Krispy Kreme Pushes Its Hub-and-Spoke Model and Signs a Major Turkey Franchise Deal

This is an English adaptation of a FoodBud historical article originally published on August 26, 2022.

In August 2022, doughnut-led bakery chain Krispy Kreme reported second-quarter revenue of $375 million, up 7.4% year over year.

Krispy Kreme grouped its business into three segments:

• U.S. and Canada, including acquired Cookies shops and the Branded Sweet Treat Line
• International, including company-operated businesses in the U.K., Ireland, Australia, New Zealand and Mexico
• Market Development, including international franchise markets and company-operated stores in Japan

Second-quarter revenue by segment was:

• U.S. and Canada: $250 million
• International: $93.853 million
• Market Development: $30.932 million

Two Strategic Priorities

Krispy Kreme’s strategy has centered on two themes: freshness and the hub-and-spoke model.

The freshness strategy includes exiting traditional wholesale and acquiring franchised stores to increase control over store-level operations. In August 2022, Krispy Kreme acquired six franchised shops and one shop under development for total cash consideration of $18.5 million.

Growth was driven mainly by three channels:

• Physical shops
• DFD Doors, smaller points of sale placed in locations such as convenience stores
• E-commerce

In the second quarter, Krispy Kreme reached 11,409 global points of access and added 396 DFD Doors. Of those, 109 were in the U.S. and Canada, 209 were in company-operated international markets, and 78 were in Market Development markets.

Krispy Kreme tracks DFD Door performance using Average Revenue Per Door Per Week, or APD. In the U.S. and Canada, second-quarter APD increased 9%.

Hub Economics

Beyond DFD Doors, Krispy Kreme also tracks revenue per hub. In its model, a larger Hot Light Theater Shop, with or without a production facility, serves as a hub supplying smaller shops and DFD Doors.

In the second quarter:

• Company-operated international markets generated average revenue per hub of $9.8 million, up 22.5% year over year
• The U.S. and Canada generated average revenue per hub of $4.4 million, up 22.2% year over year

E-commerce represented 17.5% of Krispy Kreme’s second-quarter business. The company was also working with third-party delivery platforms and adding delivery-only locations to expand delivery coverage.

International Expansion

Krispy Kreme said it aimed to enter at least three new country-level markets each year. Earlier in 2022, it had announced franchise agreements for Switzerland, Jordan and Chile. During the earnings call, the company also disclosed that it had signed franchise rights for Turkey, describing the deal as one of its largest franchise agreements to date.

Note: acquisition, expansion target and financial figures above are historical, based on the company’s 2022 second-quarter disclosure.