The donut industry has been blooming in Malaysia recently and it has attracted many investors in wanting to invest in this industry. Donut is a favorite food among the young people of Malaysia and therefore, Krispy Kreme, one of the leading donut chain company, is planning to serve these people with even more delicious donut compared to the current donut market now. Krispy Kreme is seeking for a potential entrepreneur to collaborate with in the country.
1.1Background
This section will further explain the information on Krispy Kreme, its benefits of franchising, features and the success story of the company.
What is Krispy Kreme?
Krispy Kreme Doughnuts is a restaurant services company that provides donuts and coffee. The company is a branded specialty retailer, and produces more than three million donuts a day. In addition to its Krispy Kreme stores, the company sells its donuts in supermarkets, convenience stores and other retail outlets throughout the country. The company also serves premium coffee and espresso drinks. Krispy Kreme is headquartered in Winston-Salem, North Carolina, United States.
History of Krispy Kreme
Krispy Kreme has been in the donut business for over 66 years and is growing stronger than ever. Founded by Vernon Rudolph in 1937, Krispy Kreme has been a specialty retailer for donuts from the very beginning. It all started in 1937, when Vernon Carver Rudolph, the founder of Krispy Kreme, bought a donut shop in Paducah, Kentucky, from a French chef from New Orleans. He received the company’s assets, good will, and the rights to a secret yeast-raised donut recipe. He and his partners begin with $25 in cash, a few piece of donut making equipment, the secret recipe, and the name Krispy Kreme Doughnuts. They spent their last $25 to rent a shop and left with a little money to buy the ingredients, but Rudolph manage to persuade a nearby grocer to lend them what they needed in return for payment once the first donuts were sold.
The first Krispy Kreme’s donut were made and sold at the shop but soon afterwards, people began stopping by and ask if they could buy hot donuts. The donuts were selling so greatly that Rudolph opened the shop for retail business by cutting a hole in the wall and selling directly to customers, which was the beginning of Krispy Kreme’s retail service. In the 1940s, there were small chains of stores, mostly operated by Vernon’s family, but each stores made their donuts from the scratch, so Rudolph focus on a system that delivered the perfect with the new Krispy Kreme automatic donut cutter. The process of making donuts becomes standardized and entirely automated. Later in the 1960s, the design of Krispy Kreme stores became consistent including the easily recognized hallmark green tile roofs and heritage road signs were established. However, in 1973, Rudolph passed away and the company was sold to Beatrice Foods Company in 1976.
When Krispy Kreme turns 60 years old, it earned a place as a 20th century American icon in 1997, with the donations of the company historic items to the Smithsonian Institution’s National Museum of American History. Today, the Krispy Kreme map is now international with stores covering most continents throughout the world. Krispy Kreme Australia was the first expansion outside of North America, with doors opening in 2003. Since then the UK, Korea, Hong Kong, Indonesia, Mexico, and most recently Philippines and Japan have opened.
Features of Krispy Kreme
The Krispy Kreme brand has several unique elements that have helped them create a special bond with their customers. Krispy Kreme donuts, which are made from a secret recipe that has been in the company since 1937, have a one-of-a kind taste that generations of loyal customers have grown to love. Their Hot Doughnuts Now sign, when illuminated, is a signal to their customers that our signature product, Hot Original Glazed donuts, is being made. The Hot Doughnuts Now sign is a strong impulse purchase generator and an integral contributor to the brand’s mystique. Krispy Kreme is committed to strong local community relationships. Krispy Kreme store operators support their local communities through fundraising programs and the sponsorship of local events.
Krispy Kremes’ vertically integrated, automated system is designed to create high quality, consistent donuts in an efficient manner. Quality control starts with their manufacturing plant, which produces proprietary Krispy Kreme mixes— state-of-the-art laboratory runs quality tests on all key ingredients and each batch of mix. Krispy Kreme manufactures their custom donutmaking equipment in their plant for all their retail outlets.
On one market research indicates that Krispy Kreme’s breadth of appeal extends across all major demographic groups, including age and income. In addition to their taste, quality and simplicity, Krispy Kreme donuts are an affordable treat. Many of their customers purchase the donuts by the dozen for their office, clubs and family.
Krispy Kreme Success Story
Krispy Kreme is as efficient as they are in the business because they go by the motto that the key to expansion is to have control over each step of the donut-making process and be able to deliver hot donuts to customers as soon as they emerge from the frying and sugar-glazing process. Krispy Kreme has done so well because they follow their beliefs that they must make the customers happy. Its commitment to quality, affordability, customer service and local community involvement has created a faithful enthusiastic customer base. Another one of Krispy Kremes’ successful strategies is their donut theater, which sets them apart from their competitors. Customers enjoy being able to see how and where their donuts are being made; therefore, they get the feel of freshness and enjoy the atmosphere.
Another key to the company’s success is their reputation of serving high quality donuts and beverages; their current marketing practices through word of mouth advertising; the company’s goal to become the local hometown donut shop (Boone & Kurtz p.151); and their strict franchise selection process. Their reputation begins the process to make Krispy Kreme stand out from other donut shops. Without the highest of reputations in the commercial bakery business and without Krispy Kremes high quality process, Krispy Kreme would become just another donut shop.
Benefits of franchising Krispy Kreme
There are many benefits that are offered when running a Krispy Kreme franchise. Krispy Kreme has build up a global recognition brand and it is trusted by millions of people around the world. This can be support by the fact that Krispy Kreme sells 11,000 dozen donuts every hour in America. Therefore, franchisees become a part of a proven system of operation with Krispy Kreme offering a concept with products and services that have sold successfully. Other than that, with an established franchise, franchisees get the benefits that occur from marketing an established brand of products or services. With a new franchise, franchisees can grow and contribute to the creation of the brand.
The risk of business failure is also greatly reduced because of the experience, expertise and proven resources from Krispy Kreme that supports franchisees in the business. Krispy Kreme has strict rules in franchising out the business, whereby potential candidates must have a minimum capital set by the company and significant ownership experience in the food industry. All of the candidates are interviewed and handpicked to ensure that Krispy Kreme will be successful in the particular market. As a franchisee, another benefit that is given is business support such as site selection, training, recipes for new products, marketing, new technology and more. Krispy Kreme will assist franchisees in developing a business plan, in learning the best way to hire and manage personnel, and in how to profitably manage the facility.
Krispy Kreme Franchise Requirements
As mentioned earlier, Krispy Kreme is very strict when it comes into choosing the right franchisee for the business. Applicants are required to have current ownership and operating experience or previous ownership of multi-unit food service operations in the market that the franchisee desire to develop. On the other hand, franchisee must also possess the capital sufficient to fund the development of the market. Franchises are currently grant base on an area development basis. Franchisees are required to build multiple stores with a minimum of ten or more in a market. The minimum net worth requirement is $30 million or $1 million per store to be developed, whichever is greater. For an example, a 15-store market requires a minimum net worth of $30 million.
Substantial familiarity with the market proposed for development is required as well and willingly to develop multiple units over a period of time. In addition, franchisees must also be willing to diligently exert full-time best efforts in performing their obligations under the area development agreement.
Why is there no Krispy Kreme in the Malaysian market?
There are several factors that Krispy Kreme has not arrived in the Malaysian market. Firstly, it is Krispy Kreme’s policy that is needed to be uphold when it comes to franchising the brand. With the strict policy which requires a large amount of money in order to franchise is a factor why until now there is no Krispy Kreme in Malaysia. Although there are people who would want to franchise in Krispy Kreme business, but it is important for Krispy Kreme to be precaution in selecting a franchiser. One of the reasons this happens is the lack of potential that is in Malaysia’s investors. Every detail and information around the world is compiled and research is carefully done by Krispy Kreme. This is to help improve in both product and service matter, but there is probably no research that was conducted within Malaysia, therefore, resulting in zero outlets. With the lack of information regarding Malaysia’s business market, the company is unable to predict the business market and could result a downpour in profit, hence, it is impossible for Krispy Kreme to start out and gain profit.
Below is a table which shows the number of outlets Krispy Kreme franchised in various countries.
| United States of America | No. of Outlets |
| California | 37 |
| Florida | 22 |
| North Carolina | 20 |
| New York | 13 |
| Other States | 195 |
| TOTAL | 287 |
| Asia | No. of Outlets |
| Japan – Tokyo | 2 |
| Indonesia | 8 |
| Hong Kong | 4 |
| Philippines | 3 |
| Dubai | 2 |
| South Korea | 24 |
| TOTAL | 43 |
| Other Countries | No. of Outlets |
| Australia | 31 |
| Canada | 8 |
| Mexico | 28 |
| United Kingdom | 32 |
| TOTAL | 99 |
| GRAND TOTAL | 429 |
Based on the table above, Krispy Kreme has over 400 stores worldwide and currently still growing and expanding. How Krispy Kreme became world renown is with the combination of excellent research and potential investors that helped achieved that. Right now, many people in Malaysia enjoy donuts that are from J.Co or Big Apple but they do not have the slightest clue about Krispy Kreme. There is no awareness regarding the company in Malaysia, J.Co and Big Apple started out without any advertisement and managed to be a hit. There is no reason why Krispy Kreme is unable do it too as the company are here to give the best assorted varieties of donuts for the people in Malaysia to enjoy.
1.2 Purpose
The objectives of this report are to:
- Develop promotions and share ideas to create awareness of the brand in Malaysia with agencies that works closely with the Krispy Kreme marketing department and marketing representatives from across the nation. Develop trade relations with the local media which gives Krispy Kreme airtime that allows Krispy Kreme to advertise.
- Allow the people in Malaysia to recognize Krispy Kreme with their excellent food and beverages in order to gain good impression from the society that enables Krispy Kreme to be successful in Malaysia. Krispy Kreme can provide promotions or discounts that attract customers to try out and at the same time, stealing customers from competitors such as Dunkin Donuts, Big Apple or J.Co.
- Allow the public to discover the differences of Krispy Kreme donuts and other donut companies such as J.Co, Dunkin Donuts and Big Apple. Krispy Kreme has been operating for 71 years and is well known internationally for their health conscious donuts (for example, Krispy Kreme uses vegetable oil to fry instead of using palm oil). For this reason, it is an advantage for Krispy Kreme to expand the business in Malaysia.
- Krispy Kreme offers opportunity to investors in franchising out the company therefore, it is an advantage for the investor to gain profit in the long-run and in return, it helps Krispy Kreme to expand international market.
- By conducting questionnaires to public, the results will determine whether Krispy Kreme should be franchise in Malaysia. The questionnaires details can help Krispy Kreme in a way to identify or improve both strength and weakness. Other than that, it can help Krispy Kreme to develop a product that is suitable for the Malaysian market.
- Scope and Limitations of the Study
This study was only carried out only on people with the age gap between 10 to 50 and urban areas with past experience of purchasing at least one donut. There were a few limitations in the study; one of them is time factor and manpower to conduct a large amount of surveys, hence, information may be insufficient. Other than that, no research was done on people who do not purchase donuts before.
- Method of investigation
The information that is obtained in this report is through survey whereby 150 questionnaires were distributed to people in the public at colleges, workplace and housing areas in the Klang Valley.
Interviews were also conducted with Mr. John, Lecturer of SEGi college and Sarah “Krazy Donut Lover” Tan. Mr. John is specialize in promotional field and agrees to answer a few questions regarding his opinion on a new donut company opening in Malaysia. Other the other hand, Sarah “Krazy Donut Lover” Tan explains her views on donuts and how she enjoys it very much.
2.0Findings
This section will present the findings of the survey and the interview responses.
2.1Questionnaire Responses
Questionnaires were distributed randomly to the public at urban areas. A total of 150 respondents were kind enough to take a minute or two to fill in the questionnaires. The following is the discussion on the findings:
2.1.1Out of the 150 respondents who answered the questionnaire, 85%
(127) of the respondents claimed that they like donuts while the remaining, 15% (23) claimed that they dislike donuts.
Figure 1: The percentage of responses according to the amount of people that
like donuts.
2.1.2In response to the question on the amount of preferable choice on
donut companies from respondents. It was found that 38% (57) were the favors of Dunkin Donuts, 21% (32) are supporting Big Apple Doughnuts, another 34% (51) respondents favor J.Co Doughnuts and the remaining 7% (10) were into other donut companies.
Figure 2: The percentage of responses according to the amount on preferable
donut companies.
- Out of 150 respondents, it was found that 4% (6) respondents would purchase donuts twice a week, which was the lowest percentage among the others. Another 12% (18) respondents would purchase donuts at least once a week. 14% (21) respondents would purchase donuts for at least once a month. On the other hand, 57% (86) respondents would purchase at least once a month. The remaining 13% (19) would purchase anytime they prefer.
Figure 3: The percentage of responses on how often respondents would purchase
donuts.
- Another questionnaire was conducted among respondents regarding on how they would purchase their donuts. In 150 respondents, 7% (10) would prefer to dine-in restaurant only. Majority of the respondents which is 52% (78) would prefer to take-away orders. 35% (53) respondents would either do both dine-in or take-away orders. The remaining 6% (9) respondents would only consider of going drive-thru, delivery or pick-up order if such options are available.
Figure 4: The percentage of response on how respondents purchase donuts.
- Another questionnaire was conducted concerning how much would do respondents think is a reasonable price for a donut. Among the 150 respondents, 41% (61) would think that a donuts price should be less than RM1.50. 44% (66) respondents think that a donut is reasonable to be sold off between RM1.50 – RM2.00. Another 9% (14) respondents thinks that donut at the range of RM2.00 – RM2.50 is not a problem while the remaining 6% (9) respondents considered that price is not a factor.
Figure 5: The percentage of response on how much does respondents think is a
reasonable price for a donut.
- Out of 150 respondents, 87% (131) respondents wouldn’t mind trying a new donut which is more health-conscious and 13% (19) respondents would not purchase due to the fact that they dislike donuts.
Figure 6: The percentage of response on respondents’ thoughts of buying a
healthy low-carb and calorie donut.
- Another questionnaire was conducted regarding on do respondents prefer donuts with or without coffee. This is done to identify whether coffee is the perfect beverage to consume with donuts. 57% (86) respondents prefer donuts are best with coffee while 43% (64) disagree with it. This is most likely because respondents dislike coffee.
Figure 7: The percentage of response on whether respondents prefer donuts
with coffee.
- 150 respondents are questioned with the awareness of Krispy Kreme. 37% (55) respondents are aware the existence of Krispy Kreme and have tried it while the remaining 63% (95) are not aware of the existence of Krispy Kreme at all.
Figure 8: The percentage of response regarding the existence of Krispy Kreme
among respondents.
- It was found that the population in Malaysia is aware of famous
donut-makers such as Dunkin Donuts, Big Apple and J.Co. Dunkin Donuts have been operating in Malaysia for years but J.Co and Big Apple has recently just began their business in Malaysia is taking over the storm. More and more Malaysians are into J.Co Doughnuts compared to Dunkin Donuts and Big Apple. But there are a number of people that are aware of Krispy Kreme and how good it is. This information will be used to study the market and minimize any possible risks.
2.2Interview Responses
Interviews were conducted with a number of people from the business industry and a person with high interest in donuts to obtain their opinions concerning of having a new donut company in Malaysia as well as their views on the donut itself.
- An interview was conducted with Mr John, Lecturer of SEGi College at 11a.m. on 24March 2008 in a college classroom. Mr. John has been teaching as a lecturer for the past few years, specializing in the hotel management and promotional industry.
During the interview, he clarify that he do not like donuts for a reason that he claim donut is boring and contains a lot of sugar. He further explains that donut is just a piece of bread with unreasonable price and it is not healthy. But what influences him to buy a donut is peer pressure, mostly because of friends that pressure him to buy a donut when they visit a donut store. He agrees that the donut industry have been blooming over the past years which can be seen that several companies have been opening new stores in Malaysia as Dunkin Donuts were monopolizing the donut market for many years. He commented that the new companies are gaining so many customers is because of people going for the brands and being influenced by friends but in the future the brand will go down.
We asked Mr. John that what type of advertisement that suit the Malaysian market and he suggested that hiring celebrity to promote a donut would be effective because it would change the perception of the public towards a donut, for an example a model having a donut and she still look fabulous. Other than that, television commercial, newspaper and billboard may work. When we asked Mr. John what ways can he suggest to increase the sales of donut, he replied that donut have been competing with many other types of food in Malaysia and it is difficult to reach sales in a diluted market. On the other hand, beverages such as milk and fresh fruit juices go well with donuts. He advises donut companies to watch out for bakery competitors and it is a matter how people perceive donuts, for example a donut is a type of bread and it is competing with other bakery shops. When asked that he were given a chance to franchise a donut company, he would not want to take the risk as this business involves many factors that could close the business down if it is not planned properly.
2.2.2Another interview was conducted with Ms. Sarah “Krazy Donut Lover” Tan, a donut fanatic for years, at 12p.m. on 24 March 2008 in SEGi College classroom. Ms. Sarah fanatic started since young and have tasted almost every brand of donuts in Malaysia and even Krispy Kreme donuts.
During the interview, Ms. Sarah stated that donuts is so convenient to eat anytime, from breakfast to a midnight snack and even when in need of sugar-boost. She described that donuts have many varieties of flavors and choices to choose from but also emphasize that there are a few factors to be considered before purchasing a donut such as texture, fillings, price and hygiene in processing the donuts. Ms. Sarah also agrees with the fact that donut industry have been expanding widely ever since donut retailers came in to the market because previously only bakery shops sells donuts. For Ms. Sarah, she describe donut as a fun and cute shape compared to people who thinks that donuts are boring but she argues that it is the trademark of the donut for having the ring-shape.
When we tried to bring in the idea of having a healthy donut such as low-carbohydrate and low-calorie donut, she strongly supports the idea as people are being more health conscious especially the older generation. Ms. Sarah prefers television commercial as an advertisement for a donut company because it could make people feel hungry behind the screen and have the urge to get one. From her point of view, celebrity endorsement does not work on smart consumers because the main purpose is all about the donut, not the celebrities. She also recommends customer loyalty programs such as point-based system, coupons and vouchers to reward a loyal customer, it is how a company thank the customer. When it is given an opportunity to her to franchise a donut company, she would prefer to open a retail shop or shop lots. The design is very crucial; it must be comfortable and have a cozy feeling so customer can relax under the dimmed light. She will also provide free samples of her product to attract new customers and advertising massively to create awareness so that people would spread the word around as she believes that word of mouth is a very powerful advertising tool.
- Conclusions
Based on the findings of the study, it can be concluded that most people are unaware of the existence of Krispy Kreme Doughnuts. Many people are sticking with products from Dunkin Donuts or J.Co due to the fact that customer’s are not used to change in brand loyalty. Although Krispy Kreme is doing very well in the United States and other countries, it is uncertain for the company to franchise in Malaysia.
Donuts that are made from Krispy Kreme are more into a health-conscious matter which benefits many people. They even have donuts that are made from whole-wheat which other donut companies has yet to make any. This finding is one of the key to capture the Malaysian attention. The findings also conclude that majority of the respondents is willing to pay RM1.50 – RM2.00 for a donut which suits the current market price today.
In conclusion, although most people are still sticking to their current brand, but it is possible for Krispy Kreme to step into the picture and attract customer’s attention with it’s own strategy such as promoting new varieties of donuts and their health-conscious made donut with an affordable price.
- Recommendations
It is the recommendation of this study that the following proposals be implemented:
4.1Based on the survey, some people may have wrong perception towards Krispy Kreme. For instance, people think that it is a fattening food since its fried and oily but Krispy Kreme uses vegetable oil as a healthier substitute, therefore, the percentage of calories is reduced. Besides that, pricing of a donut has been another factor. Some people feel that RM2.50 for a piece of donut is not worth it, it is somehow equivalent by purchasing a loaf of bread. Hence, advertisement is highly recommended to change the public’s perception and at the same time, creating awareness. As a result, public will have an opportunity to understand well about Krispy Kreme and understand the ingredients that they used that costs RM 2.50 for a donut.
4.2 Krispy Kreme have to come up with a new design of donuts in order to maintain regular customers because they tend to get bored of the same design and flavor in long-term. Besides that, Krispy Kreme should provide free refill for certain beverages and promotion for donuts during certain time. For example, giving free refill on coffees and having donut promotions on National Doughnut Day, which falls on the first Friday of June each year. Other than that, Krispy Kreme can produce a limited edition design and flavor for certain festival, for instance, a couple donuts on Valentine’s Day.
4.3Krispy Kreme is a profitable company, it is proven that Krispy Kreme is internationally well-known for its “not doughnut experience”. This company takes pre-caution in a way of selecting franchisee, this is why it has managed to avoid the pitfall of being accused of rewarding company insiders with incrative franchise buyout offers. Understand level of a franchisee is important, it determine how high is franchisee confident level in franchising.
4.4Krispy Kreme should design the outlet creatively and create a nice cozy atmosphere for the customers. Besides selling donuts and beverage, customer can relax and enjoy their time while dining in. it is important to ensure customer to feel comfortable and relax with its environment. in addition, survey forms should be place at the counter and customers are advice to fill up the form. With this, Krispy Kreme has the opportunity to improve better in advance.
4.5Recently, there is discussion between Krispy Kreme and Xpresso Mobile Coffee to provide promotions on both of the company’s product. It is highly recommended to joint-venture with Xpresso Mobile Coffee as it will benefit Krispy Kreme in expanding the Malaysian market. In the discussion, it is proposed that Xpresso Mobile Coffee will supply Krispy Kreme’s franchisee coffee at an affordable rate and in return Krispy Kreme will supply donuts to Xpresso Mobile Coffee for them to sell, hence, it is a win-win situation for both companies.
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