Connie Calloway

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• Connie Calloway
• Martin Sanders
• David Walters

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• Founded July 13, 1937 by Vernon Rudolph
• First Krispy Kreme opened in Winston-Salem, NC
• Sold to Beatrice Foods in 1973
• Purchased by original Franchise owners in 1982

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Expansion

• 1982---Began expanding out of the Southeast
• 1996---Opened first store in New York
• 1999---Opened first store in California
• 2000---Opened first store in Toronto, Canada
• 2000---IPO, Krispy Kreme is traded on NYSE

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Stockholder Information for KKD

• April 20, 2000 closing price 9.61
• May 30, 2003 closing price 34.66
• Price to Earnings ratio 39
• Forecast earnings of .90 per share
• 20 new store openings in second quarter of 2003

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Subsidiaries

• Montana Mills Bakery

• Digital Java

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Break Even Analysis

• Total Revenue
• Fixed Costs
• Variable Costs
• When TRTC
• Contribution Margin
• Relevant Range

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Total Revenue

• Calculated by net sales-returns and allowances
• Total Revenue for fiscal 2003 491,550,000

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Costs

• Fixed
• Rent
• Equipment
• Overhead
• 76,580,000 in 2003

• Variable
• Raw materials
• Labor
• Selling Costs
• 381,489,000 in 2003

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When TCTR

• Break even exists when TCTR
• Total Costs 458,069,000
• Total Revenue491,550,000.

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Contribution Margin and Relevant Range

• CMTotal Revenue-Variable Costs
• CM for 2003 110,061,000
• Relevant Range

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COMPETITON

• MAJOR COMPETITORS
• Dunkin Donuts
• Independent Shops

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Product Differentiation

• Unique Recipe
• Hot and Fresh - Factory Stores
• Brand Recognition
• Location, convenience, fun

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Market Structure

• Monopolistic Competition
• Many Competitors
• Differentiated Product

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Elasticity

• Product differentiation leads to less substitutes
• Low relative price

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Price Inelastic

• Price increase will increase revenues and total
  cost
• Price decrease will decrease revenues and total
  cost

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Price Inelastic

• Fall 2002, Krispy Kreme implemented a price
  increase
• Early reporting shows increased revenues

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Says Law

• Supply creates its own demand
• Krispy Kreme is increasing the market, not just
  taking market share

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Cost Structure and Strategy

• Comprehensive and inclusive cost strategy
• Generating more revenue
• Growth into two-households
• Global expansion

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Cost Structure and Strategy

• Fixed and semi-fixed costs
• On-premises sales
• Off-premises sales

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Cost Structure and Strategy

• The New Mix
• Employee empowerment
• Intranet vertical view
• Web-based order system

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Cost Structure and Strategy

• Manufacturing Capacity
• Fiscal year 2003
• Joint ventures

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Cost Structure and Strategy

• Fiscal year 2004
• Satellite stores
• The New Economy