Fast food is an American institution. There are many fast food franchises that were started in America and have spread across the world, and are some of the most profitable ventures in the food industry in modern history. Mergers are a necessity when it comes to building a business that grows and expands with time, and a recent announcement makes that abundantly clear.
The Largest Fast Food Chain
McDonald’s is the world’s largest fast food chain, which was founded in 1940 as a restaurant in San Bernardino, California. The business was later rechristened as a hamburger stand, and later turned into a franchise with the Golden Arches logo being introduced in 1953.
The company changed hands in 1961 when the McDonald brothers were bought out by Ray Kroc, who had previously joined the business as a franchise agent in 1955.
Revenue From Multiple Avenues
McDonald’s is not only a restaurant, but it is a real estate company as well. McDonald’s owns approximately 70% of the restaurant buildings that sport its name, and approximately 45% of the land on which the restaurants are built, which is leases to its franchisees for another stream of revenue to the fast food giant.
McDonald’s serves over 69 million customers daily, and has restaurants in over 100 countries as of 2021. They are the world’s second largest private employer behind Walmart, with 1.7 million employees across the world.
Expanding the Business
The expansive nature of both the business and the company itself make it unsurprising that McDonald’s, as a corporation, is constantly looking to expand. Current revenue for McDonald’s comes primarily from the rent, royalties, and fees paid by the franchisees, in addition to sales in company-operated restaurants.
Further expansion increases profits, though, and McDonald’s recently announced a merger with Krispy Kreme that will see McDonald’s selling the famous doughnuts in their stores in locations all across the United States.
Older than McDonald’s
Krispy Kreme is an even older company than McDonald’s, with its first location being rented out in Old Salem in 1937 by Vernon Rudolph. The company expanded steadily until it went public in 2016, only to go private again, before again going public in 2021.
Krispy Kreme is famous for its glazed doughnuts, which is a recipe that has stuck with the company since that first store was opened in the 30’s. Since those early days, Krispy Kreme has expanded their offerings to include other types of doughnuts as well as coffee, but the glazed doughnuts are the pride and joy of the company.
A Logical Partnership
The success of both McDonald’s and Krispy Kreme as franchises makes it a logical partnership. Adding Krispy Kreme to its menu gives McDonald’s “a chance to unlock new business opportunities in the breakfast category and throughout the day,” according to Tariq Hassan, the chief marketing officer for McDonald’s USA.
Ahead of announcing the partnership, though, McDonald’s soft launched the doughnuts in more than 160 of its locations across the country. According to a statement from the company, the experiment “exceeded expectations” for business.
A Slow Rollout Expected
In their formal announcement, McDonald’s stated that the rollout was expected to happen gradually, with full integration of the two companies by the end of 2026. McDonald’s has more than 13,000 locations across the United States, and Krispy Kreme has more than 14,000 “points of access” according to the statement.
This deal will more than double the number of locations that Krispy Kreme has available to sell its products. The lineup of doughnuts will include three of Krispy Kreme’s most popular doughnuts – the original glazed, chocolate iced with sprinkles, and chocolate iced kreme filled – and they will be delivered to McDonald’s locations every day.
The Latest Change to the Bakery
The addition of Krispy Kreme is the latest change to McDonald’s bakery lineup. In 2023, the chain discontinued its apple fritter, blueberry muffin, and cinnamon roll from all restaurants.
The bakery section was not done away with completely, though. It kept its chocolate chip cookies, baked apple pie, and frozen desserts. This reduction of options is believed to have been a decision to boost profits.
Fast Food Chains Making Deals
The partnership between McDonald’s and Krispy Kreme is the latest in a list of fast food chains that are making the decision to pair up with snack makers. Wendy’s and Cinnabon introduced a new dessert in February, while Subway partnered with Cinnabon and Auntie Anne’s to add new snacks to its menu in January.
It’s clear that Krispy Kreme has significantly more to gain from the partnership compared to McDonalds, and chief executive Josh Charlesworth told investors last month that Krispy Kreme could serve 6,000 McDonald’s restaurants with its existing supply chain network. However, Krispy Kreme will be seeking to build up that infrastructure in order to be a more equal partner.
The Latest Krispy Kreme Partnership
For Krispy Kreme, the partnership with McDonald’s is the latest in a series of business team ups that the company has engaged in the past. Krispy Kreme doughnuts are sold at Walmart, Kroger, and other grocery stores along with its own stores, in one small example.
It’s clear that access is an important value to the executive team at Krispy Kreme. The McDonald’s partnership will not only make stockholders happy, but it will also provide another avenue of availability for the customers who have made the company’s business possible.
Happy Stockholders, Indeed
And the stockholders are happy, indeed. After the announcement of the partnership with McDonald’s, Krispy Kreme saw its stock price soar in the early hours of the market.
Krispy Kreme Inc. shares had their biggest gain in the history of the company after announcing the new partnership with McDonald’s Corp, with shares jumping a whopping 39% in New York trading.
Keeping the Specifics Quiet
Both McDonald’s and Krispy Kreme declined to make any statement regarding the financial specifics of the deal that the companies struck, but it’s clear that it’s going to be a lucrative venture between the pair.
Overall, Krispy Kreme shares were up 15% overall, as of this past week. This is well ahead of the 2.2% rise of the Russell 2000 Index. McDonald’s shares were down 6% overall, though it’s still early in the year.
Beginning Later this Year
The phased rollout of Krispy Kreme doughnuts in McDonald’s stores will begin later this year. The plan is for doughnuts to be delivered to locations every day early in the morning, with doughnuts available in singles or in half-dozen boxes.
The doughnuts will be sold from breakfast, and last throughout the day while supplies last. This is a decision that was made with not only the stockholders, but the consumer in mind, and buzz around the announcement has revealed that customers of both McDonald’s and Krispy Kreme are excited about this upcoming partnership.
Stock Boost Ongoing
It’s likely that the stock boost that Krispy Kreme saw from the announcement will last some time. This is good news for the company, even if McDonald’s didn’t see the same boost to its stock price after the announcement went live.
Looking forward, the next partnership between Krispy Kreme is unknown. The company has made clear that its primary objective is access for its many customers, meaning that more partnerships are all but certain. Now it’s a waiting game to find out which company Krispy Kreme will be sold out of next, but in the meantime, McDonald’s has Americans covered.
