Krispy Kreme Is Closing Even More Locations "In the Coming Months"
Eight locations have already been shuttered.
A household name since 1937, Krispy Kreme is the place to go when you've got a hankering for something sweet. The iconic donut company operates approximately 361 brick-and-mortar shops nationwide, offering customers the chance to grab a famed glazed donut with a cup of coffee. But in 2022, Krispy Kreme has been actively closing locations—and more closures are reportedly on the way. Read on to find out which Krispy Kreme shops will be gone for good "in the coming months."
The donut shop is shifting its business model.
During a Nov. 15 earnings call, Krispy Kreme executives outlined evolving business practices and initiatives. Rather than focusing on traffic and profit made from in-store sales, the donut company, which is owned by JAB Holding Company, has shifted to a "hub and spoke" model. This distribution system can be compared to a wheel, according to Redwood Logistics, with a "hub" in the center shipping products to several "spokes."
These points-of-access are separate retailers like grocery stores, known as DFD shops, which stands for "Delivered Fresh Daily." The name indicates exactly that, as fresh donuts are shipped to these stores, helping to improve quality and sales.
Josh Charlesworth, chief operating officer and chief financial officer for Krispy Kreme, confirmed that the number of hubs and spokes in the U.S. increased to 129 during the third fiscal quarter, with each hub averaging $4.5 million in sales. The approach is somewhat effective, with revenue up 10 percent $278 million, but a net income loss of $13.1 million, Nation's Restaurant News reported.
As an side effect of this approach, however, traditional Krispy Kreme shops are on the chopping block.
One round of closures was announced over the summer.
During an Aug. 17 earnings call, Charlesworth confirmed that there were a total of 118 U.S. Krispy Kreme locations without "spokes"—some of which "are strong and profitable and much loved community stores." However, those without spokes are growing at a slower rate, and following a performance review of the shop network, 10 stores were deemed "not sustainable in the long run."
Charlesworth confirmed that the 10 stores would be closing, although he did not specify where.
Now, Krispy Kreme has announced closure plans for additional stores.
You might miss the "hot light" experience.
During the recent earnings call, Charlesworth explained that all of the 118 hubs without spokes are "hot light theaters." These are Krispy Kreme's traditional donut shops equipped with the signature hot light: When switched on, it's a clear sign to customers that fresh donuts are ready and available for purchase.
Eight of the 10 hot light theaters announced in July were closed during the third quarter, but a dozen more have been added to the docket.
"We also identified a further 12 shops, which we will close in the coming months," Charlesworth said.
The stores were found to be underperforming.
The stores that are closing are "low revenue," according to the earnings call. Most importantly, Charlesworth said these hubs can't be converted to produce for DFD shops where fresh donuts are shipped, which is key to Krispy Kreme's future. Although he didn't explain exactly why conversion isn't possible, he clarified that these kinds of stores "represent the overwhelming majority of potential closures."
It appears to be full steam ahead with the company's new omnichannel strategy. In the last quarter alone, 382 points-of-access retailers were added where Krispy Kreme donuts are shipped, and the company is planning to increase that number to 50,000 across the globe, according to the recent call.
So if you do lose your local Krispy Kreme, you may be able to find your favorite donuts elsewhere—including McDonald's, thanks to a new partnership, per Nation's Restaurant News.