# KrIspy Kreme: Enron II: Electric Boogaloo! **URL:** \ **Category:** The BBQ Pit\ **Created:** [January 5, 2005, 12:03am UTC](https://boards.straightdope.com/t/krispy-kreme-enron-ii-electric-boogaloo/283110 "2005-01-05T00:03:10Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![Tuckerfan](https://avatars.discourse-cdn.com/v4/letter/t/eada6e/32.png) [@Tuckerfan](https://boards.straightdope.com/u/Tuckerfan)\ **Post date:** [January 5, 2005, 12:03am UTC](https://boards.straightdope.com/t/krispy-kreme-enron-ii-electric-boogaloo/283110/1 "2005-01-05T00:03:10Z")
[As someone who _ates_ their doughnuts, I’m not surprised by this news.](http://www.mlive.com/newsflash/regional/index.ssf?/base/business-4/110488224151830.xml&storylist=newsmichigan) > [@](#): > > Amid allegations of padded sales figures, Krispy Kreme on Tuesday restated its earnings for fiscal 2004, sending its shares tumbling more than 17 percent and threatening the once-trendy doughnut maker with a cash and credit crunch. > > In a statement, Krispy Kreme said its revised earnings reports place it in potential default of a $150 million credit line. While the company is negotiating with lenders to avoid being forced to immediately repay almost $91 million in outstanding loans, it warned “there can be no assurance that the lenders will accede.” > > The company is currently unable to borrow additional money, and has guaranteed $52.3 million in franchisee debt. Because some franchisees are not in compliance with their credit agreements, Krispy Kreme estimates it is on the hook for $16.7 million that could be subject to a demand for repayment. > > Making matters worse, Winston-Salem-based Krispy Kreme said it is still reviewing its accounting practices and expects to make further revisions to past earnings reports. Better buy 'em now, Krispy lovers, they may not be around much longer. ---
**Author:** ![Tuckerfan](https://avatars.discourse-cdn.com/v4/letter/t/eada6e/32.png) [@Tuckerfan](https://boards.straightdope.com/u/Tuckerfan)\ **Post date:** [January 5, 2005, 12:09am UTC](https://boards.straightdope.com/t/krispy-kreme-enron-ii-electric-boogaloo/283110/2 "2005-01-05T00:09:10Z")
Damn it, that first line should be "As someone who **hates** their doughnuts. . . I’m such a :wally ---
**Author:** ![Reeder](https://avatars.discourse-cdn.com/v4/letter/r/c6cbf5/32.png) [@Reeder](https://boards.straightdope.com/u/Reeder)\ **Post date:** [January 5, 2005, 12:20am UTC](https://boards.straightdope.com/t/krispy-kreme-enron-ii-electric-boogaloo/283110/3 "2005-01-05T00:20:49Z")
I don’t think it’s fair to equate KK with Enron. They are not quite the same thing. One company jacked up rates for people who have to pay power bills. The other sells donuts. ---
**Author:** ![Tuckerfan](https://avatars.discourse-cdn.com/v4/letter/t/eada6e/32.png) [@Tuckerfan](https://boards.straightdope.com/u/Tuckerfan)\ **Post date:** [January 5, 2005, 12:31am UTC](https://boards.straightdope.com/t/krispy-kreme-enron-ii-electric-boogaloo/283110/4 "2005-01-05T00:31:49Z")
> [@Reeder](#): > > I don’t think it’s fair to equate KK with Enron. > > They are not quite the same thing. > > One company jacked up rates for people who have to pay power bills. > > The other sells donuts. Yes, but both of them cooked the books to inflate their stockprices, and Enron has all but disappeared because of it, and the same fate may befall KK as well. So whilst the screwing Enron dished out was larger and affected more people, parts of it aren’t that different than what’s been going on at KK. ---
**Author:** ![Cheesesteak](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cheesesteak/32/3694_2.png) [@Cheesesteak](https://boards.straightdope.com/u/Cheesesteak)\ **Post date:** [January 5, 2005, 12:32am UTC](https://boards.straightdope.com/t/krispy-kreme-enron-ii-electric-boogaloo/283110/5 "2005-01-05T00:32:06Z")
Actually, Reeder, I consider their actions entirely equitable, in type if not in scope. Enron fleeced their shareholders and debtors, so did KK. What Enron charged their customers for energy is an entirely separate issue, the crime they committed was hiding their bad finances. I hope this company goes down in flames bringing the CEO and other high level officials down too. Corporate officers who do this sort of thing deserve every bit of punishment our system can dole out. ---
**Author:** ![Mtgman](https://avatars.discourse-cdn.com/v4/letter/m/b5a626/32.png) [@Mtgman](https://boards.straightdope.com/u/Mtgman)\ **Post date:** [January 5, 2005, 12:34am UTC](https://boards.straightdope.com/t/krispy-kreme-enron-ii-electric-boogaloo/283110/6 "2005-01-05T00:34:24Z")
> [@Reeder](#): > > One company jacked up rates for people who have to pay power bills. While engaging in practices they knew damn well would cause power failures. They had far more customers than shareholders and they were screwing people both in front of the counter and behind it. Krispy Kreme just appears to have screwed the people behind the counter. Enjoy, Steven ---
**Author:** ![smiling\_bandit](https://avatars.discourse-cdn.com/v4/letter/s/e9a140/32.png) [@smiling\_bandit](https://boards.straightdope.com/u/smiling_bandit)\ **Post date:** [January 5, 2005, 12:42am UTC](https://boards.straightdope.com/t/krispy-kreme-enron-ii-electric-boogaloo/283110/7 "2005-01-05T00:42:05Z")
Why would they do this? As an expanding, growing company in a field vulnerable to consumer fickleness and with lots of competition, they’re expected to be a little bit erratic about it, but by all accounts they have have strong if not overwhelming sales. ---
**Author:** ![Tuckerfan](https://avatars.discourse-cdn.com/v4/letter/t/eada6e/32.png) [@Tuckerfan](https://boards.straightdope.com/u/Tuckerfan)\ **Post date:** [January 5, 2005, 12:44am UTC](https://boards.straightdope.com/t/krispy-kreme-enron-ii-electric-boogaloo/283110/8 "2005-01-05T00:44:58Z")
> [@smiling bandit](#): > > Why would they do this? As an expanding, growing company in a field vulnerable to consumer fickleness and with lots of competition, they’re expected to be a little bit erratic about it, but by all accounts they have have strong if not overwhelming sales. Stupid greed, pure and simple. ---
**Author:** ![bluecanary](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bluecanary/32/3614_2.png) [@bluecanary](https://boards.straightdope.com/u/bluecanary)\ **Post date:** [January 5, 2005, 12:45am UTC](https://boards.straightdope.com/t/krispy-kreme-enron-ii-electric-boogaloo/283110/9 "2005-01-05T00:45:16Z")
There was a thread referring to ‘Krispy Kreme’ in MPSIMS yesterday. I thought it was some sort of TV in-joke thread that had missed Cafe Society. I had no idea it was a real company! It sounds like something from a Simpsons episode that I haven’t seen yet. Maybe in the future it will be now! ---
**Author:** ![duffer](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/duffer/32/1026_2.png) [@duffer](https://boards.straightdope.com/u/duffer)\ **Post date:** [January 5, 2005, 12:48am UTC](https://boards.straightdope.com/t/krispy-kreme-enron-ii-electric-boogaloo/283110/10 "2005-01-05T00:48:25Z")
I think part of the problem was they tried to expand too far, too fast. Hell, where I live we can’t support a Dunkin’ Donuts franchise (superior in my book), yet KK has donuts in about 30% of all established businesses here. That’s a shitload of wasted money, and this is only one city. Reminds me of the rabbit and hare fable. ---
**Author:** ![Lemur866](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/lemur866/32/434_2.png) [@Lemur866](https://boards.straightdope.com/u/Lemur866)\ **Post date:** [January 5, 2005, 12:58am UTC](https://boards.straightdope.com/t/krispy-kreme-enron-ii-electric-boogaloo/283110/11 "2005-01-05T00:58:44Z")
If you like the KK doughnuts, I wouldn’t worry. If the company is bankrupt, the company assets, including the storefronts, recipes, and company name is still worth a lot of money. The existing shareholders will lose their entire investment, but the creditors will own a new company with the same assets, etc. Of course, if particular storefronts are unprofitable those will be closed down quickly, but profitable stores will stay open. The individual minimum wage workers probably won’t notice much difference, unless their particular store closes. ---
**Author:** ![Tuckerfan](https://avatars.discourse-cdn.com/v4/letter/t/eada6e/32.png) [@Tuckerfan](https://boards.straightdope.com/u/Tuckerfan)\ **Post date:** [January 5, 2005, 1:05am UTC](https://boards.straightdope.com/t/krispy-kreme-enron-ii-electric-boogaloo/283110/12 "2005-01-05T01:05:42Z")
> [@bluecanary](#): > > There was a thread referring to ‘Krispy Kreme’ in MPSIMS yesterday. I thought it was some sort of TV in-joke thread that had missed Cafe Society. > > I had no idea it was a real company! It sounds like something from a Simpsons episode that I haven’t seen yet. > Maybe in the future it will be now! It’s okay, I thought the same thing about Mr. Brain’s Faggots when I first heard about them (except, of course, it being from a Monty Python sketch I’d missed). 😃 ---
**Author:** ![manhattan](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/manhattan/32/7_2.png) [@manhattan](https://boards.straightdope.com/u/manhattan)\ **Post date:** [January 5, 2005, 1:07am UTC](https://boards.straightdope.com/t/krispy-kreme-enron-ii-electric-boogaloo/283110/13 "2005-01-05T01:07:58Z")
> [@](#): > > smiling bandit Why would they do this? As an expanding, growing company in a field vulnerable to consumer fickleness and with lots of competition, they’re expected to be a little bit erratic about it, but by all accounts they have have strong if not overwhelming sales. [/quote] > [@duffer](#): > > I think part of the problem was they tried to expand too far, too fast. Hell, where I live we can’t support a Dunkin’ Donuts franchise (superior in my book), yet KK has donuts in about 30% of all established businesses here. That’s a shitload of wasted money, and this is only one city. There’s likely to be all kinds of litigation and perhaps regulatory intervention in the Krispy Kreme case, but **duffer** ’s looks like the most probable explanation, if a little charitable. Krispy Kreme became a fad, but they thought they were a phenomenon. So they had several years of massive increases in same store sales as more people got onto the fad. Same store sales increases are the lifeblood of a publicly traded retailer – it tells investors that not only can the company grow by adding stores, additional retail outlets, etc, but that the existing stores can grow profitability. What looks to have happened is that KKD expanded too quickly, and they expanded too quickly with an eye toward growing into the larger infrastructure just as the fad wore off. The donuts became less special when they became ubiquitous and a lot of the new stores had very high overheads – kitchens which could make 10,000 dozen a day as opposed to 4,000 a day in smaller stores, high rents on new stores in hot areas rather than low rents on older stores, franchisees unprepared for the business, the whole bit. After same-store increases of 12.8% in the year ended Feb 28, 2002, 11.8% in 2003 and 10.2% in 2004, same-store sales are down 6% this year. Their infrastructure and overhead are too large for their size and it looks increasingly like they won’t be able to grow into it. Top management, too, seems to have been unprepared for their growth – at best, they were sloppy in the CFO’s office and other key departments like real estate and franchisee development seem to have been overwhemed too. That said, it _looks_ like the company can be a cash generator (we’ll know more after the coming restatements). That’s different from Enron, which just chewed cash and never generated any. What that means is that even if the company fails it is not likely to disappear. Some of the dumber stores (like the expensive ones in the Gallerias of the country – there’s a reason people sell donuts and coffee from carts on Michigan Ave. rather than from stores!) may have to close, but you’ll still be able to buy the product in your town. Ownership may (or may not) change from stockholders to creditors or to a different entity, but I don’t see them going Enron’s way. ---
**Author:** ![An\_Arky](https://avatars.discourse-cdn.com/v4/letter/a/87869e/32.png) [@An\_Arky](https://boards.straightdope.com/u/An_Arky)\ **Post date:** [January 5, 2005, 1:20am UTC](https://boards.straightdope.com/t/krispy-kreme-enron-ii-electric-boogaloo/283110/14 "2005-01-05T01:20:04Z")
… I would venture that low carb diets might be a factor, as well. ---
**Author:** ![Finagle](https://avatars.discourse-cdn.com/v4/letter/f/b19c9b/32.png) [@Finagle](https://boards.straightdope.com/u/Finagle)\ **Post date:** [January 5, 2005, 1:26am UTC](https://boards.straightdope.com/t/krispy-kreme-enron-ii-electric-boogaloo/283110/15 "2005-01-05T01:26:48Z")
> [@manhattan](#): > > After same-store increases of 12.8% in the year ended Feb 28, 2002, 11.8% in 2003 and 10.2% in 2004, same-store sales are down 6% this year. Their infrastructure and overhead are too large for their size and it looks increasingly like they won’t be able to grow into it. To what extent do you think the Atkins fad cancelled out the Krispy Kreme fad? ---
**Author:** ![manhattan](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/manhattan/32/7_2.png) [@manhattan](https://boards.straightdope.com/u/manhattan)\ **Post date:** [January 5, 2005, 1:35am UTC](https://boards.straightdope.com/t/krispy-kreme-enron-ii-electric-boogaloo/283110/16 "2005-01-05T01:35:19Z")
Hee! Excellent observation, gentlemen. KKD is certainly citing low-carb diets as a reason ([here’s some old financials where they do so](http://www.sec.gov/Archives/edgar/data/1100270/000095014404009039/0000950144-04-009039.txt)). I hear similar stories from makers of raw pasta, etc. And certainly protein companies are drowing in the profits they’re making amid very high prices for proteins. Even hog producers, which were killing piglets just a few years ago because they couldn’t afford to raise them to market weight, are making out. That said, I’m starting to hear whining from companies which sell low-carb foods, too. Some of it is because they’re losing sales as more products come on the market and are available at more outlets. Others tell me that the whole Atkins thing is now in decline. So whether it’s a reason or an excuse remains to be seen. I think it’ll be some of each. To be sure, Atkins had its own fad. On the other hand, it’s not like it took Atkins to teach people that a glazed donut is not a healthy food choice. ---
**Author:** ![duffer](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/duffer/32/1026_2.png) [@duffer](https://boards.straightdope.com/u/duffer)\ **Post date:** [January 5, 2005, 1:39am UTC](https://boards.straightdope.com/t/krispy-kreme-enron-ii-electric-boogaloo/283110/17 "2005-01-05T01:39:28Z")
Shit! I completely forgot about the Atkins part of this. :smack: ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [January 5, 2005, 1:46am UTC](https://boards.straightdope.com/t/krispy-kreme-enron-ii-electric-boogaloo/283110/18 "2005-01-05T01:46:07Z")
> [@duffer](#): > > Shit! I completely forgot about the Atkins part of this. :smack: Actually, I think you’re right the first time. I believe they were using the Atkins thing as an excuse. The ones they opened near us used to have long lines all jhours of the day and night, but now don’t. BTW, the NY Times had a big article on how the Atkins vendors are now stuck with lots of inventory as the fad has worn off. They are chopping their product lines rapidly ---
**Author:** ![Lissla\_Lissar](https://avatars.discourse-cdn.com/v4/letter/l/8491ac/32.png) [@Lissla\_Lissar](https://boards.straightdope.com/u/Lissla_Lissar)\ **Post date:** [January 5, 2005, 2:19am UTC](https://boards.straightdope.com/t/krispy-kreme-enron-ii-electric-boogaloo/283110/19 "2005-01-05T02:19:10Z")
I read an article in the Globe and Mail that said Krispy Kreme was doing pretty badly in Canada, especially in comparion with Tim Horton’s. The article cited the Atkins fad, growing health-conciousness, and overexpansion as the root problems. If they hadn’t started selling the damn doughnuts at every grocery store and gas station they would have done better here. They’re only exciting if they’re a treat- if KKs are universally available the average Canadian is likely to think, “Hey! These aren’t that great, and Tim Horton’s does better coffee!”, and takes their business to Tim’s. Just IMHO. ---
**Author:** ![DiosaBellissima](https://avatars.discourse-cdn.com/v4/letter/d/a8b319/32.png) [@DiosaBellissima](https://boards.straightdope.com/u/DiosaBellissima)\ **Post date:** [January 5, 2005, 2:41am UTC](https://boards.straightdope.com/t/krispy-kreme-enron-ii-electric-boogaloo/283110/20 "2005-01-05T02:41:42Z")
Man, I sure hope I’m not the only one who was giggling at your title 😃 Awful movie, btw. [Next page](https://boards.straightdope.com/t/krispy-kreme-enron-ii-electric-boogaloo/283110.md?page=2)