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McDonald’s and Krispy Kreme Talk Expanding Partnership
November 10, 2023
Krispy Kreme announced on Thursday ongoing discussions concerning the expansion of its partnership with fast-food giant McDonald’s. For over a year now, the two restaurant chains have been exploring consumer demand for doughnuts among Big Mac enthusiasts in selected McDonald’s outlets in Kentucky. By March, the trial had extended to nearly 160 restaurants across Louisville and Lexington, with the broader test aiming to gauge customer demand and the impact of a larger-scale launch on restaurant operations.
McDonald’s has been capitalizing on the popularity of coffee, a frequent companion to doughnuts, in an effort to increase customer footfall. Meanwhile, it has scaled back on bakery items such as cinnamon rolls and blueberry muffins. Krispy Kreme, known for its fresh doughnuts, has managed to increase prices without affecting sales, as consumers appear willing to spend on such affordable indulgences.
According to incoming Krispy Kreme CEO Josh Charlesworth on an earnings call Thursday, the discussions with McDonald’s have revolved around Krispy Kreme’s capacity to deliver fresh doughnuts on time, the necessary scale for broader expansion beyond Kentucky, and the commercial viability of the partnership. Charlesworth pointed out that the company has found that fast-food customers behave similarly to those at Krispy Kreme’s other retail outlets.
“While nothing has been finalized, we are excited about our continued partnership with McDonald’s, and we are in advanced discussions about expanding the relationship.”
Josh Charlesworth via USA Today
The successful “hub and spoke” model utilized by Krispy Kreme, allowing for efficient production and distribution of its products, is expected to expedite the expansion. Despite the company’s third-quarter earnings and revenues falling short of Wall Street’s estimates, leading to a nearly 7% drop in share prices, the doughnut chain has seen a 20% stock increase this year, now boasting a market cap of $2.1 billion. In addition to its doughnut operations, Krispy Kreme also owns Insomnia Cookies, a late-night cookie chain, although it announced in October that it’s considering strategic alternatives for this subsidiary.
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