operations.

Furthermore, the company did not have consistent accounting, in that it enter interest income as...If you want to get a full essay, beau monde it on our website: Orderessay



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