Krispy Kreme

BURTON D. COHEN

Krispy Kreme:

The Franchisor That Went Stale

The Brand

Krispy Kreme began in 1937 when Vernon Rudolph of Winston-Salem, North Carolina,

bought a secret yeast-raised doughnut recipe from a French chef in New Orleans. He installed a

rack in the back of his Pontiac and used it to deliver doughnuts to local grocery stores.1 In 1976,

three years after Rudolph died, the company was sold to Beatrice Foods. Beatrice began

experimenting with expanding the product line, even changing the original recipe. Troubled by

the mismanagement under Beatrice, a group of franchisees bought the company back in 1982 and

took it under their control.

From the beginning, Krispy Kreme had a cult following. The doughnuts were simple yet

irresistible, and loyal customers argued that no other doughnut could compare. Willard Scott of

NBC said that he “worships at the church of Krispy Kreme.” Nicole Kidman called them “God’s

gift to donut lovers.” Susan Sarandon once told a talk show audience, “It’s kind of like taking a

hallucinogen.” The Hot Original Glazed Doughnut was the company’s signature product. The

brand became synonymous with the freshest, hottest, and most delicious doughnuts one could

buy. The “Hot Doughnuts” neon sign, which signaled to customers that a fresh batch of glazed

doughnuts was ready, became a well-known symbol associated with Krispy Kreme and added

mystique to the brand. By sticking to its core competencies and a simple product line in its early

years, Krispy Kreme was able to build a well-known regional brand, with a loyal group of

customers that most companies would envy.

The power of the Krispy Kreme brand helped franchisees enjoy instant success upon opening

new stores. The crowds that formed outside new stores, waiting for the doors to open, were

unprecedented. Krispy Kreme took pride in the fact that it used no advertising, instead relying on

devoted customers to spread the word.2 For almost sixty years Krispy Kreme was not known

beyond the southeastern United States. In the late 1990s, however, the company began to expand,

and Krispy Kreme exploded into a national phenomenon. By 2000 Krispy Kreme was selling

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