Krispy Kreme appears to have found the perfect partner in McDonald’s.
Doughnuts will be sold in nearly 2,000 stores by the end of 2024, a big increase from the previous guidance of approximately 1,000 locations. The U.S. rollout began this October in 400-plus Chicago stores and will continue with Ohio, Indiana, Pennsylvania, and West Virginia. The long-term goal is to make Krispy Kreme doughnuts available in more than 12,000 McDonald’s restaurants by the end of 2026.
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So far, Krispy Kreme is seeing incrementality in Chicago and no cannibalization from existing, nearby shops. The company is also experiencing positive feedback from customers and McDonald’s employees. Krispy Kreme can track doughnuts that are unsold, and its data shows the products are being sold throughout the day. Although McDonald’s doesn’t share all consumer data—like attachment rates—with Krispy Kreme leadership, the brand is still pleased with McDonald’s efforts to keep doughnuts in stock and present the items well.
“Regarding the reception of the brand in Chicago, I think that the strong support McDonald’s is putting behind this is no doubt part of that,” CEO Josh Charlesworth said during Krispy Kreme’s Q3 earnings call. “And indeed, the confidence that we have from the success is having us sort of accelerate to service more restaurants as fast as we can, all align with our strategy of becoming bigger and better.”
Three Krispy Kreme doughnuts are available at participating McDonald’s locations: the Original Glazed, the Chocolate Iced with Sprinkles, and the Chocolate Iced Kreme Filled. These doughnuts are delivered fresh daily and can be ordered at the store or via the app and website. The U.S. launch follows a successful pilot at 160 McDonald’s locations in the Louisville and Lexington, Kentucky, markets.
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The burger giant is supporting the launch with a sophisticated local marketing plan featuring TV, social media, and billboards. Krispy Kreme expects to see more national advertising as it builds toward thousands of more locations.
“We’re really impressed with the social media marketing and activation, so creative,” Charlesworth said. “And I must admit, I really love how true it is to what Krispy Kreme is. There’s a fresh offering, a fun moment of joy in people’s day, not just to consume, but to share. And the McDonald’s team really, really get that. … We’re pleased with how McDonald’s is boosting that, but everyone knows the power of the Krispy Kreme brand already, and it’s just really communicating to them that it’s available in all these places because I suspect still people are positively surprised when they come across it, which it’s great to surprise and delight.”
The venture is part of Krispy Kreme’s changed business model that moves away from retail shop expansion and focuses on using production hubs to send fresh doughnuts every day to thousands of Delivered Fresh Daily (DFD) locations across the country, whether that’s restaurants, grocery stores, convenience stores, gas stations, or pharmacies.
CFO Jeremiah Ashukian said there have been no surprise costs amid the rollout. He added that Krispy Kreme is proactively investing in the opportunity, such as increased training and development and overstaffing drivers. The brand is also improving its manufacturing operations, doughnut production lines, and delivery logistics network. Ashukian said he expects margins to be pressured because of these start-up costs in the first half of 2025, but the numbers should start increasing in the back half of next year.
The executive also noted Krispy Kreme may use a third-party logistics company to fulfill deliveries to McDonald’s restaurants. The brand piloted this style of operation in Washington, D.C., and Los Angeles and saw positive results. In fact, on October 9, Krispy Kreme launched an RFP with several national and major regional carriers to evaluate using external partners more broadly across the U.S. The idea would be to avoid extra costs like growing a truck fleet and taking care of vehicle insurance claims.
“I do believe that leveraging a third-party approach to logistics can and indeed will be actually part of the McDonald’s rollout as well,” Ashukian said. “We don’t see McDonald’s deliveries differently from other DFD deliveries. Instead, we’re building out comprehensive integrated distribution. And McDonald’s is great doughnuts, on time. And so we’ll absolutely deliver on that, supporting the nationwide rollout as we’ve aligned with them. But we can and likely will leverage a third-party fleet and drivers and partners if that makes for a better system.”
In addition to McDonald’s, Krispy Kreme added delivery to over 150 new Target stores in Q3, as well as more Walmart and Kroger locations. After success internationally, the brand also started testing deliveries to a small number of Costco warehouses in Southern California.
Krispy Kreme finished Q3 with 8,018 points of access, or wherever customers can purchase fresh doughnuts. The goal is to add 15,000 points of access by the end of 2026, the majority of which will include McDonald’s restaurants. There are 152 production hubs in the U.S. that each deliver to about 50 sites on average. Krispy Kreme wants this to increase to over 100 sites by 2026.
Organic revenue grew 3.5 percent to $376.4 million in Q3. Net revenue was $379.9 million, a decline of 6.8 percent, compared to $407.4 million in the same quarter last year. This decrease was driven by the sale of Krispy Kreme’s majority ownership stake in Insomnia Cookies.
