How Krispy Kreme’s Hub and Spoke Asset Model Delivers Fresher Doughnuts
Krispy Kreme had a major problem. Their franchise model was disjointed and didn’t scale well for the company’s ambitions to sell at grocery stores, convenience stores, and fast food chains like McDonald’s across the country. Krispy Kreme wanted fresh doughnuts in stores, enabled by same-day deliveries, but didn’t have the store infrastructure to make it economically viable.
So, Krispy Kreme’s management team created a multi-year plan to switch from its franchise model to a hub and spoke asset model to improve the quality of its doughnuts sold outside of its famous hot light theater stores, where customers can watch doughnuts come fresh off the production line.
Delta Air Lines pioneered the hub and spoke asset model before Amazon made it famous for enabling same-day delivery. The distribution model resembles a bicycle wheel where Krispy Kreme hot light theater stores represent the “central hub” connected to the third-party stores (restaurants, grocery stores, convenience stores, etc.) via “spokes” they want to distribute to. The more company-owned Krispy Kreme stores in well-located areas, the more Krispy Kreme would be able to distribute fresh doughnuts to third-party stores, which are stored in “delivered fresh daily” kiosks (pictured below).
To execute this vision, Krispy Kreme acquired franchisee units in all major urban centers across the U.S. Between 2018 and 2021, Krispy Kreme spent ~$466 million buying out 24 franchisees and 469 locations.
By all accounts, the capital-intensive multi-year plan seems to be working:
- Krispy Kreme’s net revenue was $1.7 billion in 2023, up 10.2% from $1.5 billion in 2022, per SEC Company Filings
- Krispy Kreme is delivering its doughnuts to 6,800 third-party stores as of Dec. 31, 2023, per CNBC
- McDonald’s and Krispy Kreme are expanding their partnership so that Krispy Kreme doughnuts will be sold in all McDonald’s U.S. locations by the end of 2026, which will more than double Krispy Kreme’s third-party distribution, per CNBC
Most importantly, Krispy Kreme can deliver daily and take away every night compared to before when doughnuts in third-party stores sat for 4-7 days.
That means fresher doughnuts for you and me <3
