Krispy Kreme Shifting Focus From Wholesale to Retail

NEW YORK – Krispy Kreme is planning to boost its revenue by offering retail-only sales -- as opposed to retail and wholesale operations -- at some of its new, smaller stores, according to a Bloomberg Businessweek report. The doughnut chain plans to add 157 more U.S. stores to the 243 it currently operates by 2017.

Krispy Kreme, headquartered in Winston-Salem, N.C., originally operated primarily as a wholesaler and required 4,000 to 6,000 square feet for each store, which included a retail area, a manufacturing area and a loading dock. It began developing its retail business in the mid-1990s, with its smaller locations still occupying approximately 2,800 square feet, but sales declined through the late 2000s, according to the report.

The new store design is approximately 2,300 square feet, will offer retail-only sales and be able to produce 65 to 110 dozen doughnuts per hour, less than the 150 to 600 dozen produced by its traditional factory stores.

Reasons for the change include declining profitability of wholesale and the short, two-day shelf life of Krispy Kreme's yeast-raised doughnuts that make up approximately 80 percent of its wholesale sales. Currently, between one-quarter and one-half of Krispy Kreme's revenue comes from sales to grocery and convenience stores.

"Smaller stores with lower overhead will make it easier for our franchise partners to open new locations and ultimately make the brand more accessible to our customers," said company spokeswoman Lafeea Watson.

Krispy Kreme will focus its corporate store growth on the Southeast region of the United States and leave development in other areas to franchisees, according to the report.