Krispy Kreme and McDonald’s Expand Partnership

After a successful test in Kentucky at 160 McDonald’s locations, Krispy Kreme and McDonald’s plan to roll out Delivered Fresh Daily (DFD) doughnuts at participating McDonald’s.

The roll-out begins in the second half of 2024, and will continue through 2026. Three Krispy Kreme doughnuts will be offered at participating McDonald’s—the Original Glazed Doughnut, the Chocolate Iced with Sprinkles Doughnut, and the Chocolate Iced Kreme Filled Doughnut.

The company exited the consumer-packaged goods (CPG) market in May 2023, with the closing of its North Carolina facility (see the OM in the News post, Big Changes for Krispy Kreme’s Logistics Model.)  Krispy Kreme is now focusing on the DFD model, using a hub-and-spoke distribution system which is a variation on Krispy Kreme’s “made fresh at every shop” model.

The hub-and-spoke model begins at the hub, the hot light theatre shops, where doughnuts are made. These shops sell fresh, hot doughnuts, and are known for having the neon “Hot Now” sign. An automated line, which customers can watch, is used in these shops to produce the doughnuts.

In addition to making and selling doughnuts, deliveries go out from the shops to the spokes. The spokes can be other Krispy Kreme shops that only sell doughnuts delivered fresh daily. McDonald’s locations will also serve as spokes, expanding Krispy Kreme’s DFD reach.

Currently, Krispy Kreme has approximately 7,800 access points. With McDonald’s and other spokes, Krispy Kreme hopes to expand to more than 22,000 access points by 2026, including 12,000 McDonald’s locations.

In addition to McDonald’s and Krispy Kreme stores, other spokes include Walmart, Target, food trucks, food carts, and convenience stores. This approach overcomes one of the problems that has plagued Krispy Kreme, increasing its reach to get more fresh doughnuts to customers.

Currently, Krispy Kreme has 154 hubs that serve an average of 47 access points in the U.S. These changes are intended to extend the reach of each hub to 100 access points.

Video Spotlight:  

This post is based on the QSR article, Krispy Kreme’s Fresh Doughnut Delivery Network Will Get A Lot Bigger, by Ben Coley, May 13, 2024; the Krispy Kreme Investors page, Mcdonald’s® USA And Krispy Kreme® Announce Expanded National Partnership, by Krispy Kreme and McDonald’s USA, LLC, March 26, 2024; the Nation’s Restaurant News article, Krispy Kreme Continues to Expand Points Of Access, by Ron Ruggless, May 10, 2024; and the YouTube videos in the Spotlight. Image source: Pixtal/AGE Fotostock

Discussion Questions:

1. Do doughnuts and burgers work well together?

Guidance: Obviously, the 160-unit test in Kentucky showed the products go well together. McDonald’s has served breakfast for over 50 years, making a breakfast stop at McDonald’s a part of many people’s lives. Combining with Krispy Kreme’s limited distribution creates an opportunity for increased sales for both organizations. If McDonald’s locations can sell a doughnut to just a fraction of coffee customers (over 8 million cups of coffee sold daily), it will be tremendously successful.

2.  Why did Krispy Kreme exit the consumer-packaged goods (CPG) market?

Guidance: The biggest issue was quality. Krispy Kreme is known for fresh, hot doughnuts. If the doughnut isn’t fresh and hot, at least it should be fresh. The CPG doughnuts were neither.

3. Why did Krispy Kreme leave the “produced at every store” model?

Guidance: Although a fresh, hot doughnut is the best, an automated doughnut production line at each shop isn’t efficient. The Delivered Fresh Daily (DFD) model tries to balance the quality of the product versus convenience for the customer.

4. In what types of locations does Krispy Kreme’s hub-and-spoke model work best?

Guidance: Unlike other hub-and-spoke models, Krispy Kreme has the limitation that the doughnuts must be produced, delivered, and available for the customer when the customer wants them. With the daily fresh doughnut requirement, the geographic distance must be kept small. As a result, more densely populated areas work best for its hub-and-spoke approach. Sparsely populated areas may still have to wait for Krispy Kreme doughnuts.

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