McDonald’s planning to sell Krispy Kreme donuts in its restaurants across the country by the end of 2026, the chain announced on Tuesday.
The rollout will begin in the second half of this yr but will take about two and a half years as Krispy Kreme greater than doubles its distribution to satisfy the partnership. For the duration of the agreement, McDonald’s will be the exclusive fast food partner of Krispy Kreme in the US
Shares of Krispy Kreme rose 39% on Tuesday. The stock was previously on the right track for its best day ever.
The donut chain uses a hub-and-spoke model that enables for efficient production and distribution of treats. Production centers, that are donut shops or factories, ship freshly prepared donuts daily to shops akin to grocery stores and gas stations.
The partnership with McDonald’s is a big opportunity for Krispy Kreme to expand its reach. As of December 31, it delivers its donuts to six,800 outside stores. McDonald’s has about 13,500 restaurants in the U.S. and plans to open 900 recent locations across the country until 2027.
“With our existing infrastructure, we believe we can serve about 6,000 restaurants, mostly donut shops, that have excess capacity,” Krispy Kreme CEO Josh Charlesworth told CNBC.
Krispy Kreme can also be expanding its capability to deliver fresh donuts to the roughly 7,500 McDonald’s restaurants it currently cannot reach.
While McDonald’s is the foremost reason the company is expanding its distribution so quickly, Charlesworth said Krispy Kreme will also pursue the opportunity to enter grocery and convenience stores that favor national suppliers.
“This means that over time the overall efficiency and productivity of our distribution network will improve significantly, not least because of all these local deliveries,” he said.
Additionally, Krispy Kreme donut shops typically produce more candy than the chain can sell. Additional demand from McDonald’s and other recent customers means its production lines can produce more products at little additional cost.
“Overall, developing a fresh daily delivery channel increases the profitability of our system, and McDonald’s is an accelerator of that,” Charlesworth said.
The cooperation between the two chains began a couple of yr and a half ago, when McDonald’s began selling Krispy Kreme donuts in nine restaurants as a test. Just a few months later, the pilot program expanded to roughly 160 restaurants in Louisville and Lexington, Kentucky. These initial restaurants will proceed to sell donuts during the nationwide rollout.
According to Charlesworth, demand from McDonald’s customers during the tests exceeded expectations of each chains.
For McDonald’s, the addition of Krispy Kreme donuts helps improve its bakery and breakfast offerings. The burger chain favors coffee, a well-liked addition to donuts, but is withdrawing other baked goods akin to cinnamon rolls from its menu.
McDonald’s customers will have the opportunity to order original glazes, glazed chocolate with sprinkles and chocolate-filled donuts, individually or in packs of six. Restaurants will sell donuts all day long.
Longer term, Krispy Kreme now expects it could have greater than 100,000 access points for its donuts worldwide, up from its previous projection of 75,000 locations. The chain’s donuts can currently be present in over 14,100 stores in 39 countries.
Shares of Krispy Kreme have fallen 20% over the past yr, bringing the company’s market value all the way down to $2.11 billion. As buzz around weight-loss drugs like Novo Nordisk’s Ozempic grows, investors worry whether the drugs will reduce Krispy Kreme’s future sales.
Similar concerns have weighed on McDonald’s, at the same time as its shares rose 2% last yr as consumers switched to low cost food and drinks. The company’s market value is $201 billion.
