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Krispy Kreme
Introduction:
This is a case study of Krispy Kreme Doughnuts and changes in management strategy to address stagnant sales. The first Krispy Kreme Doughnut shop was opened in Winston-Salem, North Carolina, by Vernon Rudolph. Vernon first sold his doughnuts (which were made with a secret yeast-raised recipe) to grocery retailers; however, due to their quick popularity, he opened his own retail shop. In 1954, Mike Harding became a partner in the company and he and Rudolph grew revenue from less than $1 million to $58 million by 1974.
Case Overview
Rudolph and Harding had a vision to expand business by controlling every step of the doughnut-making process. They built an equipment department, a plant for blending doughnut mixes and standardized all Krispy Kreme shops. The standardized look of their shops and the melt-in-your mouth taste became a trademark during this period. When Beatrice Foods bought Krispy Kreme in 1976 and made changes to the recipe and the company's signs, it quickly became apparent this was a problem. Customer reaction was negative and business declined.
Sales rebounded when a group of franchisees bought the company from Beatrice Foods in 1982 and restored the original recipe and sign appearance. While this acquisition temporarily revived Krispy Kreme, high interest rates on the debt incurred for the buy-out influenced their ability to have funds to expand. To work with limited funds, their strategy was to grow revenue from both company-owned and associate stores by wholesaling Krispy Kreme and private label doughnuts to local groceries and supermarkets. With sale ...