Krispy Kreme buyback includes Springfield store

Springfield's Krispy Kreme Doughnuts is under new ownership.

In a cash buyout for an undisclosed amount, Krispy Kreme Doughnuts Inc. last month acquired five stores in the Missouri and Kansas markets, including Springfield's Krispy Kreme at 3860 S. Campbell Ave. Franchise owner Jimmy Strickland sold the rights and associated assets of his Springfield, Wichita, Kan., and three Kansas City-area stores.

Krispy Kreme corporate took control March 10.

"The Springfield store was purchased back by Krispy Kreme doughnut corporation," Strickland said last week from his Kansas City office. "(Corporate) came and approached me. I am going to be retained and work for the company in senior management in charge of franchise operations."

The company has been actively acquiring franchise stores, according to Brooke Smith, Krispy Kreme spokesperson. There are now 99 corporate-owned stores, which is more than a third of total retail outlets. In the last year, the corporation has purchased markets in Michigan, Florida, Georgia, South Carolina, Ohio, Maryland, Colorado, Wisconsin and Minnesota.

"We have just said that where there is an interest or an opportunity in a market, we would explore the opportunity of buying that back. In this particular case, it fit those guidelines, and we saw a lot of opportunity for growth both in retail and wholesale opportunities," Smith said.

However, she added, the company generally doesn't enter the wholesale market until a retail store has been open for at least a year, which means the earliest Springfield grocery stores and gas stations could begin selling Krispy Kreme doughnuts is in the fall.

Krispy Kreme Chairman, President and CEO Scott Livengood also expressed interest in growing the new corporate markets. In a press release announcing the acquisitions, Livengood said, "With five stores in these markets collectively, we believe there is room to grow both in number of stores and additional off-premises sales opportunities. Jimmy Strickland has been one of our most successful area developers. His personal desire to relocate to his home state of North Carolina provided Krispy Kreme a major opportunity to add bench strength to our senior management team."

Strickland worked at the Krispy Kreme home office in Winston-Salem, N.C., as divisional director of store operations for two years prior to establishing the Kansas City franchise in 1996. He opened the Springfield store less than six months ago, when the company began entering smaller markets.

"It has performed above anyone's expectations for a market that's less than 500,000 people," he said, but he did not disclose sales volumes in Springfield, per confidentiality agreements signed with the corporation.

Smith said the company does not disclose numbers by store.

A Springfield doughnut competitor says the transaction raises questions of the stores' success.

"If they had been making a lot of money for Jimmy Strickland, I think he would have kept them," said Bill Risberg, franchisee of the Lamar's Donuts located within a block of Krispy Kreme. "(Maybe) that means they weren't doing quite as well as he thought they would do. I don't know whether corporate taking them over will make any difference or not."

Krispy Kreme is no longer seeking franchisees in any U.S. markets. The costly rights set at a minimum of $5 million net worth are only available outside of the U.S. "We are beginning to expand internationally," Smith said, with recent announcements of franchisees in Australia/ New Zealand and the United Kingdom.

Franchisees are required to build 10 or more stores with a minimum net worth of $5 million or $750,000 per store, whichever is greater. For instance, a 15-store market requires a minimum net worth of $11.25 million.

Based on this cost structure, Strickland's five stores would have a minimum net worth of $3.75 million.