McDonald's Popular Partnership with Krispy Kreme May Be Hitting a Major Snag
McDonald's became part of a truly iconic partnership last year when it teamed up with Krispy Kreme to sell fresh doughnuts at select McDonald's locations in Kentucky. But while the companies say the Krispy Kreme test is showing promise so far, there may be one major hurdle preventing them from expanding it to restaurants nationwide: production capacity.
McDonald's first announced its Krispy Kreme partnership in October 2022, initially only offering the popular doughnuts at nine select locations in Kentucky. In March this year, the fast-food giant expanded that test to roughly 160 locations across Louisville, Lexington, and surrounding Kentucky areas.
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The participating McDonald's restaurants receive daily deliveries of fresh Krispy Kreme doughnuts thanks to an upgraded business strategy the dessert chain implemented in 2021. Krispy Kreme's upgraded "hub and spoke" distribution model consists of larger shops with production factories called "hubs" that ship doughnuts to smaller outposts called "spokes." The strategy has helped the dessert chain maintain higher quality and freshness standards with the doughnuts it sells in its own stores and delivers to other shops, like Walmart and McDonald's.
However, being able to supply hot, fresh doughnuts to more of McDonald's roughly 13,000 locations in the United States would be no easy task. In an earnings call last week, Josh Charlesworth, Krispy Kreme's global president and chief operating officer, said the company had to add more trucks and double production at several hubs in order to supply the Kentucky McDonald's locations participating in the test.
Currently, Krispy Kreme has less than 400 hubs and about 6,000 spokes throughout the country, Restaurant Business Magazine reported. Krispy Kreme believes that it can eventually expand the number of spokes in the United States to 15,000, but that would require it to add about 30 to 40 more hubs in order to supply them all with doughnuts adequately, Charlesworth said.
Charlesworth also noted that Krispy Kreme has no current plans to expand its McDonald's test beyond Kentucky, and it's currently just focused on "delivering great doughnuts fresh every day" to the fast-food giant.
"We expect to be doing this test with them for months, and I'm sure that they'll be evaluating all sorts of parameters important for them," he said.
While Krispy Kreme focuses on learning from its fresh doughnut deliveries to McDonald's, it recently said goodbye to another part of its business. The company confirmed to Food Dive in March that it would shut down its "underperforming" line of grocery store donuts. Unlike the doughnuts that Krispy Kreme delivers fresh to certain retailers, these packaged snack products had to be shelf-stable so that they could last for some time in grocery stores.