Krispy Kreme Doughnuts, Inc.

1212 words 5 pages
Case #7
Krispy Kreme Doughnuts, Inc.


FNCE 4620 - Financial Analysis and Policy

Dr. Gregory

Group 1

Chris Suggs

Alex Stephens

Florian Fourmanoy

Jonathan Colangione

Table of Contents

1. Executive Summary

2. Problem Statement

3. Data Analysis

4. Key Decision Criteria

5. Alternatives Analysis

6. Recommendations

7. Action and Implementation Plan

1. Executive Summary:

Krispy Kreme Doughnuts was a successful privately owned business since 1937. In 1982 a group of franchises bought back the company from Beatrice Foods for $24 million, and reintroduced the old recipe of doughnuts and their “hot doughnuts now” system. In 1998 Scott Livengood became Krispy Kreme’s new
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Long term debt was only 7.3% of KKD’s balance sheet when other averages where around 40%. Shareholder’s equity accounted for 68.4% of their balance sheet when others were at about 13% due to growing retained earnings and not re-investing their money properly. They were using revolving lines of credit instead of retained earnings to operate and invest. KKD’s operating expenses were about 25% higher than others in the industry showing high expenses and sales.

4. Key Decision Criteria

In deciding among the alternative we have compiled the following statements in order to aid in choosing a solution from our alternatives:

1. Increasing profitability

2. Achieving a higher ROI

3. Staying focused on their main product

4. Maintain corporate image to retain customers

5. Lowering risk

6. Focusing more on long-term investments

5. Alternatives Analysis

The four alternatives that we think are the most reasonable and relevant to our problem statement are:

- Having a more conservative expansion strategy, by focusing on long-term investment.

- Reducing franchise fees and ingredient prices to help the newer franchises in fragile markets succeed.

- Properly accounting reacquisitions by amortizing the reacquired franchises and therefore reducing the amount of intangible reported on the balance sheet.

6. Recommendations

We feel that KKD taking a more conservative expansion strategy would be the best alternative.


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