Krispy Kreme and McDonald’s announced Tuesday that they will officially end their partnership effective July 2 after questions around profitability and efficiency.
Krispy Kreme CEO Josh Charlesworth said the doughnut chain was unable to “bring its costs in line with unit demand,” which made the partnership unsustainable. The company had reached 2,400 McDonald’s restaurants before calling off the deal.
Going forward, Krispy Kreme is focused on bringing fresh doughnuts to more places, including high-volume retail points like grocery/club stores (Target, Kroger, Walmart, Sam’s Club, etc.) and international franchise growth.
Profitability has been a major focus for Krispy Kreme. The doughnut chain has around $1 billion in debt. It recently sold the rest of its stake in Insomnia Cookies for $75 million to pay down debt and put all of its energy into its doughnut business. The chain is also working on other cost-cutting measures, such as using a third-party company to deliver doughnuts and value engineering its production facilities.
The brand’s organic revenue declined $3.6 million, or approximately 1 percent in Q1, as growth was more than offset by consumer softness. In the U.S. specifically, organic revenue declined $6.1 million, or 2.6 percent.
As for McDonald’s, the Krispy Kreme doughnuts represented a small, non-material part of its breakfast business. The company emphasized that the morning daypart remains a “core pillar of McDonald’s business strategy.”
“We were excited and pleased to partner with Krispy Kreme,” Alyssa Buetikofer, McDonald’s USA’s chief marketing and customer experience officer, said in a statement. “We had strong collaboration with Krispy Kreme and they delivered a great, high-quality product for us, and while the partnership met our expectations for McDonald’s and Owner/Operators, this needed to be a profitable business model for Krispy Kreme as well.”
McDonald’s—otherwise known as a Delivered Fresh Daily door (DFD)—used Krispy Kreme’s hub-and-spoke distribution model in which an existing network of doughnut production hubs supplies freshly made products to different locations, like grocery stores, convenience stores, pharmacies, gas stations, and restaurants.
Previously, the long-term goal was to make Krispy Kreme doughnuts available in more than 12,000 McDonald’s restaurants by the end of 2026. The U.S. launch followed a successful pilot at 160 McDonald’s locations in the Louisville and Lexington, Kentucky, markets. Testing began in 2022 and ramped up from there.
Three Krispy Kreme doughnuts were available at participating McDonald’s locations: the Original Glazed, the Chocolate Iced with Sprinkles, and the Chocolate Iced Kreme Filled. These doughnuts were delivered fresh daily and could be ordered at the store or via the app and website.
