krispy kreme doughnuts (kkd) case studa

STRATEGIC MANAGEMENT

“KRISPY KREME DOUGHNUTS (KKD)”

CASE STUDY FROM THE BOOK(STRATEGIC MANAGEMENT, CONCEPTS

AND CASES… WRITTEN BY, FRED R. DAVID)

Presented by:Bano Khisrow, Hira Ali, Maha Jawed and Misbah Khan

Department of Commerce, BS (final year)

PRESENTATION PREVIEW Introduction Mission and Vision Internal assessment External assessment Strategy formulation Strategy implementation Strategy evaluation Conclusion

INTRODUCTION

Krispy Kreme Doughnuts, Inc. is an American global doughnut company and coffeehouse chain based in Winston-Salem, North Carolina, United States.

INTRODUCTION Founder: Vernon Randolph Company type: Public Industry: Restaurant Founded in: 1937 Headquarter: Winston Salem, North Carolina,

United states. Employees: 3700 Official website: krispykreme.com

INTRODUCTIONKrispy Kreme doughnuts deals in the following main products:

* Doughnuts* Sausage rolls* Soft drinks* Coffee and other beverages

INTRODUCTION Krispy Kreme Doughnuts, Inc. is an American

global doughnut company and coffeehouse chain based in Winston-Salem, North Carolina, United States.

Though there are other similar companies in the market but Krispy Kremes signature item is a glazed doughnut that is traditionally served warm.

Beside the store their products are sold in super markets, grocery stores, convenience stores, gas stations, Wal-Mart and Target stores in the United States.

Krispy Kreme Doughnut’s existing vision and mission statements.

VISION STATEMENT:

"Our vision is to be the worldwide leader in sharing delicious tastes and

creating joyful memories."

MISSION STATEMENT:

"Our mission is to touch and enhance lives through the joy that is Krispy

Kreme."

Krispy Kreme Doughnut’s re-designed vision and mission statements.

VISION STATEMENT:

"Our vision is to be the worldwide leader in sharing delicious tastes and

creating joyful memories."

MISSION STATEMENT:

"Our mission is to reach every culture throughout the world with our

delicious doughnut. We will provide quality service and product to everyone

that walks through our doors."

The vision and mission statements of Competitors!

Starbucks vision and mission statements.

VISION STATEMENT:

“To establish Starbucks as the premier purveyor of the finest coffee in the

world, while maintaining our uncompromising principles, while we

grow.”

MISSION STATEMENT:

“To inspire and nurture the human spirit – one person, one cup and one

neighborhood at a time.”

Dunkin Donuts vision and mission statements.

VISION STATEMENT:

“To be always the desired place for great coffee beverages and delicious complementary donuts & bakery products to enjoy with family and friends”

MISSION STATEMENT:

”To be the leading provider of the wide range delicious beverages & baked product around the kingdom in a convenient, relaxed, friendly environment, that insures the highest level of quality product and best value for money.            We provide our guest, the elegant service and unforgettable experience to meet their expectations in every single visit. ”

Internal Assessment

Existing organizational chart of, Krispy Kreme Doughnuts (KKD)

Improved/ recommended organizational chart of ,

Krispy Kreme Doughnuts (KKD)

The market positioning map of the firm and the competitors

Marketing strategies of the Firm

MARKETING STRATEGIES: Krispy Kreme doughnuts were vertically integrated in term

of their supply chain.

They introduced the free doughnut strategy, termed as “hot now” (free doughnut while waiting in the line)

Gift/ accessories: shirts, hats, coffee mugs, toys.

Fundraising: helped schools raise over $30 million in a matter of few years (selling doughnuts, coffee, certificates and partnership cards).

KKD divisions and operations

KKD DIVISIONS AND OPERATIONS: Krispy Kreme is operating 523 stores in the United

States, Australia, Bahrain, Canada, Hong Kong, Indonesia, Japan, Kuwait, Lebanon, Mexico, the Philippines, Peurto Rico, Qatar, Saudi Arabia, South Korea, the United Arab Emirate and the United Kingdom.

There are two types of Krispy Kreme stores:* Factory stores (281)* Satellite stores (242)

KKD DIVISIONS AND OPERATIONS: The “factory stores” usually contain a doughnut-making

production line in addition to retail establishment. They can produce from 4000 to10,000 dozen doughnuts daily.

The second type of KKD store is the “satellite store”, which sells doughnuts and beverages and some satellite stores contain what is termed a hot shop, tunnel oven doughnut heating equipment, which allows the consumers to have a hot doughnut experience.

WEBSITE AND E-COMMERCE EFFORTS:The new site of Krispy Kreme doughnuts was launched in December 2012 and has proved a success:

Before its new site launched, Krispy Kreme found making vital improvements to the site proved extremely difficult - as the development agency who maintained it were based outside of the UK.

Krispy Kreme had also lost touch with the payment service provider responsible for processing card payments made on the site; and attempting to re-establish contact with them was "proving to be a nightmare.“

In light of these issues, it was agreed that a complete overhaul of Krispy Kreme UK’s e-commerce operation was needed: the FMCG e-commerce market was moving forwards at an incredible pace, and for Krispy Kreme, being left behind was simply not an option.

As a result, Nigel Perry, Internal Audit Manager, took responsibility for overseeing the project and selected the Drupal platform(an open source technology), considering it a significant move.

“VALUE OF FIRM” , ANALYSIS:Krispy Kreme Doughnuts, Supply chain:

•KK Supply Chain produces doughnut mixes and manufactures doughnut-making equipment, which all franchisees are required to purchase.

Additionally, KK Supply Chain operates a distribution center that provides Krispy Kreme stores with supplies for the critical areas of their business.

KK Supply Chain generates revenues on sales of doughnut mixes, supplies, ingredients and equipment to franchisees.

It supports both Company and franchise stores by providing product knowledge and technical skills, controlling critical production and distribution processes and collective purchasing of certain materials.

STRENGTHS: Brand recognition Vertical integration Effective supply chain Affordable prices High-quality doughnuts Strong visual appearance “Hot shop” stores (Advance equipment/ machines) Wide demand Consistent expansion

WEAKNESSES: Decline in revenues, facing loss Decline in profitability ratios Limited product line Ineffective advertising Ineffective organizational hierarchy Management disputes with franchises

INTERNAL FACTOR EVALUATION (IFE) MATRIX

Key Internal Factors Weight Rating Weighted

Score

Strengths

1) Affordable, high-quality doughnuts with strong visual appeal and "one-of-a-kind" taste

0.09 4 0.36

2) Neon "Hot Doughnuts Now" sign encourages people outside the store to make an impulse purchase

0.06 3 0.18

3) Market research shows appeal extends to all major demographic groups including age and income

0.08 4 0.32

4) "Hot shop" stores save money while keeping Krispy Kreme Donuts customer experience intact

0.07 3 0.21

5) Vertical integration helps ensure high quality product 0.07 3 0.21

6) Consistent expansion; now in 16 countries 0.08 3 0.24

7) Product sold at thousands of supermarkets, convenience stores, and retail outlets through U.S.

0.06 3 0.18

Key Internal Factors Weight Rating Weighted

Score

Weaknesses

1) Return on equity, assets, and investments all negative in the trailing twelve months; skill of management is questionable

0.10 1 0.10

2) Shareholders have not received dividends recently, and are not expected to in near future; stock price in state of flux

0.07 1 0.07

3) Closing stores when stores should be opening globally at steady rate to keep up with competitors' growth

0.06 2 0.12

4) Management states in recent 10-K that it is struggling with how to make stores profitable

0.07 1 0.07

5) Product line slow to expand with nothing outside "sweet treats" to draw in health-conscious customers

0.04 2 0.08

6) Advertising not aggressive enough to appeal to areas outside southeast of U.S. where most stores are

0.03 2 0.06

Key Internal Factors Weight Rating Weighted Score

7) Revenues down, net losses in each of past three years

0.08 1 0.08

8) Per 10-K, continued disputes with franchisees could hurt future business

0.04 2 0.08

Total 1.00 2.36

MAJOR COMPETITORS OF KRISPY KREME DOUGHNUTS

MAJOR COMPETITORS OF KRISPY KREME DOUGHNUTS

EXTERNAL FACTOR EVALUATION (EFE) MATRIX

Key External Factors Weight RatingWeighted

Score

Opportunities

1) Families crave convenience because of busy lifestyles 0.08 3 0.24

2) Asians love sweets and are open to trying foreign foods 0.05 2 0.10

3) Starbucks lacks a diversified and distinctive pastry line 0.10 3 0.30

4) Dunkin' Donuts does not have hot doughnuts to sell 0.07 4 0.28

5) Many children love sweet treats 0.03 2 0.06

6) Tim Hortons has yet to expand beyond the U.S. and Canada, and its product line does not appear to be competitive

0.04 2 0.08

7) South America, Africa, and Southern Asia are markets to conquer

0.09 1 0.09

Key External Factors Weight RatingWeighted

Score

Threats

8) Dunkin' Donuts presently dominates the doughnut market, particularly in northeastern U.S.

0.12 1 0.12

9) People are becoming more health-conscious, which does not bode well for high-sugar, high-fat treats

0.08 2 0.16

10) Starbucks has approximately 25 times the amount of stores worldwide that Krispy Kreme Donut has

0.08 1 0.08

11) Restricted cash flow from banks and massive layoffs have stifled the world economy, decreasing discretionary income

0.06 2 0.12

12) Europeans prefer their local brands of doughnuts 0.05 2 0.10

Key External Factors Weight RatingWeighted

Score

13) Britons tend not to have cars, which inhibits drive-thru customers, and their eating habits and office etiquette differ from Americans

0.06 2 0.12

14) Shareholders may sell Krispy Kreme Donut stock for lack of returns and dividends compared to other similar firms in the industry

0.09 1 0.09

Total 1.00 1.94

COMPETITIVE PROFILE MATRIX (CPM)

Dunkin' Donuts Starbucks Tim Hortons

Critical Success Factors

Weight Rating Score Rating Score Rating Score

Advertising 0.11 4 0.44 3 0.33 2 0.22

Product Quality 0.15 3 0.45 3 0.45 2 0.30

Product Diversity 0.08 3 0.16 1 0.08 2 0.16

Price Competitiveness 0.08 3 0.24 2 0.16 3 0.24

Management 0.10 3 0.30 3 0.30 2 0.20

Financial Position 0.10 3 0.30 2 0.20 3 0.30

Customer Loyalty 0.10 4 0.40 3 0.30 3 0.30

Global Expansion 0.13 3 0.39 4 0.52 1 0.13

Market Share 0.10 3 0.30 3 0.30 1 0.10

Sales Distribution 0.05 2 0.10 3 0.15 2 0.10

Total 1.00 3.08 2.79 2.05

OPPORTUNITIES Asian love sweets and are open to trying foreign foods. Dunkin’ donuts does not have hot doughnuts to sell. Many children love sweet treats. South America, Africa, and Southern Asia are markets

to target. Tim Hortons has yet to expand beyond the U.S. and

Canada, and its product line does not appear to be competitive.

Families crave convenience because of busy lifestyles.

THREATS Starbucks has much greater in amount, store

worldwide than Krispy Kreme. People are much health conscious, and much care

about high sugar and high fat. European mostly prefer their local brands. Dunkin’ Donuts presently dominates the global

market, particularly in north- eastern U.S. Shareholders can sell their shares due to lack of

return or dividend compare to their competitors.

STRENGTHS-WEAKNESSES-OPPORTUNITIES-THREATS (SWOT)

MATRIX

(SWOT) MatrixStrengths Weaknesses

1) Affordable, high-quality doughnuts with strong visual appeal and "one-of-a-kind" taste

2) Neon "Hot Doughnuts Now" signencourages people outside the store to make an impulse purchase

3) Market research shows appealextends to all major demographicgroups including age and income

4) "Hot shop" stores save moneywhile keeping KKD customerexperience intact

5) Vertical integration helps ensurehigh quality product

1) Return on equity, assets, and investments all negative in the trailing twelve months; skill ofmanagement is questionable

2) Shareholders have not received dividends recently, and are not expected to in near future; stock price in state of flux

3) Closing stores when stores should be opening globally at steady rate tokeep up with competitors‘ Growth

4) Management states in recent 10-K that it is struggling with how to make stores profitable

(SWOT) Matrix

Strengths Weaknesses

6) Consistent expansion; now in 16 countries.

7) Product sold at thousands of supermarkets, convenience stores, and retail outlets through U.S.

5) Product line slow to expand with nothing outside "sweet treats" to draw in health-conscious customers.

6) Advertising not aggressive enough to appeal to areas outsidesoutheast of U.S. where most stores are.

7) Revenues down, net losses in each of past three years.

8) Per 10-K, continued disputes with franchisees could hurt future business.

Opportunities SO Strategies WO Strategies

1) Families crave convenience because of busy lifestyles

2) Asians love sweets and are open to trying foreign foods

3) Starbucks lacks a diversified and distinctive pastry line

4) Dunkin' Donuts does not have hot doughnuts to sell

5) Many children love sweettreats

1) TV, radio, and print adsdemonstrating 27 varieties of doughnuts against non-descript pastry offerings by Starbucks (S3, O3)

2) All store signs in supermarkets and conveniences where product is sold have picture of young child eating a Krispy Kreme doughnut (S7, O5)

3) Continued grand openings of stores in highly-populated cities such as Sao Paulo, Brazil &Johannesburg, South Africa (S6, O7)

1) Make doughnuts filled with fruit, put fruit cups on menu, and develop wide variety of fresh fruit smoothies; offer ways to incorporate nuts and protein into foods (W5, O3)

2) Aggressive Internet adsdemonstrating the appeal of Krispy Kreme Doughnut “hot doughnuts now” (W6, O4)

3. Open small but profitable "hot shops" in South America, Africa, and Southeast Asia in order to expand globally (W3,O7)

Opportunities SO Strategies WO Strategies

6. Tim Hortons has yet toexpand beyond the U.S. and Canada, and its product line does not appear to beCompetitive

7. South America, Africa, and Southern Asia are markets to conquer

Threats ST Strategies WT Strategies

1) Dunkin' Donuts presently dominates the doughnut market,particularly in northeastern U.S.

2) People are becoming more health-conscious, which does not bode well for high-sugar, high-fat treats.

3) Starbucks has approximately 25 times the amount of stores worldwide that Krispy Kreme Donut has.

1) Compare "hot" doughnut appeal of Krispy Kreme Doughnut to cold doughnuts of Dunkin' Donuts in TV and Internet ads (S1,T1).

2) Do "roadshow" across Europe as means of advertising, driving truck and mobile "hot shop" to major European cities and filming their reactions for European ads (S2, S4,T5, T6).

3) Express strengths and outline concrete strategies in clear format within 10-K in order to restore shareholder confidence in future of Krispy Kreme Doughnut (S1-S7, T7).

1. Expand product line with low-calorie foods (W5, T7).

2. Recruit top executivetalent from other fast-foodfirms (W1, T7).

3. Survey franchisees todiscover ways to repairbusiness relationships andretain growth of franchisemodel; study McDonald'smodel for tips (W8, T1,T3) .

Threats ST Strategies WT Strategies

4) Restricted cash flow from banks and massive layoffs have stifled the world economy, decreasing discretionary income.

5. Europeans prefer their local brands of doughnuts.

6. Britons tend not to have cars, which inhibits drive-thru customers, and their eating habits and office etiquette differ from Americans.

7. Shareholders may sell KKD stock for lack of returns and dividends compared to other similar firms in the industry.

STRATEGIC POSITION & ACTION EVALUATION (SPACE) MATRIX

Strategic Position & Action Evaluation (SPACE) Matrix:

Financial strength (FS) factors include: Profit (+1); Sales growth (+2); and Cash flow (+2)

1+2+2=5; 5/3=1.67

Competitive advantage (CA) factors include: Customer loyalty (-2); Product quality (-1); and Market share (-5)

-2 + -1 + -5 = -8; -8/3 = -2.67.

**For the above, KKD's financials were compared against competitors Dunkin' Donuts, Starbucks, and Tim Hortons.

Environmental Stability (ES) factors include: Barriers to entry into market (-4); Risk involved in business (-3); and Ease of exit from market (-4)

-4 + -3 + -4 = -11/3 = - 3.67

Industry Strength (IS) factors include: Profit potential (+2); Financial stability (+1); and Technological know-how (+4)

2 + 1 + 4 = 7/3 = 2.33

(SPACE) MATRIX:

BOSTON CONSULTING GROUP (BCG) MATRIX

BOSTON CONSULTING GROUP (BCG) MATRIX:

Krispy Kreme Doughnuts has three business segments, and they are presented here along with their annual revenues: Company Stores ($266M), Franchise ($26M) and Krispy Kreme Supply Chain ($93M), with approximately $384M in total revenues. This means that each business segment represented the following percentage in revenues: Company Stores (69.2%), Franchise (6.7%), and Krispy Kreme Supply Chain (24.1%).

BOSTON CONSULTING GROUP (BCG) MATRIX

Profits for each business segment are as follows: Company Stores ($-2M); Franchise ($18M); and KK Supply Chain ($25M), for a total of $41M in profits. Therefore, Company Stores has 0% of the profits; Franchise has about 41%; and Krispy Kreme Supply Chain has about 59%. We’ll assume that Company Stores has 3% of the market share and a -13% growth rate; Franchise has 3% of the market share and a 10% growth rate; and Krispy Kreme Supply Chain has 3% of the market share and -7% growth rate.

INTERNAL – EXTERNAL (IE) MATRIX

INTERNAL – EXTERNAL (IE) MATRIX:

The IE matrix employs two key dimensions which is the IFE total weighted score on the X-axis and the EFE total weighted score on the Y-axis. Moreover, the matrix is divided into three main regions; cells I, II and IV are classified as growth and build, cells III, V, and VII are hold and maintain while cells VI, VII and IX are classified as harvest or divest. For Krispy Kreme, the combined score of IFE and EFE puts it in cell VII which is a hold or maintain. This translates that the business strategies to be employed by KKD should be defensive, appropriate sub-strategies include market penetration, and product development.

CLASSIFICATION OF CELLS: I, II, IV classified as: Grow & Build Backward, Forward, or Horizontal Integration Market Penetration Market Development Product Development

III, V, VII classified as: Hold & Maintain Market Penetration Product Development VI, VIII, IX classified as: Harvest & Divest Retrenchment Divestiture

INTERNAL – EXTERNAL (IE) MATRIX:

The IE Geographic matrix indicates sales by region, with the Krispy Kreme’s largest share of sales being in the US, followed by the Asia Pacific, Middle East, Other North American countries and lastly Europe. The US quick service industry as whole is highly competitive and price/value sensitive. Krispy Kreme’s presence internationally is currently weak and greater focus needs to be placed on increasing its market share in the growing Asia Pacific regions.

GRAND STRATEGY (GS) MATRIX

f

RAPID MARKET GROWTH

Quadrant II

Market Development Market Penetration Product Development Horizontal Integration Divestiture Liquidation

Quadrant I Market Development Market Penetration Product Development Forward Integration Backward Integration Horizontal Integration Related Diversificationj

Quadrant III

Retrenchment Related Diversification Unrelated Diversification Divestiture Liquidation

WEAK COMPETITIVE

POSITION

STRONGCOMPETITIVE

POSITION

SLOW MARKET GROWTH

Quadrant IV

Related Diversification Unrelated

Diversification Joint ventures

QUANTITATIVE STRATEGIC PLANNING MATRIX (QSPM)

QUANTITATIVE STRATEGIC PLANNING MATRIX (QSPM):

In the QSPM two strategic alternatives were compared: whether KKD should discontinue its Company Store segment and concentrate solely on building the Franchise segment via the "hot shop" model, or whether it should continue the slow and steady growth of its Company Stores and Franchise business segments through its traditional business model.

RANGE FOR ATTRACTIVE SCORES:

1 = Not attractive 2 = Some what attractive 3 = Reasonably attractive 4 = Highly attractive

STRATEGIC ALTERNATIVES

1) Discontinue company stores and concentrate solely on building Franchise via "hot shop" stores

2) Continue slow and steady growth of Company Store and Franchise business segments through traditional business model (without "hot shops")

Key Factors Weight AS TAS AS TAS

Opportunities

1) Families crave convenience because of busy lifestyles

0.08 _ _

2) Asians love sweets and are open to trying foreign foods

0.05 _ _

Key Factors Weight AS TAS AS TAS

3) Starbucks lacks a diversified and distinctive pastry line

0.10 _ _

4) Dunkin' Donuts does not have hot doughnuts to sell

0.07 4 0.28 3 0.21

5) Many children love sweet treats

0.03 _ _

6) Tim Hortons has yet to expand beyond the U.S. and Canada, and its product line does not appear to be competitive

0.04 4 0.16 3 0.12

7) South America, Africa, and Southern Asia are markets to conquer

0.09 3 0.27 2 0.18

Key Factors Weight AS TAS AS TAS

Threats

1) Dunkin' Donuts presently dominates the doughnut market, particularly in northeastern U.S.

0.12 3 0.36 1 0.12

2) People are becoming more health-conscious, which does not bode well for high-sugar, high-fat treats.

0.08 _ _

3) Starbucks has approximately 25 times the amount of stores worldwide that KKD has.

0.08 2 0.16 1 0.08

4) Restricted cash flow from banks and massive layoffs have stifled the world economy, decreasing discretionary income.

0.06 _ _

Key Factors Weight AS TAS AS TAS

Threats

5) Europeans prefer their local brands of doughnuts

0.05 _ _

6) Britons tend not to have cars, which inhibits drive-thru customers, and their eating habits and office etiquette differ from Americans

0.06 _ _

7) Shareholders may sell KKD stock for lack of returns and dividends compared to other similar firms in the industry

0.09 2 0.18 1 0.09

1. 00

Key Factors Weight AS TAS AS TAS

Strengths

1) Affordable, high-quality doughnuts with strong visual appeal and "one-of-a-kind" taste

0.09 _ _

2) Neon "Hot Doughnuts Now" sign encourages people outside the store to make an impulse purchase

0.06 4 0.24 3 0.18

3) Market research shows appeal extends to all major demographic groups including age and income

0.08 _ _

4) "Hot shop" stores save money while keeping KKD customer experience intact

0.07 4 0.28 1 0.07

5) Vertical integration helps ensure high quality product

0.07 _ _

Key Factors Weight AS TAS AS TAS

Strengths

6) Consistent expansion; now in 16 countries

0.08 _ _

7) Product sold at thousands of supermarkets, convenience stores, and retail outlets through U.S.

0.06 _ _

Key Factors Weight AS TAS AS TAS

Weaknesses

1) Return on equity, assets, and investments all negative in the trailing twelve months; skill of management is questionable

0.10 3 0.30 1 0.10

2) Shareholders have not received dividends recently, and are not expected to in near future; stock price in state of flux

0.07 _ _

3) Closing stores when stores should be opening globally at steady rate to keep up with competitors' growth

0.06 3 0.18 1 0.06

4) Management states in recent 10-K that it is struggling with how to make stores profitable

0.07 4 0.28 1 0.07

Key Factors Weight AS TAS AS TAS

Weaknesses

5) Product line slow to expand with nothing outside "sweet treats" to draw in health-conscious customers

0.04 _ _

6) Advertising not aggressive enough to appeal to areas outside southeast of U.S. where most stores are

0.03 _ _

7) Revenues down, net losses in each of past three years

0.08 3 0.24 1 0.08

8) Per 10-K, continued disputes with franchisees could hurt future business

0.04 1 0.04 2 0.08

Total 1.00 2.97 1.44

RECOMMENDATIONS

RECOMMENDATIONS:

1) Reduce operating expenses Change entire manufacturing and distribution strategy. – Implement par baked manufacturing operation. To allow individual stores to decrease in size, thus lowering per store

operating costs to a more appropriate level for sales volume. Increased efficiency – smaller workforce per store, par- bake allows for

minimal waste – inventory as needed (important b/c fresh goods – low shelf life).

Par bake will allow for “hot doughnuts now” all of the time. New Plant Equipment – freezers, production equipment, freezer trucks for

distribution/delivery. Store Equipment – freezers, oven for various par baked goods, fryers for

doughnuts. R&D for unique par bake operation.

RECOMMENDATIONS:

2) Develop stronger relations and control of franchisees Short-term period of one year – postpone new

franchise agreements/new store openings. Implement Franchise Support Systems. Communication – between corporate and franchisees Support – training, advertising. Utilize recommendation #1 in order to lower

operating expenses for franchisees.

RECOMMENDATIONS:

3) Implement Marketing Strategies Advertising – national television and radio advertising

campaign based on “hot doughnuts now”. Marketing research – periodic research to stay familiar of

trends. R&D – product development. 4) Strengthen Competitive Advantage through differentiation in products and services. Continue to utilize “hot doughnuts now”. Expand product line.

FINANCIAL ANALYSIS

KKD BALANCE SHEET    (USD)FISCAL YEAR ENDING 31-JAN2011 31-JAN2012 31-JAN2013

Cash & Equivalents 22.0M 44.3M 66.3M

Accounts Receivable 20.8M 22.3M 26.3M

Inventories 14.6M 16.5M 12.4M

Pre-paid Expenses 0 0 4.50M

Deferred Tax Assets 0 10.5M 23.3M

Other Current Assets 5.97M 3.61M 1.94M

Total Current Assets 63.4M 97.2M 135M

Property, Plant & Equipment 71.2M 75.5M 78.0M

Goodwill & Intangibles 23.8M 23.8M 24.2M

Other Long-term Assets 11.6M 9.41M 11.8M

Total Long-Term Assets 107M 238M 207M

Total Assets 170M 335M 342M

BALANCE SHEET    (USD)Accounts Payable 9.95M 10.5M 12.2M

Accrued Expenses 0 0 0

Short Term Debt 2.51M 2.22M 2.15M

Other Current Liabilities 0 3.17M 4.32M

Total Current Liabilities 40.8M 41.5M 46.7M

Long Term Debt 32.9M 25.4M 23.6M

Capital Lease Obligations 19.8M 0 0

Other Long-term Liabilities 0 18.9M 25.2M

Total Long-term Liabilities 52.7M 44.3M 48.8M

Total Liabilities 93.5M 85.8M 95.5M

Additional Paid-In Capital 371M 378M 354M

Retained Earnings -294M -128M -107M

Other Equity -34.0K -336K -338K

Total Shareholder's Equity 76.4M 249M 246M

RATIOS

For the years 2011 2012 2013

Debt / Equity  0.46 0.11 0.10

Current Ratio  1.55 2.34 2.89

Quick Ratio  1.19 1.94 2.52

Times Interest Earned Ratio  2.38 19.16 23.17

KKDINCOME STATEMENT    (USD)

FISCAL YEAR ENDING

31-JAN2011

31-JAN2012

31-JAN2013

Total Revenue 362M 403M 436M

Cost of Revenue 312M 346M 362M

Gross Profit 50.0M 57.2M 73.4M

SG&A 21.9M 22.2M 25.1M

Amortization & Depreciation 8.95M 8.66M 10.3M

Other Expenses 3.31M 749K 394K

Total Operating Expenses 34.1M 31.6M 35.8M

Operating Income 15.9M 25.6M 37.6M

Other Income -693K 6.41M 317K

EBIT 15.2M 32.0M 38.0M

KKDINCOME STATEMENT    (USD)

Interest Expense 6.36M 1.67M 1.64M

Income Before Taxes 8.86M 30.4M 36.3M

Income Taxes 1.26M -136M 15.5M

Net Income from Continuing Ops 7.60M 166M 20.8M

Net Income 7.60M 166M 20.8M

Net Income to Common 7.60M 166M 20.8M

For the years 2011 2012 2013

Net profit margin 0.02 0.41 0.04

Return on total assets(ROA) 0.04 0.49 0.06

Return on shareholders Equity(ROE) 0.09 0.66 0.08

Earning per share(EPS) 0.11 2.43 0.31

PROFITABILITY RATOS

BALANCE SORECARD OF KRISPY KREME DOUGHNUT

OBECTIVE MEASURE TARGET

To add value to the purchase and dining experience

Frequency of walk-ins and improved customer feed back

At least 15% in 1 year

Intensive marketing efforts

number of franchise and satellites store

At least 2 store per month in year

CUSTOMERS PERSPECTIVE

OBECTIVE MEASURE TARGET

Venturing into e-commerce

Number of online members

At least 10% of the area population in 1 year

Intensive marketing efforts

number of ad launched

At least 1 ad campaign per quarter

PROCESS PERSPECTIVE

GROWTH/INNOVATION LEARNING PRESPECTIVE

OBECTIVE MEASURE TARGET

Training of staff and crew for use of internet tools and software

Accomplishment of training

Maximum of 2 months

Employing team building activities

accomplishment of activity

At least once a year

FINANCIAL PROSPECTIVE

OBECTIVE MEASURE TARGET

To have a positive and increasing ROE

Percent ROE At least 10% in 1 year

Employing team building activities