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He must be truly concerned about Krispy Kreme's growth prospects, as his personal attack on my eating habits paints me as some sort of ingredient-obsessed maniac. I'm not. I've simply watched too many loved ones literally go blind, or have a limb chopped off as a result of diabetes, or suffer the pains of heart disease as a result of a lifetime of high-sugar, high-fat eating. I don't want a similar fate. And neither do the millions of Americans whose health consciousness is rapidly awakening.
I agree that Krispy Kreme has roared out of the gate like a prize-winning racehorse. Don't be surprised, however, if it falls well short of the finish line -- like other quick-start and failed eatery plays like Boston Market and Planet Hollywood, whose rapid expansions turned shareholder dollars into bankruptcy dust. That's the history that will most likely repeat itself.
Successful growth is sustained by a company's ability to keep their products fresh, both literally and philosophically. How much innovation can you add to a doughnut? One-product companies are scary investments.
In addition, Krispy Kreme is the exclusive supplier of all its doughnut mixes, glaze flavoring, and doughnut-making equipment, all of which are manufactured out of a single, solitary plant in Winston-Salem, North Carolina. God forbid there's a fire in the facility -- there's no one left to manufacture the mixes or equipment, which would turn the company's operations sour. North Carolina is, after all, a magnet for hurricane damage.
Speaking of that solo, vulnerable plant, it's a curiosity how this lone manufacturing facility will keep up with capacity if expansion goes as Rick hopes. All stores in every corner of the country will be reliant upon Winston-Salem to supply their ingredients and equipment. Krispy Kreme will need to build new facilities, which will no doubt eat into its bottom line. And that's assuming it can build them in time.
Krispy Kreme doughnuts are delicious to eat; but stick to other companies for a rise in your financial dough.
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