Wednesday, July 27

Sour times for a sweet treat

Krispy Kreme, formerly the King of cheap publicity, is not so "HOT NOW."

The doughnut franchise posted incredible growth as it went public in 2000. It was a darling of the Motley Fool guys, and investors just couldn't resist the slow march out of the South.

Neither could television stations. I was still in the news business then, and Krispy Kreme had a knack for making grand openings in new cities an "event." Every station that could go live in the early mornings did, just to be a part of those mad lines for the first Krispy Kremes to roll off the racks.

How the mighty have fallen... as Krispy Kreme is struggling to avoid bankruptcy. Stephen Cooper (the post-fraud Enron guy) is doing the restructuring, and now he's got another hurdle. Some franchises are going to court to keep the doughnut mix and supplies rolling in -- even though they can't pay for them. Franchisees with restructuring plans of their own allege they can't meet other obligations if they pay Krispy Kreme. (They also allege that Krispy Kreme has overcharged them over the years, keeping the filings from being tossed out of court.)

Some place the blame on accounting idiocy, others on growing too fast. Me? I think Krispy Kreme got KO'ed by Karb Konsciousness.

In any respect, the company's growth was built NOT around memorable advertising, but instead around good PR. Alas, rebuilding will not be. You're only new once, and it's becoming more difficult to sell questionable nutrition. I'll bet you dollars to doughnuts that turning doughnuts to dollars won't be the sweet proposition it once was.

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