Krispy Kreme investors have filed a class action lawsuit, claiming they were deceived about the company’s pause on expansion into McDonald’s restaurants.
In late 2024, Krispy Kreme announced plans to deliver fresh doughnuts to McDonald’s stores nationwide over the next few years. The long-term goal was to make doughnuts available in more than 12,000 McDonald’s restaurants by the end of 2026. Thus far, the brand is in 2,400 stores.
However, Krispy Kreme announced earlier in May that it had paused expansion because of low demand and profitability concerns. No new locations will be added in Q2 as both companies work to identify a more profitable, streamlined operating model.
On the day the news was shared, Krispy Kreme’s stock fell 24.71 percent.
The lawsuit alleges Krispy Kreme didn’t disclose that demand had declined after the initial marketing launch, that the partnership wasn’t profitable, and that the company would pause expansion into new McDonald’s locations.
McDonald’s is one of Krispy Kreme’s Delivered Fresh Daily doors (DFD), which are locations that receive fresh doughnuts every day, like convenience stores, gas stations, warehouse clubs, and grocery stores. Krispy Kreme also works with Target, Walmart, Kroger, and others.
“We’re pleased with many aspects of the McDonald’s partnership,” Krispy Kreme CEO Josh Charlesworth told investor analysts during the Q1 earnings call. “The execution across all the cities has been very good. Our teams have worked well together, making sure we have awesome fresh doughnuts readily available. I think it’s also important to understand that we need it to be profitable on a sustainable basis over a long term. So really, what we’re doing working with them is to make sure that the availability and the visibility of the doughnuts is consistently prominent and that our operations are as simplified and streamlined as they can be. So really, our focus through 2,400 restaurants we’re in today is making sure we’re positioned for profitable growth before we expand further.”
Krispy Kreme finished Q1 with 10,186 DFD doors in the U.S., up from 7,198 in Q1 2024. Average revenue per door per week declined to $587. The brand’s organic revenue declined $3.6 million, or approximately 1 percent, as growth was more than offset by consumer softness. This led to a decline in doughnut shop transaction volume. In the U.S. specifically, organic revenue declined $6.1 million, or 2.6 percent.
To address logistics hurdles, Krispy Kreme is outsourcing delivery—currently representing 15 percent of its U.S. network and targeting full outsourcing by mid-2026. Early results show lower costs and better service rates. Additionally, the company is retrofitting production hubs in high-traffic areas, such as Minneapolis, to cut capital and real estate expenses by 20 percent.
Investors who purchased Krispy Kreme securities between February 25 and May 7 are eligible for the class action lawsuit.
