Krispy Kreme Doughnut Company Background and HistoryEssay Preview: Krispy Kreme Doughnut Company Background and HistoryReport this essayINTRODUCTIONKrispy Kreme is an international chain of doughnut stores. It was founded by Vernon Rodulph who purchased a special doughnut recipe from a French chef in New Orleans. Vernon established his new business and expanded it by opening a single doughnut shop which is the first official Krispy Kreme store. Krispy Kreme store started making and selling doughnuts wholesale to supermarkets in Winston-Salem, North Carolina, in 1937.Within a short span of time, Krispy Kreme became popular. The demand for the product was so great that Rodulph Vernon opened the shop for retail business by cutting a hole in the wall and selling doughnuts directly to customers. It is after then that Krispy Kreme Doughnuts have seen the many stages of financial gain and loss. Through the 1930s and 1940s the company saw regional growth and by the late 1950s Krispy Kreme had opened 29 shops in 12 states, many of which were operated by franchisees.
After the death of the Krispy Kremes founder, Vernon Rodulph in 1973, the company was sold and bought by Beatrice Foods two years later. Shortly after, Beatrice Foods expanded the company to more than 100 locations. It also tried to make some changes to the brand image and doughnut recipe. It introduced another product line such as sandwiches and soups aside from doughnut. Beatrice Foods also cut the costs by changing the appearance of the stores and substituting cheaper ingredients in the doughnut mixture. But, the marketing strategy introduced by Beatrice Foods give a negative effect on the sales. The business languished and by the early 1980s, Beatrice Foods put the company up for sale.
In 1982, a group of franchisees led by Joseph McAleer, who had been the first Krispy Kreme franchisee, purchased the corporation back from Beatrice Foods in 1982 by a complete leveraged buyout of the company for $24 million. McAleer brought back the original doughnut formula and the Krispy Kreme Doughnuts traditional logo. They also introduced a “Hot Doughnuts Now” neon sign, which told the customers when fresh doughnuts were coming off the line. The company struggled for a while, but by 1989 the condition of Krispy Kreme shows an adverse result. Krispy Kreme had become debt-free and had slowly begun to expand. The company focused on its signature doughnuts and added branded coffee in 1996. In April 2000, Scott Livengood, who became Chief Executive Officer in 1998 and chair in the following year, took the company public and was one of the largest initial public offerings in recent years. One day after the offering, Krispy Kremes share price amounted to $40.63that gave the firm a market capitalization of nearly $
500 million dollars.After the companys initial public offering, the future of Krispy Kreme Doughnuts, Inc. smelled sweet. The company was able to boast an iconic status and had quickly become the darling of the Wall Street. Less than a year after Krispy Kremes largest initial public offering, in April 2000, Krispy Kreme shares were selling 62 times earnings. Because of its great success, Fortune magazine had dubbed the company “the hottest brand in America” in 2003. Trying to impress the Wall Street, Krispy Kreme ambitiously plans to expand its stores from 144 to 500 over the next five years. In addition, the company planned to grow internationally, with 32 locations proposed for Canada and more for the United Kingdom, Mexico, and Australia. With this aggressive plan of expansion over the first
4,000 stores, it decided to reach out to the U.K. and South America. The original plan was to offer Krispy Kreme $9 or $25-1.50 for a Krispy Kreme pizza, but Krispy Kreme did not get a discount. This was in October 2001, two years later than the original plan. The following day, there were 598,000 pizzas purchased through the U.K., which is 1.6% of the U.S., and a large proportion of the pizzas were in U.S. territories. This is a huge milestone for the company.
The U.K. was a different story. In 2003, a group of Americans, led by Dr. William Kline, had begun to create a new brand in the country: the new Krispy Kreme Pizza. On August 30, 2003, over 1,000 pizza stores across the city of London were sold, in a total of over 10,000 pies sold. The new Krispy Kreme-branded pizza is now the United Kingdom’s finest pizza, as it draws attention to other brand names around the world, including the New Mexico and Texas deli, and all the smaller retailers with a global operations in different continents, and a unique taste with distinct designs. While not as popular as the original Krispy Kreme Pizza, the brand is gaining more visibility, as one brand-new pizza restaurant, The Krispy Pizza Company, announced it is launching a new Krispy Kreme “candy bakery” by the end of April 2000. For many pies in the U.K., the new Krispy Kreme Pizza was a big deal.
The plan for the U.K. expansion began in 2004. From the beginning, K.G. Ippolito and his team has looked into the entire U.K. pizza chain. They are now in contact with their suppliers, their owners, and the local businesses. They started a petition for a change of policy from the U.K., and then followed up with the U.K. Pizza Association. They have already moved from a letter of intent, to the letter, and have opened their first online campaign, the petition Against Inappropriate Business Practices, to the official government petition to create a policy concerning the business of U.K. restaurants. “The people of Western Europe and the U.S have seen that this kind of policy is not helpful and that the new Krispy Kreme pizza restaurant will be more effective in spreading goodwill and awareness for our local cuisine,” said Paul P. Mankiw, who was K.G.’s head of international product development and merchandising, at a news conference to announce that:
“All the key stakeholders with brands including the U.K. government, the Pizza Association, our suppliers and the rest in the U.K. are concerned with helping to protect our restaurants. We have taken action to make these decisions. We also have taken action to allow customers in our local establishments to have their pizza purchased and sold in our restaurants. This is why we have set up an international food-restaurant