Krispy Kreme is preparing for a significant expansion in the U.S. market by partnering with McDonald’s to offer its iconic doughnuts at locations nationwide. This ambitious rollout will begin in the fall of 2024 in Chicago, marking the start of a new era for the doughnut chain as it integrates its offerings into one of the largest fast-food networks in the country.
Nationwide Expansion Strategy
The national rollout will commence in Chicago, McDonald’s hometown, where Krispy Kreme will begin supplying its freshly made doughnuts to local restaurants. By the end of 2024, Krispy Kreme plans to have its doughnuts available at over 1,000 McDonald’s locations, with a goal to expand to 5,000 locations by the end of 2025 and 6,000 by 2026. This aggressive expansion strategy aims to cover 85 percent of McDonald’s U.S. footprint by that time.
Modernizing Production and Delivery Systems
To meet the increased demand generated by this partnership, Krispy Kreme is making substantial investments in modernizing its production and delivery systems. The company is upgrading its manufacturing processes, expanding its production lines, and enhancing its delivery logistics network. These improvements are designed to ensure that McDonald’s locations receive fresh doughnuts daily, maintaining the high-quality standard that customers expect from Krispy Kreme.
“We have a dedicated cross-functional team to make sure the facilities and our people are ready,” said Krispy Kreme CEO Josh Charlesworth during the company’s Q2 earnings call. “We’re very focused on delivering high-quality service to McDonald’s restaurants so that people get fresh doughnuts every day at the same quality level they expect in Krispy Kreme and other channels.”
Launching with a Proven Formula
The nationwide expansion follows a successful test run in 160 McDonald’s locations in Louisville and Lexington, Kentucky. During this trial, customers were offered three popular Krispy Kreme doughnuts: Original Glazed, Chocolate Iced with Sprinkles, and Chocolate Iced Kreme Filled. These doughnuts will be available at McDonald’s locations nationwide, sold individually or in six-packs, while supplies last.
Strategic Market Penetration and Revenue Growth
Krispy Kreme’s partnership with McDonald’s is part of a broader strategy to increase its presence in the U.S. market. The company is not only focusing on expanding its reach through McDonald’s but also strengthening its distribution network with other major retailers like Walmart, Target, and Kroger. By enhancing its production capacity and optimizing its hub-and-spoke distribution model, Krispy Kreme is poised to significantly increase its revenue.
In Q2, Krispy Kreme reported an 8.2 percent increase in net revenue for its U.S. segment, driven by innovative specialty doughnut collections and a 24 percent increase in DFD (Delivered Fresh Daily) door sales. The company’s adjusted EBITDA margin also improved, reflecting the productivity benefits of its expansion efforts.
Chicago: A Strategic Launchpad
Chicago was strategically chosen as the launch city for this nationwide expansion due to its existing infrastructure and Krispy Kreme’s strong presence in the Midwest. The company’s three production centers in Chicago are well-equipped to handle the increased demand, making the city an ideal starting point for the rollout.
“I feel really confident about starting out in Chicago,” Charlesworth said. “We have a nice presence across the Midwest in general. So, getting going with really positive, strong momentum from the start makes sense for both of us. We’re excited for the teams there.”
A Promising Future
As Krispy Kreme expands its footprint across the U.S., the partnership with McDonald’s is expected to unlock new opportunities for growth. The collaboration will not only increase Krispy Kreme’s visibility but also enhance its brand value by associating with a major national partner. With plans to further expand into major markets like Los Angeles and Detroit, Krispy Kreme is on track to become a ubiquitous presence in the American food landscape.
The company’s overall net revenue increased by 7.3 percent to $438.8 million in Q2, and its organic revenue grew by 7.8 percent to $440.2 million, highlighting the success of its expansion strategy. As Krispy Kreme continues to modernize its operations and build strategic partnerships, it is well-positioned to achieve sustained growth and solidify its place as a leader in the doughnut industry.
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