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WGO @ Krispy Kreme

  • Writer: Hardik Shah
    Hardik Shah
  • Jun 30
  • 3 min read

What’s Going On at Krispy Kreme?

A beloved doughnut brand navigates a strategic reset amid a shelved McDonald’s partnership, shifting consumer patterns, and rising cost discipline.


Krispy Kreme production line

Krispy Kreme (NASDAQ: DNUT), the iconic doughnut company known for its melt-in-your-mouth Original Glazed®, is at a pivotal juncture. Once riding high on a national rollout with McDonald’s and expanding its U.S. production capacity, the company is now reining in expectations, restructuring operations, and sharpening its focus on profitability and capital efficiency.


The Business Model: From Hot Light to Hub-and-Spoke


At the core of Krispy Kreme’s strategy is a hub-and-spoke model. Large production hubs supply “spokes”—retailers like Walmart, Target, and convenience stores—through its Delivered Fresh Daily (DFD) system. As of Q1 2025, the company had over 17,900 global points of access, up 21% year-over-year.


“Our ability to become a bigger Krispy Kreme requires that we become better,” said CEO Josh Charlesworth. “We are taking swift and decisive action to pay down debt, de-leverage the balance sheet and drive sustainable, profitable growth”.



Changing Ground Conditions: Growth Strategy Meets Reality


A key turning point came in late June, when Krispy Kreme and McDonald’s mutually agreed to end their national partnership. While the rollout had extended to over 2,400 McDonald’s restaurants, demand fell short of expectations following the initial launch buzz.


“After the initial marketing launch, demand dropped below our expectations, requiring intervention.” - Josh Charlesworth, CEO

The pullback coincides with broader macro pressures and a consumer backdrop increasingly favoring value and convenience. While Krispy Kreme’s product is often considered an “affordable luxury,” transaction softness in U.S. retail doors has put pressure on same-store sales and profitability.


Reshaping the Business for Sustainable Growth


To reset the business for long-term profitability, Krispy Kreme has launched a series of strategic initiatives aimed at simplifying operations, improving capital efficiency, and focusing on scalable, high-return growth.


In March 2025, the company divested its remaining stake in Insomnia Cookies, marking a clean exit from a non-core asset and sharpening its focus on doughnuts. Around the same time, a leadership overhaul brought in a new Chief Operating Officer to drive operational discipline, reduce waste, and streamline shop-level execution.


To lower delivery costs and improve reliability, Krispy Kreme began outsourcing logistics, with 15% of U.S. routes transitioned by May. The company expects to fully outsource its logistics network by mid-2026, enabling its in-house teams to refocus on core production and customer experience.


Internationally, it is actively refranchising markets such as the U.K., Mexico, and Japan—an effort designed to offload capital-intensive operations and empower local partners with scale and regional know-how.


Domestically, the company is also trimming its footprint, planning to close up to 10% of its U.S. DFD doors in 2025. These closures primarily target underperforming convenience and regional grocery doors, with reinvestment directed toward higher-volume partners like Costco, Walmart, and Sam’s Club.


“Our focus is on profitable growth with sustainable revenue streams,” said CEO Josh Charlesworth. “That means closing inefficient doors and scaling only with strategic partners.”


Financial Snapshot: A Costly Reset, with Clearer Capital Priorities


In Q1 2025, Krispy Kreme reported a net loss of $33.4 million on revenue of $375.2 million, down 15% year-over-year due to the Insomnia Cookies divestiture. Adjusted EBITDA fell 59% to $24 million, with margins sliding to 6.4%. U.S. sales per hub declined slightly to $4.8 million.

To stabilize its position, the company has suspended its quarterly dividend, tightened CapEx, and secured $125 million in new term loans to reduce revolver debt. It is also pursuing international refranchising to unlock capital and focus on higher-return U.S. growth.


“We are becoming even more disciplined with respect to capital allocation—investing only in things that have the highest return.” - Jeremiah Ashukian, CFO


Key Catalysts to Track


As Krispy Kreme enters the back half of 2025, several developments will be critical to its turnaround story:


  1. Execution on logistics outsourcing, which could materially improve margins.

  2. Progress on refranchising deals, which will be used to pay down debt.

  3. Sales momentum in high-volume retailers like Costco, Sam’s Club, and Walmart.

  4. New market launches, like Brazil, which generated $100,000 in sales in its first two days—surpassing the company’s France debut.


Bottom Line


Krispy Kreme isn’t crumbling—but it’s definitely in the kitchen, reworking its recipe for growth. For investors and industry watchers alike, this is a brand pulling back to leap forward, with a clearer sense of where it makes money and where it doesn’t. How fast it can regain margin traction and reignite U.S. growth—without the golden arches—will determine whether this turnaround sticks.


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