Maintaining the Brand

By Edward Cone  |  Posted 2002-11-01 Print this article Print

The doughnut-maker and -franchiser doesn't spend a penny more than it needs to on technology. Its frugality hasn't held back its growth.

Maintaining the Brand

One of the company's priorities is to support a consistent look and feel for the brand at all locations. The low point in Krispy Kreme's long history—the company was founded in Winston-Salem in 1937—came when then-owner Beatrice Foods diluted the brand in the '70s and '80s by adding sandwiches to the menu. In terms of systems consistency, all stores use the order-entry system, although some area developers choose to run some internal accounting and e-mail systems of their own. The online ordering system supports a supply-chain alliance program that offers area developers the benefits of bulk buying power and freight concessions. Says Hood, "We give away solutions. We do charge if franchises want hardware on site, or they can come here via frame relay."

The just-opened New England market is served by area developer Jan Cos., a Cranston, R.I., company that plans to open 16 stores over the next five years in Massachusetts, Rhode Island and Connecticut. Jan Cos., which operates almost 80 Burger King restaurants and several other properties, relies on Krispy Kreme's corporate systems to run its local doughnut business. "We get everything, including help-desk support," says Jan Cos. Vice President Janice Mathews.

Controlling expenses is one important strategy as Krispy Kreme tries to justify the pricey multiples that its shares still attract (the price-to-earnings ratio in late October was 60). But Krispy Kreme remains very much a growth story, and analysts see plenty of room for more stores. "We believe it is in the infancy of growth," wrote analyst David Geraty of RBC Capital Markets in Minneapolis in a research report dated Oct. 11. The company also is aiming to increase the size of its average retail transaction by upgrading the quality of the coffee it serves. The goal, says Casstevens, is to double coffee sales from 5% of revenues to 10%. That would help maintain the impressive 10% annual growth in same-store sales Krispy Kreme has achieved since its IPO.

Another key to increasing same-store sales is adding wholesale business by upping the number of grocery stores and other outlets on delivery routes. Wholesale transactions are handled by a recently upgraded system that runs on AS 400 computers in the stores. Using the AS 400 system, checks that used to take two weeks to apply to Krispy Kreme's account are now handled in half a day. Store manager Hendrix recently used the system to restructure all his delivery routes in one week, a job that would have taken him months in the past.

Members of Hood's staff are expected to be capable of handling multiple tasks. His assistant, Glenna Gerard, also handles hardware leasing and routes calls to the help desk. Hood says a surprising number of his people have advanced degrees, and that turnover is so low that he hasn't lost anyone to another tech job in at least three years (a record that may be helped by the company's high-flying stock).

And some technology costs get amortized by pushing responsibility out into the field. Store managers can handle many routine support tasks, and the company will pay for some technical training of store employees. Hendrix, who started as a route driver for the Fayetteville store in 1970, was reimbursed for courses in Word and Excel at a local technical school, and has sent some of his own staff there, too.

The CIO's next project will likely be a new ERP system from a major vendor to replace a product from Macola (now owned by Exact Software) that has worked fine but won't scale to match the company's growth. He also plans to put all remaining support applications on the Web, including daily cash reconciliation and order entry. "We want to offer our franchisees services that they would otherwise have to pay for," says Hood.

The crowds that seem certain to attend the Nov. 19 opening of the next new Krispy Kreme store in Milford, Conn., will be focused on doughnuts, not Web services for advanced ordering. But for the franchisees and the company to which they pay royalties, those new services could end up being no less sweet. You may think Krispy Kreme is simply fortunate to find itself in an industry with small outlays on information systems. But the company still spends less than its industry's average. How do you compare to your nearest competitors when it comes to information-technology spending? Is the trick to spend less...or simply target your spending better? E-mail us at baseline@ziffdavis.com to let us know your answers.

Senior Writer and author of the Know It All blog

Ed Cone has worked as a contributing editor at Wired, a staff writer at Forbes, a senior writer for Ziff Davis with Baseline and Interactive Week, and as a freelancer based in Paris and then North Carolina for a wide variety of magazines and papers including the International Herald Tribune, Texas Monthly, and Playboy. He writes an opinion column in his hometown paper, the Greensboro News & Record, and publishes the semi-popular EdCone.com weblog. He lives in North Carolina with his wife, Lisa, two kids, and a dog.

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