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How Profitable is a Krispy Kreme franchise? 2022 FDD Data

Krispy Kreme are very popular franchises, and there’s a good reason for that: they are very profitable businesses, especially considering the low investment cost. Indeed, opening a Krispy Kreme franchise may cost you close to $820,000, yet you can expect to make $7.6 million in sales per year..!

So are Krispy Kreme franchises a good investment? That’s what we will look into in this article. We’ll look into how much it costs to open a Krispy Kreme franchise, how much you can make with this business and how profitable it really is. Let’s dive in!

Krispy Kreme: key figures

Franchise fee$12,500
Royalty fee4.5%
Marketing fee3.5%
Investment (mid-point)$824,000
Average annual sales$3,400,000
Sales to investment ratio4.1x
Payback period*1.6 years (excellent)
Minimum net worth$2,000,000
Minimum liquid capital$350,000
* using 15% net profit margin

Krispy Kreme: A brief introduction

Krispy Kreme is a leading American multinational doughnut and coffee shop chain store with 373 in the US and over 1,600 locations worldwide. The chain offers glazed doughnuts, coffee, and other beverages, treats, and sweets.

Headquartered in Winston-Salem, North Carolina, Krispy-Kreme was founded by Vernon Rudolph in 1937.

The Krispy Kreme franchise started in the 1950s and the company went public in 2000 as Krispy Kreme Doughnuts Inc. 

Shortly after, the company opened its first stores overseas: in Canada in 2001, in Australia, and the UK in 2003.

Since then, Krispy Kreme has opened over 361 stores in the US and over 1,700 other locations across 31 countries.

Krispy Kreme Franchise: Pros and cons

Just like many other investment opportunities, the Krispy Kreme franchise has its good share of advantages and disadvantages.

The Pros

  • Brand recognition: The Krispy Kreme brand is well-known in the US and worldwide. Its popularity is a big advantage when establishing new franchises in any location
  • Strong customer retention: With an established business line, Krispy Kreme enjoys huge customer retention. The company has developed a tradition that keeps customers loyal to its warm, tasty confections
  • A broad selection of products: To keep up with the modern competition, Krispy Kreme keeps expanding its product base. This allows them to venture into new markets and keep up with changing customer trends. Krispy Kreme offers a wide variety of classic doughnuts and seasonal varieties, as well as beverages and icy treats, in addition to their traditional warm glazed doughnuts.
  • Proven working model: Krispy Kreme has some great experience, having been in operation for over 75 years. They understand what works or doesn’t in the doughnut industry. They can then provide new franchises with expertise and advice on how to be profitable.
  • No requirement for direct management. If you’re just interested in financial investment, the Krispy Kreme franchise is the best option. It allows investors to employ direct managers to run the franchises on their behalf. 
  • New markets: The Krispy Kreme Company continues to explore new markets for expansion in the US. For instance, they are planning to remodel 350 of their US stores and open 45 new ones. This creates numerous market opportunities for new franchises. 

The Cons

  • Long approval process: The process between the signing of the Krispy Kreme franchise and starting operations can take up to 65 weeks. In addition to the approval process, you must undergo a 2-month onsite training as well as 15 days of classroom training to learn about business management and the food industry.
  • No exclusive territory protection: One model Krispy Kreme has advocated is aggressive growth. As such, they promote growth over profitability. Therefore, as a new franchisee, you may find yourself competing with another franchise in the same location.
  • Competition from big companies: With many doughnut lovers worldwide, Krispy Kreme does not operate in a vacuum. Many competitors, like Dunkin’ and Horton’s, are offering the same doughnuts and coffee. With customers having many options, your Krispy Kreme franchise may face stiff competition.

How much it costs to open a Krispy Kreme franchise?

As per the 2020 FDD, the investment cost required to open a Krispy Kreme franchises varies between $222,000 and $4,115,000 depending on the type of shop you go for.

By far the most common type of franchise is a fresh shop: a Krispy Kreme shop that receives the donuts from a factory (the “factory store” or a “commissary facility”) and finish them (icing and/or filing) as per the company’s recipes and requirements.

On average, the investment cost for a fresh shop is $824,000 and varies between $440,500 (lowest) up to $1,207,500 (highest).

This amount includes the $12,500 franchise fee you must pay upfront as well as other expenses such as: construction costs, the first 3 months of rent, grand opening marketing expenses, etc.

Type of costAmount
Franchise fee$12,500
3 months lease cost$8,000 – $37,500
Construction costs$250,000 – $837,500
Equipment, signage, furniture$90,000 – $175,000
Grand opening $20,000 – $45,000
Other$60,000 – $100,000
Total investment$440,500 – $1,207,500

What’s the average turnover of a Krispy Kreme franchise?

As per Krispy Kreme’s own website, the average annual sales for a franchise is around $3.4 million. Yet, this number is for the 2020 period and therefore impacted by the pandemic.

Looking at 2019 numbers, instead, the numbers are far more flattering: pre pandemic, the average Krispy Kreme franchise generated a whopping $7.6 million in sales per year instead.

Unfortunately, Krispy Kreme doesn’t give a lot of details on the financial performance of its stores. In order to obtain this number, we simply looked at the total revenue the holding franchisor company made from franchises royalty fees:

Amount (2019)
Royalty fee income$114,244,000
Royalty + marketing fee8.0%
Total annual franchises revenue$1,428,050,000
Number of franchises187
Average annual revenue per franchise$7,636,631

How profitable are Krispy Kreme franchises?

In light of such impressive numbers, it’s not surprising that Krispy Kreme is a profitable venture.

Again, unfortunately Krispy Kreme doesn’t provide any data on costs in its Franchise Disclosure Document. Therefore, in order to look at profits, we must make some assumptions. Here’s the EBITDA margin we obtain by using the data available in their FDD.

Note that we used 2 examples here: the $3.4 million annual sales for 2020 as well as the pre pandemic $7.6 million (2019).

As you can see, even though our adjusted EBITDA excludes other operating costs, the numbers are impressive vs. other franchises in the same industry (~25%). Even with a $3.4 annual sales, profitability (adjusted EBITDA) stands at 33% of sales..!

20202019Notes
Revenue3,400,0007,636,631
COGS(850,000)(1,909,158)25%*
Labor(986,000)(2,214,623)29%*
Rent(182,000)(182,000)As per FDD
Royalty + marketing fees(272,000)(610,930)13% (as per FDD)
Adjusted EBITDA1,110,0002,719,920
% margin33%36%
* Industry average (not available in the FDD)

Is a Krispy Kreme a good investment?

The profitability of a business doesn’t tell us much about whether you should invest in it. Indeed, even if you would make $1 million in profits per year, would you invest in this business if it would cost you $100 million upfront? Probably not right?

Well this is exactly what we’ll do now. We will compare Krispy Kreme’s profits to the initial investment cost to assess whether Krispy Kreme is a good investment at all.

That’s what we call payback period: the number of years it takes for an investor (or a franchisee) to recoup her/his original investment.

Now, as per our analysis, we found out that the average payback period for a Krispy Kreme franchise is around 1.6 years, which is exceptionally good..!. In other words, it takes you 1.6 years only to recoup your original investment of $824,000.

Note that this is an average across all shops and especially all shop format (box, commissary facility, etc.). Therefore, your franchise payback may be different based on your specific situation. In order to assess your franchise payback period and whether it’s a good investment, download our financial plan below.

Download the Krispy Kreme business plan and get your franchise funded

Including a 5-year financial plan built with the latest Franchise Disclosure Document numbers