Waco, Texas, Krispy Kreme Franchisee Abruptly Closes Shop

By Mike Copeland, Waco Tribune-Herald, Texas

Sep. 27–Waco’s love affair with hot Krispy Kreme doughnuts lasted only 19 months. The shop at New Road and North Valley Mills Drive closed abruptly at 7 p.m. Saturday, with owners blaming poor sales.

Long lines and countless promotions marked Krispy Kreme’s opening in Waco on Feb. 3, 2004, but apparently the maker of specialty doughnuts could not sustain its momentum.

Glazing Saddles, Ltd., of Austin, which is the local franchisee for Krispy Kreme, released a statement saying that the closing “was due to the retail portion of the store’s operation,” meaning that the shop did not get the walk-in and drive-through traffic it needed.

It will continue to provide Krispy Kreme doughnuts to several local stores, including Brookshire’s Food Stores, Wal-Mart, IGA United Super, Pilot Travel Center, Flying J, Cefco Food Stores and Shoppettes locations. But these will be made in Round Rock and trucked to Waco.

Reaction to the closing was mixed.

“I’m still mourning the loss of Krispy Kreme,” said Waco businessman Jay Mathis, who also serves as pastor of Grace Community Church, when contacted Monday.

“I think they have a great product, but they just could not sell enough,” said Mathis. “You would have to sell a lot of doughnuts to pay for that expensive real estate (at Waco Drive and Valley Mills Drive).” Mathis said he did not get the impression Krispy Kreme was going out of business.

“When we were in there, they were sending out some pretty good-sized orders,” he said, “but it was not like the early days, when tons of people were in there.” Marvin Kunze, of Waco, was enjoying breakfast Monday morning at the Shipley Do-Nuts location on North Valley Mills Drive. He had heard about Krispy Kreme closing, but he was not overly annoyed.

“Krispy Kreme’s doughnuts are a little too sweet for me. I couldn’t take all that sugar,” said Kunze, 70, who enjoys the meat-and-cheese kolaches and the plain glazed doughnuts at Shipley. He said he patronized Krispy Kreme when it first opened but gradually quit going there.

Kenny Sanders, who drove a truck for Krispy Kreme in Waco, said its 38 employees were summoned to the shop at about 7 p.m. Saturday. They were told that the store was not making enough money and that it would close. It was then, he said, they received their severance checks.

The conveyor belts were stopped, Sanders said, and doughnuts were tossed into the trash.

“I was in the wholesale side of the business, which meant I hauled doughnuts as far south as Killeen and Harker Heights. Sales were pretty good,” said Sanders. “But the owners said we had more money going out than coming in.” Sanders said he’s not a disgruntled employee, but he would have appreciated more notice of the closing.

He said employees have been encouraged to apply for work with Glazing Saddles in the Austin market, where it operates three Krispy Kreme locations.

“But who in their right mind is going to pay $3 a gallon for gas to commute down there?” said Sanders. “You either commute or move to Austin.”

Randy Willard, president of Glazing Saddles, released a statement, saying: “We appreciate the warm welcome that everyone in the Waco community has given to Krispy Kreme, and being a part of the community is very important to us. We look forward to continuing to serve our local customers through our off-premise partners, and we hope to continue a strong relationship with the community through many avenues, including our programs available to non-profit organizations.”

Before Krispy Kreme opened a shop in Waco, its doughnuts were popular with schools and churches wanting to sell them to raise money.

Angela Herrera, spokeswoman for Glazing Saddles, said the company would make no other statements about the closing. The company operates other shops in Corpus Christi, Laredo, Austin and San Antonio.

Phil Adkins, the local Shipley franchisee, said his product proved to be a staunch competitor, but he believes other factors doomed Krispy Kreme in Waco.

He said he does not believe Glazing Saddles drummed up enough wholesale business to make the local shop work and that the retail business could not pick up the slack.

“If you’re going to be a 24-hour operation and a national brand, you should be on the interstate, not buried three or four miles from it,” he said, adding: “The only one of my stores it affected was the one on North Valley Mills Drive, and the hit on that store wasn’t big enough for me to make a change in payroll.”

Adkins said Krispy Kreme’s business model puts great pressure on franchisees. The company’s automated equipment is expensive, he said, and Krispy Kreme historically has required franchisees “to buy land and build buildings.” Adkins, meanwhile, operates stores smaller than the typical Krispy Kreme, and he leases space.

Once a darling among sweets lovers and investors, Krispy Kreme has seen a national slide in recent years.

It has come under scrutiny from federal regulators who have questioned the accounting practices of the North Carolina-based company that was founded in 1937 and went public in April 2000.

In a recent filing with the Securities & Exchange Commission, Krispy Kreme’s board of directors claimed that the company “failed to meet its accounting and financial reporting obligations to its shareholders and the public.”

Six top Krispy Kreme executives were fired or resigned earlier this year. And Sweet Traditions, a Krispy Kreme franchisee with about 25 stores in the Chicago and St. Louis areas, is suing Krispy Kreme over issues related to its sales slumps.

Value Line, a stock monitoring service, reports that average sales for all 370 Krispy Kreme stores both company-owned and franchisee-owned have plummeted about 20 percent this year from last.

Stock in Krispy Kreme has dropped from about $47 a share in 2003 to roughly $6 a share today.

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