Denise Cheng, Claudia Funes, Emma Geach, Jennifer Lin, Brian Walker

HRD 328
Team Project
February 16, 2010
Executive
• Summary
Known for their “hot doughnut experience” and “doughnut theatres”, Krispy
Kreme Doughtnuts, Inc. is currently facing many major obstacles in its
business operations and organizational structure. Recent SEC filing
discrepancies have added to the lack of optimism (and
market confidence?) among stockholders. A major reason for the decline in
franchise sales is because of market oversaturation and overexpansion. The
company doubled its number of stores from 70 to 150 in 3 years and supplied
their products to other outlets such as supermarkets, gas stations,
and convenient stores without examining the quality of their products or their
marketing strategy.  Currently, the company is planning to develop small retail
concept stores, cut costs, and  expand upon their beverage and Kool Kreme
concepts.
•
This presentation will examine the history of Krispy Kreme’s strategy, their
current strategy (delete "now"), and our recommendations to transform the
company into a high performing organization with the assistance of the
balanced scorecard approach, HR best practices, and a better organizational
strategic direction.

DC, CF, EG, JL, BW

Agenda
• Company Overview
• Company Strategy – Then and Now
• Key Performance Indicators
• SWOT Analysis
• New Organizational Strategy
• New Human Resources Strategy
• A Balanced Scorecard Approach
• Questions?

DC, CF, EG, JL, BW

Company Overview
• Founded in 1938 by Vernon Rudolph
– Bought a secret yeast-raised doughnut recipe from a French Chef
– People wanted hot doughnuts so he cut a hole in the wall and started selling Hot
Original Glazed doughnuts directly to customers
• 1976: bought by Beatrice Foods
• 1980s: focus on hot doughnut experience
• 1982: small group of Associates bought back from Beatrice
– Renewed focus on hot doughnut experience priority
• 2000: held initial public offering of common stock, opened first
international store in Canada
• 2001: acquired Digital Java, Inc.
• 2002: introduce 4 new signature coffees to stores
• Franchises available in US, Canada, Asia, Mexico, Puerto Rico, Australia and
Eastern and Western Europe

DC, CF, EG, JL, BW

Company Strategy
Then
• “Hot Doughnuts Now” Experience
• Doughnut Theatre experience
• Rely on Word of mouth than paid advertising
• Growth binge in 1990s
• Location close in proximity
• Sell brand everywhere and anywhere
– Ranged from Gas stations to Kiosks
Now
• Develop small retail concept store
– Cook doughnuts on site or have them delivered from nearby factory store
– Less expensive to open, run, and staff
– When locations are supplied by a large Krispy Kreme factory store, I improves the utilization of the
factory store and significantly enhances return on those stores
– Convenience
• Cost cutting measures to strengthen bottom line
– Kool Kreme soft serve ice cream
– Baked goods
– Coffee, expresso, blended drinks
• Limited Time Only
– Valentine’s day heart shaped donut promotion – more than 100 US stores old 400,000 of the donuts
• Switch products with 0 grams of trans fat
DC, CF, EG, JL, BW
Financials/KPIs
• 2009 Total Revenue: $383,984
• Return on investment: -0.67
– Compared to Starbucks 14.49 and industry ROI 1.39
• Inventory Turnover
– 18.72 days compared to industry 0.61 turnover

DC, CF, EG, JL, BW

SWOT Analysis
Strengths Weaknesses
• Cost advantage • Limited menu items
• Nationally known brand of donuts • Lack of advertising
• Donut making theatres • Opening additional locations without focus
• Strong community relationships on increasing store performances
• One of a kind taste So What?:
• Legal issues
– Channel Stuffing
• Excellent locations
Krispy Kreme must sharpen• itsCredibility
strengths, focusmanagement
of company its
• Streamlined doughnut making process
• competitive advantage, and offer –a greater
Buying power for doughnut ingredients and
Accusationsselection
of misconduct of
products
store operating that meets customer
equipment • demands
Bankruptcy filings by several of its franchises
for delicious
• Low Inventory Turnover Ratio
and healthier doughnuts, while–creating a unique
Average 18 days compared to industry 0.61
purchasing experience to attract anddays
retain customers.

Opportunities Threats
• Emerging markets and expansion abroad • Competition
• Innovation – Dunkin’ Donuts, Starbucks
• Product and services expansion • Economic slowdown
– Premium coffee lines, beverage program • External changes
• Offer more health conscious items – Government, politics, taxes
• Co-branding opportunities • Market leaning towards healthier food
products
• Krispy Kreme Charge card • Increasing cost of ingredients
DC, CF, EG, JL, BW
Organizational Strategy
• Go back to core business of the “doughnut experience”
– Quality control
• Continuous improvement
• Research and development
– Recipe refinement
– Better ingredients
– More health conscious
– Unique Classic Breakfast and/or Snack Experience
• Location
– No retail concept stores without factory experience
– Remove poor-quality/lesser-quality KK Doughnuts from gas stations, 7-
11s, and supermarkets
– Find a more exclusive location that will act as an attraction (one
location per major city)
– Combine retail portion with factory experience
DC, CF, EG, JL, BW
Organizational Strategy
• Marketing
– Find Specific Market Niche
• Target mass market niche
• Increase fresh doughnut prices from $0.50 to $1.00 (50%
increase)
– Offerings of Seasonal Items (winter coffee, summer ice cream)
– Doughnut Card with Incentive Plan
– Advertising -- TV/Internet/Magazines
• Kool Kreme, Coffee, Chillers, low fat doughnuts/products
• Strategic Partnering
– Jenny Craig/Weight watchers (100 calorie dessert options)
– IKEA (Finding Big Chain Stores with High Foot Traffic to open small KK
factory retail for shoppers)
– National Gyms (e.g.: 24 Hour Fitness; LA Fitness); Marathon Runners
DC, CF, EG, JL, BW
Human Resources
• Recruiting/Culture
– Family environment
– Old fashioned feel
– Value employee creativity and innovation
– Competencies
• Positive Attitude
• Image/brand management
• Training and Development
– Marketing -- employee word of mouth
– Development of employees
• Leadership
• Management
• Product knowledge
• Team Development
– Customer service -- unique purchasing experience
• Personal touch
DC, CF, EG, JL, BW
Human Resources
• Quality Control
– Unique products -- trial and error (Panda Express)
– Research and development
• Performance Management Program
– Employee engagement/retention
• Incentives
• Suggestion box
– Succession planning
– Employee Performance
• Attitude, competency, customer service, contributing to positive experience,
promoting different products, maintaining culture
• Social Responsibility
– Fundraising
– Outreach to surrounding communities
– Volunteer employee time
– Promote Social Responsibility

DC, CF, EG, JL, BW

BSC Approach
• Product/Service Attributes
– Knowledge of products
– Continuous Improvement Feedback
– Proper preparation of products
• Customer Service
– Personal touch
• Smiling, friendliness, asking for name on orders, etc…
– Maintenance/Improvement of Company Image and
Reputation
• Knowledge of company history, how doughnuts are made,
company image portrayal, etc…
– Attitudes and behaviors (in alignment with team?)
– Customer Interaction (Courtesy and Politeness)
DC, CF, EG, JL, BW
BSC Approach
• Employee Competencies
– Leadership skills
– Management skills
– Interpersonal/Communication skills
– Team-player skills
• Financial
– Revenues
– Inventory turnover
– Return on investment
– Stocks

DC, CF, EG, JL, BW

 References
• 2009 Krispy Kreme Annual Report. Krispy Kreme, Web. 26 Feb 2010. <http://files.shareholder.com/downloads/KKD/847109130x0x288139/AA6C2D27-
0AD8-46EB-86C3-8B725B472F97/KKD_2009_Annual_Report.pdf >.
• " Financials: Krispy Kreme Doughnuts, Inc. (KKD) Stocks." BUsiness & Financial News, Breaking US & International News. Reuters, Web. 26 Feb 2010.
<http://www.reuters.com/finance/stocks/financialHighlights?symbol=KKD >.
• Gentry, C.R. (2006). No more holes at Krispy Kreme. Chain Store Age. New York: 82, 7, 64.
• Hovland, Christa. "Krispy Kreme CEO confident in brand strategy." 12 May 2009. QSR Web, Web. 25 Feb 2010. <http://www.qsrweb.com/article.php?
id=14411&prc=55&page=1>.
• Kell, J. & Barris, M. (2009). Corporate news: Krispy Kreme’s loss narrows. Wall Street Journal. New York, New York.
• Krispy Kreme. Wikipedia, Web. 26 Feb 2010. <http://en.wikipedia.org/wiki/Krispy_Kreme>.
• "Krispy Kreme Expands Kool Kreme Test." 05 Aug 2009. Web. 26 Feb 2010. <http://franchise.business-opportunities.biz/2009/08/05/krispy-kreme-
expands-kool-kreme-test/>.
• "Krispy Kreme’s Chief Executive Quits Amid Turnaround ." 08 Jan 2008. The New York Times, Web. 26 Feb 2010.
<http://www.nytimes.com/2008/01/08/business/08kreme.html?_r=1>.
• "Krispy Kreme Presskit." Krispy Kreme, Web. 26 Feb 2010. <http://www.krispykreme.com/presskit.pdf>.
• "Learning from the Franchising Mistakes of Failed Krispy Kreme." 27 Jan 2010. Morebusiness.com, Web. 26 Feb 2010.
<http://www.morebusiness.com/franchise-risks>.
• Lockyer, Sarah. "Analysts: Krispy Kreme outlook not so sweet: company admits operational and strategic changes needed to increase profits." 06 Sept
2004. BNET, Web. 26 Feb 2010. <http://findarticles.com/p/articles/mi_m3190/is_36_38/ai_n6192881/>.
• Lockyer, Sarah. "Krispy Kreme looks to climb out of the hole with new strategy." 13 Nov 2006. BNET, Web. 26 Feb 2010.
<http://findarticles.com/p/articles/mi_m3190/is_46_40/ai_n16850505/>.
• May , Rob. Krispy Kreme Part II - A Bad Strategy. 23 June 2003. Business Pundit, Web. 26 Feb 2010. <http://www.businesspundit.com/krispy-kreme-
part-ii-a-bad-strategy/>.
• Mayes, W. Krispy Kreme. University of Oklahoma, Web. 26 Feb 2010. <http://students.ou.edu/W/Mayes.M.White-1/files/Krispy%20Kreme.pdf>.
• McCormack, S. (1998). Sweet success. Forbes. New York: 162, 5, 2.
• McGreer, Ben. "Krispy Kreme Marketing Plan." 17 Jan 2009. Web. 26 Feb 2010. <http://www.docstoc.com/docs/3585391/Krispy-Kreme-Marketing-
Plan # http://www.fool.com/investing/general/2004/05/21/saving-krispys-kreme.aspx >.
• Peters, J. (2003). Krispy Kreme brews new drink slate as doughnut field booms. Nation’s Restaurant News. New York: 37, 23, 4.
• "Strategy: Krispy Kreme Word-of-Mouth Tactics Continue to Go Against the Grain." 21 Oct 2002. Brandweek, Web. 25 Feb 2010.
<http://www.allbusiness.com/marketing-advertising/branding-brand-development/4675339-1.html>.
• Szczepaniuk , Jack. "Krispy Kreme Doughnuts." 22 April 2008. Web. 26 Feb 2010. <http://www.slideshare.net/szczepjw/krispy-kreme-doughnuts-
presentation>.
• Wilson, M. (2004). Recipe for comfort. Chain Storage Age. New York: 80, 4, 70.
DC, CF, EG, JL, BW