ShareThisBy M. PAUL JACKSON
Wednesday, November 15, 2006
Krispy Kreme Doughnuts Inc. plans to significantly expand operations into other countries, even as it dials back its presence domestically.
Krispy Kreme said in a recent filing to regulators that it plans to develop about 200 stores overseas over the next five years, including markets in Asia, the Middle East and Western Europe.
The company had announced plans earlier this year to expand internationally, but gave a clearer picture of those plans, and the number of potential new stores, in its annual filing to the Securities and Exchange Commission.
"Based on continued research and experience with international stores, the company is focusing international development primarily in potential markets," overseas, the company said.
According to the filing, Krispy Kreme is also hiring more workers to help with its planned expansions. The company has more than 70 stores in Australia, Canada, Mexico, the United Kingdom and South Korea.
In June, it announced that it awarded development rights to Krispy Kreme Hong Kong Ltd. to open at least 20 stores in Hong Kong and China over five years. It also plans to open stores in Tokyo and the Philippines.
Krispy Kreme does not expect to own equity interests in these stores, however. The company has stopped taking ownership stakes in franchises, hoping to reduce its financial risks if the stores perform poorly.
In contrast, its domestic growth will be small. Company officials said that the business does not plan to open a significant number of domestic stores and is considering more store closings. The company has closed about 100 domestic stores in the past year or two and now has about 330 stores in the United States.
The overseas interest is part of Krispy Kreme's plan to revive its fortunes.
The company, once a sweetheart on Wall Street, has struggled in recent years because of falling sales, investigations by federal securities officials and lawsuits from shareholders. Part of the company's falling sales have come through store closings, however.
Krispy Kreme's increased focus on overseas markets _ and tastes _ could be risky for the company, but a financial analyst said that the overseas focus was a smart decision.
Krispy Kreme is working with local companies in those overseas markets to best meet foreign tastes, which could reduce its financial risks. "This provides increased brand and product management, and therefore, further growth and expansion," said Howard Penney, a financial analyst for Prudential Equity Group, LLC.
"The Krispy Kreme name is a strong asset, and the company has a proven business model," Penney said. "More importantly, it has the added ability to sell a very valuable doughnut mix to its growing global franchise community."
