Krispy Kreme, the brand that lured customers into its stores with a “hot donuts now” neon sign, now hopes to get customers to order by going dark.
Specifically, the Charlotte, North Carolina-based chain plans to expand its delivery-only “dark stores” concept to the United States and Mexico this year.
Speaking to investors on Tuesday, Krispy Kreme executives said they were working to provide new access points for delivery coverage. The company has tested its UK-only delivery stores, offering nationwide coverage from more than 50 such locations. They said they were “building up their capabilities in the US and Mexican markets” this year.
“It’s a low-cost investment, but it gives you a fresh drop of donut that you can then take to that customer in there,” Krispy Kreme CEO Mike Tattersfield told investors, according to a transcript on the Sentieo financial services site.
Dark shops are not ghost kitchens because the company does not prepare food there. It’s just a place where the company brings its donuts every day. Customers within a 20-minute radius can then order donuts delivered from these stores.
Krispy Kreme has converted its business to a “hub-and-spoke” model, in which it delivers donuts from large stores where it makes donuts, or “hubs,” to smaller stores and in-store kiosks, or “ rays”.
The company attributes this model to a 290 basis point improvement in profit margins in the United States and Canada in the fourth quarter ended Jan. 22. The company has more than 10,000 global hotspots and expects to grow to 50,000 in the long term. .
But it also puts a big push into e-commerce sales, which can give the business even more reach.
Last year, 17.2% of the company’s sales came from various digital channels, up 130 basis points from 2020.
Krispy Kreme wants to increase its online sales by increasing the number of households that can have the chain’s donuts delivered. Company executives said delivery-only locations cost less than one of its traditional kiosks or store “aisles.” The company is currently testing the idea in the United States
The idea “looks really promising as a way to get more access to people at a lower cost,” said chief financial officer Joshua Charlesworth.
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