McDonald’s and Krispy Kreme in Discussions to Broaden Collaboration

         

Krispy Kreme and McDonald’s are exploring possibilities to expand their partnership that initially began as a pilot project for doughnuts served at McDonald’s Kentucky locations.

Pilot Project Expansion

Krispy Kreme and McDonald’s are reportedly in talks to expand their partnership. The collaboration initially started with a pilot project at a few McDonald’s Kentucky locations over a year ago. The pilot later extended to around 160 restaurants in Louisville and Lexington, Kentucky. The aim was to gauge customer demand and evaluate the impact of a larger-scale rollout on restaurant operations.

Strategic Considerations

The discussions between McDonald’s and Krispy Kreme have delved into various aspects such as Krispy Kreme’s capacity to deliver fresh and timely doughnuts, the required scale for expansion beyond Kentucky, and the commercial feasibility of the partnership. On a conference call, Krispy Kreme’s incoming CEO, Josh Charlesworth, mentioned that the company has recognized similarities in consumer behavior between fast-food restaurants and Krispy Kreme’s other retail outlets.

Business Performance and Expansion Plans

Krispy Kreme employs a ‘hub and spoke’ model to efficiently produce and distribute its products. The company’s stock experienced a 10% decline in morning trading after reporting lower-than-expected third-quarter earnings and revenue. Despite this, the company’s stock has shown an overall increase of over 18% this year, with a market capitalization of $2.06 billion. Krispy Kreme also owns Insomnia Cookies, but it has expressed interest in exploring strategic alternatives for that business.

Market Insights

In an effort to draw more customers, McDonald’s has been focusing on promoting its coffee offerings, while simultaneously reducing its bakery items. Krispy Kreme’s ability to raise prices without negatively impacting sales has been attributed to consumers’ willingness to indulge in affordable treats like fresh doughnuts.

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