KRISPY Kreme has been closing several of its locations since early 2022 and is said to be closing more “in the coming months.”
The American donut company has moved from a focus on in-store sales to a “booth and talk” model, based on a discussion between Krispy Kreme executives during an earnings call on Tuesday.
The particular model can be compared to a wheel with a “hub” in the middle, according to Redwood Logistics, transporting products from the stores to numerous “spokes”.
These “spokes” are entry points, separate retailers such as grocery stores and other markets known as DFD stores.
DFD stands for “Delivered Fresh Daily,” as fresh donuts are delivered to the stores every day helping to improve quality and sales.
Krispy Kreme chief operating officer and chief financial officer Josh Charlesworth noted that the number of centers and wings in the United States increased to 129 during the third fiscal quarter.
He said each hub is worth an average of $4.5 million.
Redirecting the company’s focus toward business practices instead of in-store traffic is relatively effective with Krispy Kreme revenue up 10 percent at $278 million.
Although revenue has increased this year, it has had a net income loss of $13.1 million, Nation’s Restaurant News reported.
Traditional brick-and-mortar Krispy Kreme stores are closing left and right as a side effect of the company’s new “hub and wings” approach.
Krispy Kreme operates about 361 brick-and-mortar stores nationwide and Charlesworth explained, on the call, that all 118 centers without a stick to send product to are “hot light theaters.”
The “hot light theaters” are traditional Krispy Kreme donut shops with the company’s signature hot light.
When the hot light is on in front of Krispy Kreme stores, it shows customers that fresh donuts are ready and available for purchase.
Eight of the 10 stores identified in July closed during the third quarter and Charlesworth said a dozen more have been added to the docket.
He said: “We have also identified a further 12 stores, which we will be closing in the coming months.”
“Low revenue” was cited as the reason why the stores are closing, but primarily, Charlesworth said the stores cannot be converted to produce fresh donuts for DFD stores, which are key to Krispy Kreme’s growth.
The Chief Financial Officer did not say why conversion is not possible for the stores but explained that these types of stores “represent the overwhelming majority of potential closures.”
During the last quarter alone, 382 point-of-entry retailers where Krispy Kreme donuts are shipped were added showing that the company is moving forward with its new growth model.
It was also noted on the call that the company has plans to increase that number to 50,000 internationally, according to Best Life.