Krispy Kreme: A Retrospective

Sometimes, if you don't laugh, you'll cry. That's the way it feels right now to look back at some of our interviews with former Krispy Kreme (NYSE: KKD  ) CEO Scott Livengood on The Motley Fool Radio Show.

Not surprisingly, Livengood gave what sounded like all the right answers. Here are a few choice tidbits from Motley Fool interviews over the years. Hold on to your hats (and don't choke on the doughnuts).

When asked how Krispy Kreme differed from a few franchised businesses like Boston Market that, as it turned out, were destined for failure, here was the response from Livengood:

"Our stores have the strongest unit economics in the industry. Our stores generate over 60% cash-on-cash returns. The best-of-the-best in the industry, and it way outpaces anybody else in the food service business. We have the strongest group of franchisees (1) because of the brand, and (2) because of the unit economic potential. It gives us the opportunity to choose the best in the class.

"What you see with Krispy Kreme is a 67-year-old business, as I said. It is not like we have to guess, 'Is this start-up going to make it?' We are there. We are in the Smithsonian.

"The other is it is a best-of-class product, and it is the best-of-class people executing the growth strategy. I would bet on Krispy Kreme. I have."

Of course, longtime Fool Bill Mann's diatribe "Krispy Kreme's Fair Value: Zero" questioned these very assumptions, and these are questions he harbored for quite some time.

When Tom and David Gardner asked Livengood about whether the idea of a low-fat Krispy Kreme doughnut was a buy, sell, or hold (for those of you familiar with the "Buy, Sell, or Hold" game on the Radio Show), Livengood stated that idea was a "sell." Why? Livengood said, "I think it's a contradiction in terms. Krispy Kreme is all about taste... it's not just about fat, it's about is it wholesome, and is it a reasonable tradeoff for that treat?"

Last May, I wondered about the concept of Krispy Kreme's decision to make a low-fat, low-sugar doughnut. My personal standpoint was that it went contrary to the brand -- which Livengood's answer above definitely implies as well. Given that previous outlook, it really did represent a pretty major change in strategy.

Perhaps one of the saddest moments was this admission from Livengood: "I have been a Krispy Kreme fan my whole life. I grew up in Winston-Salem. The first store was founded here in 1937. I grew up with Krispy Kremes and even had a Krispy Kreme birthday cake for my 16th birthday. I had 16 chocolate-covered, cream-filled doughnuts. So I am a fan for life, and I can't wait to get my doughnut every day (when) I come to work." Well, sir, no more doughnuts for you. (And while in one of the interviews, Tom and David Gardner pointed out that Livengood's name is downright Dickensian, Shakespearean tragedy seems a little more appropriate given the recent state of affairs.)

One of the things we here at the Fool like to focus on is the strength of good management. The Motley Fool Radio Show interviews with Scott Livengood revealed a likeable character, but judging by the recent troubles and allegations, perhaps a questionable one. Livengood gave all the right answers, which of course lent many of us more reason to believe that all was right in the world of Krispy Kreme.

As investors, and as Foolish ones at that, we must try to ferret out the best-in-class management we can find for the stocks we believe in. That's a Foolish imperative. However, if there's one thing that this retrospective brings home, it's the fact that, in investing as in life, sometimes people can disappoint you.

Dig up past interviews with CEOs of the companies you follow by checking our archive ofThe Motley Fool Radio Show. Krispy Kreme is one of the fewMotley Fool Stock Advisorpicks that has suffered. To talk about Krispy Kreme, sign onto our Krispy Kreme discussion board.

Alyce Lomax does not own shares of any of the companies mentioned, though she can't turn down a warm Krispy Kreme doughnut.

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Krispy Kreme Dough… CAPS Rating: **