Krispy Kreme Case Analysis Essay
Executive Summary Krispy Kreme doughnuts, Inc is facing a crisis of a drop in share price like never before since its initial public offering in the year 2000. The situation of Krispy Kreme does not look so bright after it has reacquire the underperforming franchisees’ stores worth of 170$ million. In the end of 2004, the company has some problem related with its accounting for the acquisitions of certain franchisees that it has to restated its financial statement, which would lower the pretax income by 6 to 8 million. The company fails to file the report on time. This puts the company at risk of being delisted out of NYSE, moreover there’s a low carbohydrate diet trend coming. All those …show more content…
The Aggressive Reacquisition Plan
During 2003 there’re seven stores Michigan franchise that are underperformed and owed several millions for equipments, Krispy Kreme would like to close them therefore Krispy Kreme has reacquired $170 million of franchise rights (unamortized) and booked them as an intangible asset or goodwill, which makes the company’s balance sheet looks exaggerated. This result in a fall of the return of invested capital compared with the two years ago prior to the reacquisition from 18% to 10%.
To resolve this problem, the company should first try to improve the operation quality of the franchisees instead of buying back and raise the purchase price as compensation. The company should focus more on how the franchisees run their off-premises business. Krispy Kreme needs to emphasize on what was drive them here, “Hot Doughnut Now” instead of the cold doughnut sale in a grocery stores and gas stations.
Assuming that the company repurchased the stores that are still in debt to them, not only that the company reduce its