Krispy Kreme's Q4 2024: Contradictions in McDonald's Expansion, Refranchising Plans, and Strategic Focus

These are the key contradictions discussed in Krispy Kreme's latest 2024Q4 earnings call, specifically including: McDonald's expansion expectations and impact on operating expenses, international refranchising plans, strategic focus on Original Glazed Doughnuts, and McDonald's partnership impact and cannibalization:



Organic Sales and Business Transformation:
- Krispy Kreme reported its 18th consecutive quarter of organic sales growth despite a Cyber Security Incident.
- The company achieved 21% revenue growth for the year, surpassing $250 million in sales through its delivered fresh daily network.
- The growth is attributed to simplified business operations, strategic divestments, and expanding partnerships with national distribution partners.

Impact of Cyber Security Incident:
- The Cyber Security Incident in December 2024 resulted in an estimated $11 million impact on revenue and $10 million on adjusted EBITDA for the fourth quarter.
- The incident affected business operations including online ordering, labor planning, and ingredient waste management.
- Despite these challenges, systems have been restored, and the company expects insurance to offset some of these costs.

International Franchise Expansion:
- Krispy Kreme's profitable international franchise business grew points of access by 8% in 2024, expanding in markets like France and South Korea.
- The company plans to evaluate refranchising certain international markets to focus resources on U.S. expansion and capitalize on profitable growth opportunities.
- This strategy aligns with the company's goal to grow efficiently by leveraging local franchise partners.

U.S. Expansion and Franchise Model:
- The U.S. delivered fresh daily network expanded by 34% year-over-year, with plans to reach 6,000 McDonald's restaurants by year-end.
- Krispy Kreme's focus on expanding with national partners like McDonald's, Kroger, and Costco supports the company's goal of becoming bigger and better by leveraging existing capacity and optimizing its network.