Krispy Kreme opened its first Minnesota location in 17 years Wednesday. | Photos by Jonathan Maze.
Dylan Peterson got to the Krispy Kreme drive-thru in Fridley, Minnesota, a suburb just north of Minneapolis, at 5 p.m. Tuesday, a full 15 hours before it was scheduled to open.
By 7 a.m. the next day, there were 76 cars behind him, snaking between the doughnut shop and a McDonald’s, through the strip center parking lot, past retailers and a grocer, and then a gas station, out into the street, around a corner, stopping just across from a Home Depot. The actual Krispy Kreme everybody’d been waiting for was far off in the distance. And the shop was still nearly an hour from opening.
It’s a long time to wait for doughnuts. But what’s 14 hours when you haven’t had a Krispy Kreme since the George W. Bush administration?
“It’s been 17 years,” Peterson said. “There’s a good chance I eat a dozen today.”
Krispy Kreme can do two things as well as or better than anybody else: Make doughnuts and generate long lines. And it continues to prove that again and again, from Minneapolis to Madrid. The first person in the standing line, on the other side of the building from Peterson, arrived at 1 p.m. Tuesday. More people joined him after midnight and by the opening that line had wrapped around the building.
“Consumer research shows that if you’ve ever had a hot doughnut in your life, you think positively of it,” Krispy Kreme CEO Josh Charlesworth said in an interview with Restaurant Business. “You remember your experience and you’re more likely to purchase it if you’ve had a hot one than if you haven’t.”
A long line of doughnut lovers waited for the opening of Krispy Kreme Wednesday.
The Charlotte-based doughnut chain has had a heck of a time translating that enthusiasm into a sustainable run of profitable success, at least in the eyes of Wall Street. The chain was founded in 1937 in Winston-Salem, North Carolina, by Vernon Rudolph, who bought a yeast doughnut recipe from a New Orleans chef and sold doughnuts out of a rented building.
The company grew throughout the Southeast and then into other cities. An opening in New York City in 1996 generated lines around the block, setting the stage for its 2001 IPO and expansion around the country. Yet the company opened large, “doughnut theaters” everywhere. Those long lines soon dissipated, and the chain’s expensive locations struggled to make a profit. Sales and earnings declined. The company was engulfed in an accounting scandal in 2005 and stores started closing. The last Minnesota shop shuttered in 2008.
“That was the model, just keep getting the excitement around the doughnut theater, but it’s very difficult to sustain,” Charlesworth said. “We’re much more into sustainable, profitable growth, rather than chasing shiny things.”
Krispy Kreme largely recovered from those problems, and it continued to grow, at least internationally, with a more hub-and-spoke model. The company uses those doughnut theaters sparingly, and in part to supply products to retailers and smaller locations. New openings, in places like Spain, Ireland and South Africa, generated long lines and traffic jams.
The company brought that model to the U.S., paving the way for its return to the public markets with a 2021 IPO, five years after the investment firm JAB Holding took it private. “That’s the model that worked,” Charlesworth said. “It’s an infrequent, often special occasion purchase. It’s not a daily meal.”
The Minnesota opening in many respects was to symbolize the chain’s return to prominence. The location itself is in an old CVS and is designed with a small retail area in front and a large manufacturing facility in back, so the doughnut distribution activities don’t disturb the retail component.
Demand for Krispy Kreme in Minnesota persisted long after the 2008 closure. One man used to drive a vanload of doughnuts from the nearest location in Iowa to sell around stores in the Twin Cities for years afterward. That demand was a big reason for the company’s decision to open here, that and the presence of the Minneapolis-based Target, one of the retailers where Krispy Kreme sells its doughnuts.
“It’s going to be the biggest opening that I’ve experienced in the U.S., because I’ve been working at Krispy Kreme for eight years, and we haven’t gone into one of the big cities, completely greenfield, in my tenure,” Charlesworth said.
The end of the drive-thru line at Krispy Kreme. The location is in the distance.
Yet Krispy Kreme’s Hot Doughnuts Now sign has dimmed, at least on Wall Street. Its stock has fallen 74% since its 2021 IPO, including 57% this year.
After years of telling investors that its major problem was a lack of access to its doughnuts, the chain is now closing some of those access points because they’re not profitable enough. The number of access points where people can buy the chain’s doughnuts declined 6.1% worldwide last quarter. Apparently, Krispy Kreme can’t generate a profit from many of its locations, so it’s been shuttering access points to improve profits.
That included McDonald’s. Krispy Kreme had promised the fast-food giant it would be able to sell doughnuts in each of the chain’s 13,500 U.S. locations, which is another reason it decided to open in Minneapolis. Yet logistics challenges—McDonald’s franchisees complained of frozen doughnuts during the winter in cold markets—and weak sales led Krispy Kreme to pull the plug.
The company is now doing things differently. It will no longer promise to a retailer that it can supply all its locations. It is using third-party logistics companies to provide a more stable cost structure. And it is only going in locations, mostly retailers, that give prominence to the doughnuts. It is focusing on partnerships, with companies like Walmart, its biggest distributor, along with Target, Costco, Sam’s Club and large regional retailers like Publix.
“Scaled partnerships, strategic partners, is definitely where we’re focused,” Charlesworth said. “It’s got good momentum, but we’ve had to be quite disciplined where it doesn’t work, and hence we decided to step back and exit from about 1,400 locations this year.
“But our program is finished now, so we’re back to expansion.”
None of this mattered to the people gathered on Wednesday morning for the Minnesota opening, they just wanted some hot glazed doughnuts. A radio station set up a canopy to give away shirts and other gear. Local media was out in force, interviewing eager customers. Social media influencers took videos of the crowd.
Judy Chaconi drove 23 miles from the other side of town early Wednesday to wait in line with her boyfriend. She was wearing a red Krispy Kreme sweatshirt and carried with her a white, Krispy Kreme nutcracker that her boyfriend made for her. It was dated 2019.
“We’ve been through Memphis, Seattle and my friends live in Destin, Florida, there’s one right by their house,” Chaconi said. “Every time we see the red light we would stop and get doughnuts and stuff. One time I think we ate four doughnuts. It was the most we ate at one time.”
Dylan Peterson likes being first in line for major events, for restaurant openings or new video games. He spent his time scrolling through TikTok—he was live-streaming during our interview—and talked with a friend who happened to be in a car behind him. He also talked with others wandering around the event. “I did sleep for, like, an hour and a half,” he said.
“I hated it” when they closed, Peterson said. “They left not too long after we got here in Minnesota, so we didn’t have them for very long. And then we had to wait, and only get one when we traveled somewhere.”
He doesn’t have to travel far for a hot doughnut any longer.
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