Despite challenging economic conditions, restaurant companies have of late been consistently expanding in the domestic as well as international markets. Krispy Kreme Doughnuts, Inc. KKD is one of them. In order to tap the lucrative domestic market, this doughnuts and beverage company recently entered into three different agreements with franchise operators to open 11 Krispy Kreme shops in Arkansas, Montana, Illinois and Kentucky over the next several years. All these operators have extensive experience and successful track records.
Agreements in Detail
Krispy Kreme Doughnuts has entered into agreement with Dennis Porter, President of DTL of the Emerald Coast for the opening of four additional shops in Arkansas.
To open four outlets across Montana, the company has entered into a deal with Mark Boyd, President of Sweet Treat Holdings. Boyd has extensive QSR experience as a former longtime franchisee with KFC, a unit of Yum! Brands, Inc. YUM.
Meanwhile, the company has also clinched agreements with Rodney Cabaness, President of Hungry Guys, LLC for the opening of three units in Marion, IL and Paducah, KY. Cabaness in partnership with Eric Schneider will head operations. Eric Schneider has 26 years of restaurant experience with Darden Restaurants Inc. DRI.
Krispy Kreme is looking to accelerate its presence in high-growth potential markets mainly through franchising. We believe franchising a large chunk of its system will boost its earnings and return on equity growth by reducing capital requirements. The company’s franchised business model allows it to generate strong free cash flow, thereby helping it to maintain a healthy balance sheet.
We believe that the company’s decision to expand in the domestic market is appropriate given improved job prospects, rising wages, and lower gasoline prices.
Krispy Kreme Doughnuts presently has a Zacks Rank #3 (Hold).
BJ's Restaurants, Inc. BJRI is a better-ranked stock in the restaurant industry, sporting a Zacks Rank#1 (Strong Buy).
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