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CASE 12 • KRISPY KREME DOUGHNUTS (KKD) — 2009 123

contain a doughnut-making production line in addition to a retail establishment. They can pro-
duce from 4,000 to 10,000 dozen doughnuts daily. Factory stores support other sales channels,
including other stores, so as to better penetrate the market. These other sales channels include
sales to convenience stores, grocery stores, mass merchants, and other food service and insti-
tutional accounts. Some factory stores are termed commissaries, which are mainly focused on
serving the other sales channels. To do so, they have higher production capacities. There were
19 commissaries worldwide with six operated by Krispy Kreme as of February 1, 2009.
The second type of KKD store is the satellite store, which sells doughnuts and bev-
erages. Some satellite stores contain what is termed a hot shop, tunnel oven doughnut
heating equipment, which allows the consumer to have a hot doughnut experience. Even
with a hot shop, satellite stores are much smaller than a factory store. Another form of
satellite store is the kiosk format.
Exhibit 3 shows the numbers of each store at the end of the last four fiscal years.
KKD revenue is generated from three main sources:
1. Company stores, meaning stores owned by Krispy Kreme (Company Stores). Revenue is
generated through on-premises sales meaning customers coming to either the factory or
satellite store or through promotions with community organizations. Both doughnuts and
beverages are sold. The majority of the sales outside the United States are on-premises.
Off-premises sales are also a source of revenue. Krispy Kreme branded doughnuts are
sold through a variety of outlets such as convenience and supermarkets. In these outlets,
the doughnuts are placed on shelves or on specifically designed display units or cases.

EXHIBIT 3 Number of Each Type of Store at the End of FYs 2009, 2008, 2007, and 2006

At February 1, At February 3, At January 28, At January 29,
2009 2008 2007 2006
By Owner
Company Stores 93 105 113 133
Franchise Stores 430 344 282 269
Total Systemwide 523 449 395 402
By Type
Factory Stores
Company 83 97 108 128
Franchise 198 198 188 195
Total Factory Stores 281 295 296 323
Satellites
Company 10 8 5 5
Franchise 232 146 94 74
Total Satellites 242 154 99 79
Total Systemwide 523 449 395 402
By Location
Domestic Stores
Company 93 100 107 127
Franchise 132 145 165 207
Total Domestic Stores 225 245 272 334
International Stores
Company 5 6 6
Franchise 298 199 117 62
Total International Stores 298 204 123 68
Total Systemwide 523 449 395 402

Source: Krispy Kreme’s 2009 Form 10K.