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Sweet Treats
There are some big names in doughnut franchising across the United States, but few have the status of Krispy Kreme – a business with such tremendous appeal that store grand openings have often attracted long lines and serious local media attention.  Each store even comes equipped with neon “Hot Donuts Now” signage to let passersby know that another batch of sugarcoated raised dough is ready for instant consumption.

Mystery and Retail Magic
From its earliest days as a regional operation based in Winston-Salem, N.C., Krispy Kreme’s mystique spread far and wide thanks to people who returned home to other parts of the country after sampling the delicious “raised glazed” doughnuts eaten hot from the fryer.  From humble beginnings in 1937, the company began offering franchises for sale on a national basis only in the mid-1990s, thereby bringing a Krispy Kreme store to a town near you.  Although some might claim this expansion has caused a bit of the old enthusiasm to wane, the company continues to field dozens or even hundreds of requests every day for more information on how to own a Krispy Kreme franchise.

Crunching the Numbers
Parent companies price their franchises by using a number of different criteria.  First there is the franchise fee, which could just as correctly be called a membership fee.  Oftentimes this chunk of money goes toward training, marketing, and other start-up necessities.  The Krispy Kreme franchise fee is $40,000, but that also comes with a 15-year guarantee for operating a specific location.  Next is a royalty fee, which is levied against annual gross sales.  Companies use royalties to improve corporate cash flow and also feed expensive national ad campaigns, which help keep franchise revenues flowing.  A Krispy Kreme franchisee pays a 6.5 percent annual royalty, part of which is specifically devoted to brand development (new doughnut concepts) and public relations work.

Additional Expenses
Having a famous brand name is one reason so many people look to franchising as the best way to run their own business.  But there is more to opening a retail location than simply plugging in a sign and unlocking the doors.  The first order of business involves choosing a site and putting up a building – or taking over and renovating an existing one – which could easily run $500,000.  The parent company also supplies you with tables and chairs, lighting and other décor fixtures, as well as that all-important doughnut-making equipment.  The estimated cost to fully outfit a Krispy Kreme location is about $1.35 million.  This also includes an initial stocking order of the flour, sugar, and everything else you need to make the baked goods that will populate your well-lighted display cases.

Ongoing Business Considerations
Having enough money to plunk down and open a Krispy Kreme franchise is not enough to actually qualify you to own one.  The corporation is obviously anxious to protect your investment as well as theirs.  Therefore, all prospective franchisees are required to have a minimum net worth of $5 million – since any business takes time to find its market, you need to have a financial cushion – and verifiable experience owning and running a multi-unit retail food operation.  Ideally the company works with operators who are interested in opening more than one store in a given geographic area.  This helps expand brand recognition and also allows the franchisee to make bulk purchases of the company’s supplies and unique doughnut ingredients.

Sales Opportunities
One of the factors that make Krispy Kreme such an attractive franchise is the fact that storeowners enjoy both retail and wholesale clientele.  In addition to hungry patrons lining up in the foyer to grab hot-off-the-fryer doughnuts, most places do a brisk business selling boxed dozens to other retail locations – gas stations, convenience stores, and even grocery stores – plus striking up deals with caterers and other food-service suppliers to add Krispy Kremes to delivered breakfasts and mid-morning snacks.

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