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Krispy Kreme Doughnuts is a specialty retailer of doughnuts, owning and franchising stores where it makes and sells over twenty varieties of doughnuts, including its famous Hot Original Glazed variety (Company profile, Yahoo! Finance). As of February 1, 2004, there were 357 Krispy Kreme factory stores in operation, of which 338 were located in the United States. It also uses third-party retailers to distribute its product. To grow its business, Kripy Kreme has sought aggressive domestic and international expansion of new factory stores and has expanded into coffee roasting to attract some of Dunkin' Donuts loyal coffee market (Rusch). The company has also introduced a new line of frozen blended beverages to grow revenue (Drinking those cool Krispy Kremes. 2004).
Like most companies, Krispy Kreme has a lengthy code of business conduct and ethics. However, Krispy Kreme is currently being investigated by the U.S. Securities and Exchange Commission and is…
Company profile. Yahoo! Finance. Retrieved January 27, 2005 from Web site: http://finance.yahoo.com/q/pr?s=KKD
Drinking those cool Krispy Kremes. (2004, July 21). CNNmoney. Retrieved January 27, 2005 from Web site: http://money.cnn.com/2004/07/21/news/midcaps/krispy_kreme/?cnn=yes
Form 10-Q for Krispy Kreme Doughnuts Inc.(2004, September 10). Retrieved January 27, 2005 from Web site: http://biz.yahoo.com/e/040910/kkd10-q.html
Hale, E. (2003, August 11). Krispy Kreme's sweet on Britain. USA Today. Retrieved January 27, 2005 from Web site: http://www.usatoday.com/money/industries/food/2003-08-11-krispykreme_x.htm
Krispy Kreme Corporation is primarily known for the quality of its donuts. Since the company's inception in 1937, it has grown to be for many customers the best amongst its competitors. The company thus has many strengths, not least of which is its sustained popularity among customers, and the effectiveness of word of mouth advertising. elow is a "SWOT" analysis, identifying strengths, weaknesses, opportunities and threats to Krispy Kreme. This is followed by comments to analyze and identify the company's position and future in the donut market.
Obviously, Krispy Kreme's strengths have propelled the company to become the giant it is today. Some of these strengths include the sheer magnitude of its status on a national basis. Krispy Kreme has become the biggest name associated with their product. This is coupled with an honest, old-fashioned and friendly customer-based approach. In fact, this approach has remained constant throughout Krispy Kreme's existence…
Limbach, Dan. "Has Krispy Kreme Peaked?" In Time, Inc. June 17, 2003
There is abundant opportunity in the western U.S. that KKD has yet to address. Each aspect of the strategy plan is now addressed by functional area:
Over the next three years, KKD needs to first concentrate on competing more effectively in those regional markets where Dunkin' Donuts to this point has dominated the sale of donuts and related food and beverage items. This must begin with a build-out of the 22 Montana Mills stores in states where Dunkin' Donuts has the majority of market share, followed by selective expansion in western states including Arizona, Colorado, California, Nevada and Washington. The use of joint ventures, co-branding of retail locations, and private labeling needs to be aggressively used to penetrate the new markets in western states which have to date been unaddressed.
In terms of global market development, KKD needs to consider investments in Australia, Canada and Great Britain as…
There has been increase in the number of franchise stores that are operating, which generate critically needed income for the company. Currently, the company is also involved in a credit agreement that contains provisions that, among other requirements, restrict the payment of dividends and requires the company to maintain compliance with certain covenants, including the maintenance of certain financial ratios (Management Discussion and Analysis (MD&a) of 10-K for 2007: 36). This may make it less attractive to shareholders although it may mitigate the lending institution's risk.
Through investment, joint ventures, and expanding its operations management hopes to improve the company's long-term health. But overall, market trend analysis is dim from a managerial perspective. The company is exposed to market risk from changes in interest rates on its outstanding bank debt. This makes it more difficult to substantially innovate in the company's product line or marketing approach. The company…
Krispy Kreme. (2007). Management Discussion and Analysis (MD&a) of 10-K for 2007. Retrieved 26 Aug 2007 fromKrispyKreme.com
Krispy Kreme. (2007). Management Discussion and Analysis (MD&a) of 10-K for 2002. Retrieved 26 Aug 2007 fromKrispyKreme.com
Advertising for TITB is placed in high traffic, high consumer areas (subways, bus stops, etc.)
Taste, freshness, and thinking of the office?
KK looks better than competitors.
Something special as treat for oneself or office mates
Don't just purchase one.
Alleviates guilt and adds emotion to purchase
What do people think?
Encourages multiple purchases.
Allows for multiple opinions and feedback loop.
Critique and ecommendations
Krispy Kreme's advertising campaign of a combination of making it a dozen and thinking inside the box is in its early stages of roll out. However, in combination with the focus on low-cost social media and the play on two of the most successful advertising campaigns ever, one can rarely doubt that the new campaign will be successful. The two campaigns that are precursors to the TISB are Lays, Taco Bell and Apple Computer.
One of the most successful advertising campaigns…
Emerson, J. "Thinking Outside the Box and Apple Computer." 2007. December 2012. .
"Frito-Lay Corp. - Bet You Can't Eat Just One!" 2006. December 2012. .
MDG Marketing. "How Krispy Kreme is Embracing Hands-Off Approach." 2012. December 2012. .
Morrison, M. "Krispy Kreme's New CMO to Spend Less, Lean on Social Media." 2011. December 2012. .
Krispy Kreme (KK) operates in two industries, both of which are highly competitive. The QSR side of the business has low switching costs, moderate brand loyalty, and at the local level especially there are few barriers to entry. At the national level, barriers to entry are much higher, but intensity of rivalry, especially between Krispy Kreme and Dunkin Donuts, is high. This affects pricing power, though KK has been able to offset that by successfully differentiating its product. This line of the business was the source for most of the issues that plagued the company after it expanded too rapidly.
The second key element, besides the intense competition in the industry, is where the industry fits in the context of consumer choice. Aside from competition, consumers could also choose not to eat doughnuts. An aging population more concerned with health, the Atkins diet fad, and the…
Krispy Kreme: The Unsweetened, Unglazed Truth of Its Equity, Cash Flow, And Notes
To the Managers of Krispy Kreme, Inc.:
As well you all surely know, although it does bear repeating for the sake of company pride, the publicly traded firm Krispy Kreme began as a small, independent business and is now a large, publicly traded firm with franchises extending all over the country, as well as the potential of gaining numerous acquisitions of great value and potential into its fold. For a long time, the firm has stood proud, weathering the low-carb craze to hang on as one of the darlings of all Street investors and analysts. Krispy Kreme was 'proof' that a small, relatively concentrated product that originated as a regional specialty in the American South could come to dominate bigger conglomerates such as Dunkin' Doughnuts.
However, recent adjustments in the form of statements of changes to the…
"Annual Report." (2004) Krispy Kreme Investor Website. Retrieved 17 Jan 2005 at http://media.corporate ir.net/media_files/irol/12/120929/FileUpload/2004KK_FinSec_ar.pdf
BBC News. (4 Jan 2005) "Krispy Kreme Takes a Dunking." BBC News Website. Retrieved 17 Jan 2005 at http://news.bbc.co.uk/2/hi/business/4147319.stm
"Cash flow." (2005) Investor words. Retrieved 17 Jan 2005 at http://www.investorwords.com/768/cash_flow.html
"Owner's Equity." (2005) Investor words. Retrieved 17 Jan 2005 at http://www.investorwords.com/3566/owners_equity.html
Krispy Kreme Case Analysis
Krispy Kreme Doughnuts Inc. certainly seemed in an excellent position in the doughnut business at this moment, however, both analysts and managers of the company have been wondering whether the high level the stock had reached could actually be sustained by the sale of doughnuts and whether in the future there is a possibility that the company's stock and, subsequently, its value, will be dropping.
Indeed, the stock exchange market had reacted to the low diversification of the company and many were keen to speculate the fact that Krispy Kreme was practically a "single- product concept," with only a limited lifespan, and many turned into stock short- sellers.
As such, I will be briefly analyzing the strategic issues that lay with the company at this moment. I will be then having a look at the internal environment, including a strength and weaknesses thorough analysis. The external…
1. Phatak, Arvind V. International Dimensions of management. Second Edition, PWS- Kent Publishing Company, Boston, 1989.
2. Manktelow, James. SWOT Analysis. On the Internet at http://www.mindtools.com/pages/article/newTMC_05.htm
3. Kyle, Bobette. SWOT Analysis - Beyond The Text Book. On the Internet at http://www.websitemarketingplan.com/Arts/SWOT.htm
From the case study.
The organization has been able to effectively use their large buying volume to lower the cost of supplies and reduce supplier power even further.
Bargaining Power of Buyers:
Krispy Kreme is highly vulnerable to the power of buyers, as there are a variety of substitutes and competition in the industry is intense.
However, because the industry is moderately fragmented, Krispy Kreme finds power in their strong brand name, which attracts and retains consumers. This, coupled with their variety of nearly two-dozen doughnut types has allowed Krispy Kreme to offset this buyer power better than some others.
Barriers to Entry:
The barrier to entry into the doughnut is considerable, when desiring to compete on a national or international scale, such as Krispy Kreme. Considerable capital is required to outfit stores to meet the considerable demand to be competitive and profitable. These considerable fixed costs and daily operation expenses are a significant…
Bierce, a. Personal phone call. July 19, 2005.
Bread & Rolls in the United States." Datamonitor. July 2004. Datamonitor. Apollo Library database. University of Phoenix, Phoenix, AZ. July 19, 2005 http://80-dbic.datamonitor.com.ezproxy.apollolibrary.com .
Corporate Governance. No date. Krispy Kreme. July 19, 2005 http://www.krispykreme.com/ investorrelations.html.
Krispy Kreme Doughnut Corporation." MarketLine. 25 Dec 2004. Datamonitor. Apollo Library database. University of Phoenix, Phoenix, AZ. July 19, 2005
Describe the five steps of the revenue recognition model. Specifically, provide an explanation and example as to what signifies a performance obligation.
The revenue recognition model's five steps include the following:
1. Identify the contracts with a customer
2. Identify the performance obligations in the contract
3. Determine the transaction price
4. In the contract, attribute the transaction price to the performance requirements
5. Recognize revenue when the entity fulfills a performance requirement
In simple terms, a performance obligation refers to what the buyer is paying the seller to deliver concerning the contract agreement. Significantly, the seller must pinpoint what has been promised and ascertain whether a promise or several promises signify one or more performance obligations to the consumer. In any given contract, the seller is expected to satisfy all of the performance obligations stipulated to avoid a breach of contract
Provide an overview of Krispy Kreme's business model…
De Celestino, C. M. (2007). Krispy Kreme, Sarbanes-Oxley, and Corporate Greed. University of Miami Business Law Review 15 (2): 225 – 244.
Serwer, A. (2004). A Hole in Krispy Kreme\\'s Story. Fortune International (Europe), 149(10), 23
Cash flow tells management about the health of the company, because it shows the level of money coming in and also shows management how much the company is spending. It does not matter if there is a lot of money coming in if that money and more is all going back out. Cash flow is a balance, and it is not just about how much Krispy Kreme is bringing in, but how much the company is spending. Positive cash flow is important, and can reveal a great deal about the company and how good it will be as an investment.
Income Statement Trend Analysis
An income statement does not consider all the issues that a cash flow analysis addresses. Instead, it looks specifically at home much money is coming in to the company. In Krispy Kreme's case, the income has risen for the last three years. That is good news…
In this, Krispy Kreme's strategy appears to be more focused upon monetary profit than risk-taking strategies for the sake of long-term customer relations. The company's franchising practices for example show that monetary strategy takes precedence over long-term quality assurance, whereas tarbucks' focus is upon using the company's inherent strengths to ensure the company's future growth.
In general, both Krispy Kreme and tarbucks show favorable outcomes as a result of their new management strategies. Krispy Kreme's most successful strategy is its individual focus on the customer's culinary experience. Customer responses to this testify to the excellence of the company's product, and the fact that these doughnuts are practically irresistible. It is interesting to note that the rise of health consciousness over the past decades have not influenced the company's sales significantly. While the company has added beverages to their menu, the main attraction of Krispy Kreme is its doughnuts.…
Krispy Kreme, Inc.;
Starbucks in 2004: Driving for Global Dominance in Thompson, a.A., Strickland, a.J. & Gamble, J. (2004). Crafting and executing strategy: The quest for competitive advantage: Concepts and cases, (14th ed.). New York: Irwin/McGraw Hill.
n turn, the Return on Equity, which is calculated my multiplying the Du Pont variables listed above, will most definitely be altered. The potential for return is, naturally, one of the most relevant factors for investors in determining if a stock is a worthy investment, and if so, how much of it to buy. A "downward" change in the ROE will most likely have a detrimental effect on stockholders who bought the Krispy Kreme stocks based on their projected profit margins, asset utilization and debt projections.
Another factor involved in the Krispy Kreme restatement is the news that an SEC investigation will be undertaken. As the main concern of a publicly-held corporation ought to be profitability for the shareholders, any potential criminal or Sarbanes-Oxley violations are deleterious to these investors, and would most likely have created hesitation on the part of investors to buy Krispy Kreme if these actions had…
In light of these detrimental effects, a restatement of company assets, projected profits and debts, and other factors in determining the shareholders' return on equity will almost certainly be harmful not only to the individual stockholders of Krispy Kreme, but to the company as well by reducing investor confidence in the stock. Milton is correct in his reluctance to recommend the stock although he does believe that it will be profitable in the long run due to these factors.
Article: Dennis Milton, The Holes in a Krispy Kreme Rally, Business Week online 1/19/05
Krispy Kream is a historic and iconic franchise. Its products have often resulted in cult like followings that have been very beneficial to shareholders and executives alike. However, like many companies during the early 2000's, the company fell on hard times. Accounting mistakes, coupled with executive turnover, and misplace product changes; all hindered the company's growth. As the case indicates, through the confluence of multiple mistakes, the company quickly went from an analyst's favorite stock to its most despised.
What can the historical income statements (case Exhibit 1) and balance sheets (case Exhibit 2) tell you about the financial health and current condition of Krispy Kreme Doughnuts, Inc.
The company, according to the financial statements seems to be in good health. The company, during fiscal year 2004 had enough cash and cash equivalents to cover the immediate obligations of the business. The company's long-term debt has risen substantial, but given…
1) Tosczak, Mark (2006-01-02). "Slim down or melt down? Issues loom at Krispy Kreme
But these changes, materialized in increased sales and consequently revenues, improved quality of the products and services offered as well as the technologies used in the manufacturing process have supported the development of the corporation. From a financial point-of-view, they created the image of a strong and reliable company. The reasons why this change has financial implications is a simple one: a stronger company is better perceived by the market and by the stakeholders, increasing as such the company's sales and easing their penetration of new territories. Then, it generates increased interest from investors, easing as such Krispy Kreme's access to funding possibilities.
Even though Krispy Kreme is a strong company and represents an international brand, they are still subjected to numerous risks deriving from both the inside as well as the outside of the company. These risks, as presented by the Management's Discussion and Analysis of Financial Condition and…
Diab. D., 2002, Analysis and valuation of Krispy Kreme, Angel Fire, http://www.angelfire.com/indie/dannydiab/fin821kkd.htm#_ftn1last accessed on February 11, 2008
U.S. Labor Department, 2007, Accountants and Auditors, http://www.bls.gov/oco/ocos001.html . Ast accessed on February 12, 2008
Krispy Kreme Doughnuts INC - KKD, Form 10-K, SEC Fillings, retrieved at http://www.krispykreme.com/ investorrelations.html. On February 11, 2008
That is the beauty of the successful and rising platform established through successful investments; it all becomes quite circular. Then, by reinvesting and refinancing earnings, everything becomes stronger. Just as easily, however, this corporation could have been buried.
1. What is a franchising arrangement? And how is this reflective of business expansion? Moreover, how does this support business growth? From HighBeam Business, these key-terms set the stage from here on out:
MLA: Pondent, Corr S. "About eacquired Franchise ights" (29 December 2010). Highbeam Business: Money. eHow. Demand Media, Inc. Web. 18 March 2011.
About eacquired Franchise ights
A franchising arrangement is a way to expand a company's business without investing a lot of additional money. The franchisee gets the use of an existing business model, or franchise rights, as well as business support, and pays the franchisor a franchise fee in return.
The franchisor could decide to buyback…
HighBeam Business: Issues in Accounting Education: The hole in the doughnut: accounting for acquired intangibles at Krispy Kreme. Web. 16 March 2011.
Citation: Bollinger, Michael a. CMA, CFM, CPA, CIA, CGFM, CDFM. "Fair value, Accounting procedures." Publication title: Strategic Finance. Montvale: Mar 2011. Vol. 92, Iss. 9; pg. 25, 1 pages 4K9S4PXGS8 at CALIFORNIA STATE UNIVERSITY - SACRAMENTO MAIN ACCOUNT via ProQuest, an information service of ProQuest LLC.
5. Auditor impairment analysis on book value of reacquired franchise rights for Arizona acquisitions. The four present values should allow you to reach a conclusion about the acceptability of the client's impairment analysis. Up to this point you are performing a conventional analysis of accounting estimates as per CAS 540. Become thoroughly acquainted with this CAS and refer to it in your report. Call this conventional analysis, and its conclusion, Part I of your report. It is worth 5 marks. The solution posted in BB for class 7 to the class discussion a&B company case, and the Hilton and O'Brien article in class 6 link may help in doing this part of the assignment.
You can use any accounting standards you prefer to support your conclusions, the U.S. ones mentioned in the case, or comparable CICA Handbook sections, or international standards, but be specific about which ones you are using so that the marker can follow your analysis and give you full credit.
That's proving a business opportunity for Krispy Kreme, McDonald's and other American fast-food chains. For Krispy Kreme, Japan is part of its overseas expansion -- a crucial element of its revival plan announced earlier this year. The chain, based in inston-Salem, N.C., saw its stock collapse two years ago under the weight of overexpansion in the U.S., an accounting investigation and the low-carb diet craze...[Now a] Japanese man carries boxes of Krispy Kreme doughnuts back to his office...two Japanese girls devour doughnuts last week at a Krispy Kreme shop in Tokyo. Long lines form outside the shops, sometimes leading to waits of an hour" (Kageyama 2007). But because of more health-conscious consumers in other regions of America where the Southern, Americana image of the company has less cache and novelty, this strategy has not been successful. Also, the idea of a 'trans-fat free doughnut' has not quelled fears about health…
About us. (2008). Carvel Ice Cream Website. Retrieved September, 21 2008 at http://www.carvel.com/about_us/about_us.htm
About us. (2008). Dunkin' Doughnuts Official Website. Retrieved September 21, 2008.
Cateora, P.R., & Graham, J.L. (2005). International Marketing. 12th ed. New York, NY: The McGraw-Hill Companies, Inc.
The type of innovation represented for YoNuts is an innovation in production that changes the dynamic between the user and the production. Normally, supermarket doughnuts are produced ahead of time in a factory, then shipped and sold. YoNuts are entirely different in that they are only partially produced at a factory, shipped frozen, and then the final production is done at the site of the end user. It is akin to the difference between going to the store and buying a bag of popcorn versus going to the store and buying a pack of Orville Redenbacher. Things like Jiffy Pop and microwave popcorn have a large share of the grocery store popcorn because, quite frankly, the consumer gets a fresher, better product. So it is with YoNuts. The innovation allows consumers to produce the freshest, best doughnuts at home.
The benefit to the consumer is that the…
The product is a line of bake-at-home doughnuts. The name of the product is YoNuts, meaning "Your Doughnuts", because this might be the first time that a company has marketed doughnuts that you can make at home yourself. The logic of the product is simple. First, everybody loves doughnuts. We can have fun with this, having a tagline like "Not just for cops anymore" or something like that, but the reality is that doughnuts are one of the most popular snack foods in America, the retail doughnut industry worth around $13 billion annually (IBIS World, 2014). This includes both shops and doughnuts sold in grocery stores as well. IBIS estimates that the overall doughnut market has nearly 9000 competitors, ranging from small hipster doughnut shops like the trendy Voodoo Donut in Portland to giant chains like Krispy Kreme, Dunkin Donuts and Tim Horton's. The packaged doughnut market is…
Company's Basic Information
Americana Group is a food company that is situated in Kuwait. Americana was founded in the year 1963. It started out with a small number of traditional business activities in Kuwait and has since gone ahead to substantially grow and become the largest food company in the Arab World as well as the Middle East expanse. Initially, the Americana group was a family-owned company by the Al-Kharafi family. The owners have an international business interest portfolio that takes into account food, finance, oil and gas, real estate and telecoms. However, in 2016, the Al-Kharafi family sold almost 67% of its stake to the Adeptio group, an investment group led by Mohamed Alabbar for a value of $2.4 billion. Moreover, at the outset of 2017, the Adeptio group finalized the mandatory takeover offer that remained in the company's stockholding (Reuters, 2016).
The company's main business operations includes transmitting…
On the manufacturer side, the challenge presented by the weakened economic climate would be best managed by focusing even more on the main business strategies that have already proven successful within the specialty coffee market. Both Caribou and Starbucks emphasize customer service and the "customer experience" approach to promoting their specialty coffee houses. It seems that increased competition attributable to decreasing customers would be best addressed by ensuring that the customer experience is sufficiently attractive and fulfilling to justify the unnecessary expense of continuing to purchase specialty coffee on a BTC basis in coffee houses.
To capture or maintain the maximum market share in the supermarket or grocery store sales of specialty coffee bean product sales, it would be advisable that manufacturers increase the range of their products to permit consumers to "scale down" their spending without necessarily suspending their purchase of specialty or gourmet products altogether.
4. Who are…
Prior to the current economic recession, the specialty coffee market was very attractive. From the period 2001 to 2006 alone, the entire specialty coffee market experienced a growth rate of 48%. Moreover, more than two-thirds (69%) of that market represented consumer sales of the products with the highest cost and the highest profit margin: BTC sales in specialty coffee houses. The combination of a strong (and increasing) national coffee consumption habit, high wages, economic optimism, high real estate prices, and consumer spending in virtually all market segments in both regular and specialty products and luxury services with the optimistic projection of continued growth of the specialty coffee industry until at least 2015 made this industry very strong.
At that time, the segment of the market with the greatest profit potential was the specialty coffee house. Since the complete economic upheaval in the U.S., that has changed dramatically. While it may be possible to retain a significant percentage of specialty coffee consumers, it is likely that since 2007, market share in that segment has decreased sharply and that market share in the coffee bean product sales had risen substantially in relation to BTC sales, even within the same respective manufacturers.
With consumers likely shifting their purchasing interests from the "experience" consumption model of the specialty coffee house to the bulk bean product purchase instead, competitors in this market should have anticipated that shift immediately and adjusted their production levels, range of product lines, and marketing promotions to reflect the greater potential of that market segment. Since the bulk coffee bean product profit margin is significantly less than the BTC sales profit margin, there is less room for error or miscalculation in the attempt to capture or retain the largest possible portion of consumers. Therefore, strictly on the basis of the data available in the 2007 case study, the specialty coffee market was very strong. However, on the basis of the known effects of economic instability on consumer spending habits, the specialty coffee market is much less strong today and much more dependent on bulk coffee bean product sales.