The first Krispy Kreme opened in 1937 as a local doughnut company in Winston-Salem, North Carolina by supplying doughnuts to local grocers. Eventually, their work started to attract customs with their super fresh, warm, glazed snack and began offering the opportunity to prospective franchisees. To date, there are nearly 1,400 Krispy Kreme locations globally.
How much does it cost to open a Krispy Kreme Franchise? Expect to invest $1 – $2 million including the $25,000 franchise fee. To help you better understand the financial aspect of opening a Krispy Kreme franchise, we go over the fees and program options in greater detail. Take our franchise quiz to find out if Krispy Kreme is right for you.
To qualify as a franchisee you’ll need a liquid capital of $300,000. You’ll also need a net worth of $2 million, which refers to the total value of all your assets minus liabilities. Let’s dig into the details of this beloved donut franchise to understand the pros / cons of the business.
- Financial Requirements and Fees
- Average Sales / Revenue per Year
- Krispy Kreme Franchise Facts
- Average Profits
- Advantages for the Krispy Kreme Franchise
- Challenges of Krispy Kreme Franchise
Financial Requirements and Fees
Here is a table of the brief financial requirements to start a franchise with Krispy Kreme.
|Fees/ Expenses||Financial Amount|
|Total Investment||$275,000 – $1,911,250|
Here is a further breakdown of what you’d need to pay in your initial investment with Krispy Kreme.
|Name of Fee||Low||High|
|Development Fee (per Fresh Shop)||$12,500||$25,000|
|Initial Franchise Fee (per Fresh Shop)||$12,500||$25,000|
|Real Estate and Improvements – 3 Months||$8,000||$75,000|
|Truck (per truck)||N/A||$50,000|
|Equipment and Displays for Authorized Off-Premises Sales (excluding truck costs)||N/A||$100,000|
|Grand Opening Marketing Program||$20,000||$45,000|
|Security Deposits and Other Pre-Paids||$2,500||$20,000|
|Additional Funds (3 months)||$25,000||$100,000|
Here is a table of other fees that you may encounter on a regular basis from the Krispy Kreme corporation.
|Type of Fee||Amount|
|Royalties (Franchise Agreement only, except for Authorized Off-Premises Sales by a Commissary Facility)||4.5% of net sales of the store, including fundraising sales, and excluding any authorized off-premises sales. For any authorized off-premises sales by a store or a commissary facility, 4.5% of net sales.|
|Transfer||$5,000, plus any applicable transfer fee for any other agreements, as well as the franchisor’s costs and expenses (including legal and accounting fees) incurred in relation to the transfer.|
|Opening Term||Cost and expenses the franchisor’s opening team incurs in connection with the opening of the store or commissary facility, other than travel, room and board, and salaries, for which the franchisor is responsible.|
|Brand Fund (Franchise Agreement only, except for Authorized Off-Premises Sales by a Commissary)||Up to a maximum of 2% of net sales.|
|Advertising Placement Fund (Franchise Agreement only, except for Authorized Off-Premises Sales by a Commissary)||Up to a maximum of 1% of net sales.|
|Additional Copies of Advertising (Franchise Agreement only)||The cost associated with providing additional copies of advertising materials.|
|Local Advertising Requirement (Franchise Agreement only)||At least 2.5% of net sales.|
|Local and/or Regional Cooperatives (Franchise Agreement only)||Up to 3% of net sales.|
|Hosting Fee||$150 per store per month.|
|Maintenance Fee||$150 per store per month.|
|Additional Service Fee||$65 per hour.|
|Systems Fee||The then-current fees (currently $0).|
|Replacement Fee for System Standards Manuals||Currently $1,000.|
|Relocation Fee||A fee of $2,500 plus the franchisor’s expenses associated with the relocation of a store or commissary facility.|
|Audit/Inspection Expenses||Cost of audit or inspection, includes legal fees, accountants’ fees, and travel expenses, room and board, per diem charges, and other associated expenses.|
|Costs and Attorneys’ Fees||Varies.|
|Training of Additional Managers||Franchisees must pay their managers’ wages, salaries, travel, room and board, and living expenses during training.|
|Additional or Special Training||The franchisor’s reasonable fee plus their managers’ wages, salaries, travel, room and board, and living expenses during training.|
|Interest on Late Payment||1.5% per month or the highest rate of interest permitted by law, whichever is less.|
|Fees to Evaluate Proposed Alternative Suppliers||The franchisor’s reasonable costs and expenses.|
Average Sales / Revenue per Year
Krispy Kreme produces over $800 million total in their annual sales in revenue. Each Krispy Kreme store can average about $3.4 million in sales every year.
Krispy Kreme Franchise Facts
Here are some more facts about Krispy Kreme and their franchise program.
|Incorporated Name:||Krispy Kreme Doughnuts Inc.|
|Industry||Quick Food Services|
When the 1950s came around, the doughnut-making process started to shift from your usual, personally hand-cut doughnuts to a smooth, mechanized Krispy Kreme automatic doughnut cutter. Eventually, in 1962, they came with the pressurized dough hopper that would produce dough rings into trays, making it much easier for the doughnut cutting process to take place.
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A change of events happened in 1976 where Krispy Kreme became a subsidiary to Beatrice Foods Company of Chicago. However, a small group of franchisers bought back Krispy Kreme to be a private company back in 1986. Their headquarters remain unchanged in Winston-Salem.
How Much Does Krispy Kreme Actually Profit?
Krispy Kreme franchise owners can make $60,000 – $70,000 per week in sales, which works out to $3.4 million in store revenue. This is a lot of money on average for a franchise! However, why is it that they make so much if the annual revenue for Krispy Kreme only at around $800 million? This breaks down to some factors that impact positively and negatively on certain franchises.
To begin, we should state that Krispy Kreme allows 4 types of formats that your franchise store can operate in. Each format has different sales volume and operational requirements.
- Factory store: This is a retail sales facility that can manufacture and produce fresh doughnuts on-site and in demand. They can also supply and ship to other types of franchises as well.
- Tunnel Oven Shop: A retail sales facility that has an impinger oven, which is an oven that’s normally 2 – 4 times faster than a conventional oven, but it has limited manufacturing capabilities, such as only basic icing and filling potential. They also receive doughnuts from a Factory Store or a Commissary Facility and finish them as necessary and then they’re able to sell them to consumers.
- Fresh Shop: A retail sales facility that has only limited manufacturing functions like icing and filling equipment, or they have no manufacturing capabilities, and they receive doughnuts from a Factory store or a Commissary facility and they finish them as necessary to sell them.
- Box Shop: A retail sales facility that has absolutely no manufacturing capability and it has to receive doughnuts from other facilities like the Factory store or a Commissary facility. These are usually prefabricated; a free-standing, self-contained unit that almost resembles a Krispy Kreme doughnut box and it’s usually in an enclosed retail area.
A successful Krispy Kreme franchise is finding the right location. The ideal location doesn’t have much competition in the surrounding area that sell coffee or doughnuts like Dunkin’ or other small mom and pop shops. You’d need high traffic whether it be on foot or next to a road.
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Preferably, you’d have a drive-thru as well so customers have better access instead of needing to park and then get out of the car. It’s not uncommon for quick serve concepts like this to bring in $500,000 or more every year through this window. Speaking of parking, you should also have a decent amount of parking available so customers can come inside the store.
It also helps if you’re a tunnel oven shop that can produce and finish your own doughnuts. Then you won’t need to wait for another facility to produce doughnuts when you run out or certain doughnuts that aren’t available. No customer would be impressed when they’re at a Krispy Kreme and they’re told “Sorry, we’re out of doughnuts until tomorrow morning when we have the shipment delivered.”
Advantages for the Franchise
Some of the advantages of starting a franchise with Krispy Kreme include the fact that Krispy Kreme is a striking brand that has a loyal customer following. When you hear “Krispy Kreme” doughnuts, you know exactly what to expect. This means that the store will likely require less marketing and advertising while delivering a large customer base. If you plan to open a Krispy Kreme shop in an area that hasn’t previously had the concept, except excitement from the local population.
Krispy Kreme has also been expanding in the United States and internationally too. This is another sign that Krispy Kreme as a company continues to perform well.
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The company is also slowly expanding their menu with creative options and provide customers with a sort of build-your-own style doughnut. This deepens the customer experience and differentiates the brand further from other competitors. Their marketing department has also proven they are able to stay up-to-date with trends and taste changes to keep customers interested and coming back.
Managing a franchise with Krispy Kreme is more relaxed than other franchise concepts. For example, the company doesn’t require you to be present for day-to-day operations of the franchise. This means that you can sign up for a franchise with only financial responsibility and consider the store a more passive investment. The catch is you still need to appoint someone that would be responsible for managing the day-to-day operations. Finding this sort of talent can be hard to find and expensive.
In addition, Krispy Kreme will handle any expenses for training for any 4 employees for your franchise. This is a fantastic opportunity to level up the most valuable players in your business.
- Loyal Customer following.
- Opportunity to manage the franchise as a passive income investment.
- Krispy Kreme’s expansion can lead to further growth opportunities.
Challenges of Krispy Kreme Franchise
Franchises and corporations will always have some challenges. Nothing is ever easy. One of the first things you’ll notice when you’ve made the decision to start a franchise with Krispy Kreme is that their application process is quite rigorous. You need to have prior experience in running and managing multi-unit foodservice operations. You also may have to wait a lengthy time to get approved, which you can expect to be 2 months or more.
They also have a lengthy training program. You have to spend over 2 months training on-site at the store, along with 15 classroom days to learn about business management and the food industry. There’s additional training that’s needed at the stores as well and you are responsible to cover any expenses required for employees to get to training once you have more than 4 workers.
The initial investment package from Krispy Kreme doesn’t include any furniture or equipment for your store, so that is something you’ll need to be responsible for, including the money for it. In addition, during the setup for your franchise, Krispy Kreme doesn’t provide any sort of territory protection, meaning that there may be other stores where your franchise will be located that also provide doughnuts and/or coffee.
In addition to competition from other donut shops, Krispy Kreme corporate makes prepackaged donuts available in grocery and convenience stores. This makes it’s easier than ever for Krispy Kreme fans to get their fix without visiting your store. It’s unclear the overall impact this has on franchisee owned stores, but it does create risk for over saturation of the brand.
They corporation does not offer financial support to prospective franchisees. You’re going to need to have really good financial standing and have some money in your bank to afford your franchise with Krispy Kreme. Many franchise opportunities offer discounts or support for groups like veterans.
- No financial support services, direct or indirect.
- Difficult procedure to get through the initial interview.
- Need a good amount of money to start.
Is the Krispy Kreme Franchise Right for You?
Krispy Kreme franchise comes with high earning potential, but they also have some downsides like expanding the product into grocery that can make the future less clear.
Krispy Kreme requires franchise owners to have had prior experience working in management experience with restaurants or somewhere in the food industry. They’re not going to allow any first-timers without any experience to jump onboard. You’ll also need to have a significant liquid capital to invest ($300,000) in order to get started in the franchise.
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Once you overcome these hurdles, you’re set to gain some great profits especially if you’re located in a good area with little competition. The company has continued to perform well through the health crisis especially those locations with drive-thru windows.
Krispy Kreme has also an international presence, with a majority of franchises locations being located in other countries.
If making warm, glazed doughnuts is something in your interest and the funds to invest money to back, Krispy Kreme is a proven franchise. They’re on the way to expand and attract even more consumers and broadening their menu to appeal to even more people. You can contact Krispy Kreme here to learn more about this business opportunity.