Back to top

Analyst Blog

Zacks Equity Research

Krispy Kreme's Franchise Deal in Dallas

MCD KKD BKW

 ZacksTrade Now

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

Doughnut maker Krispy Kreme Doughnut Inc. (KKD - Snapshot Report) recently formed a venture with an affiliate of Sun Holdings, LLC for the refranchising of three company-owned shops in Dallas, Texas. Upon completion of the deal, these three stores will be Krispy Kreme’s franchised stores. The deal is targeted to speed up Krispy Kreme’s domestic franchise expansion.

We believe, the latest alliance reflects the franchisee Sun Holdings’ intent to make Dallas one of the prime markets for domestic expansion considering the state’s potential to generate about $40.8 billion in restaurant sales, as per the national restaurant association.

Investment Management company Sun Holdings boasts superior local market knowledge and has a proven track record in the restaurant industry. It operates about 400 restaurants in Texas and Florida, including brands like Burger King Worldwide, Inc. (BKW - Analyst Report), AFC Enterprises Inc.’s Popeye’s, Golden Corral and Arby’s.

Since fiscal 2009, this Winston-Salem, N.C. based-company signed a number of new franchise agreements. As of Feb, 2013, there were 9 Krispy Kreme franchise stores in Texas. In fact, Krispy Kreme also has future development agreements with existing franchises in Texas to open 4 new stores.

Franchising a large chunk of its system reduces the capital requirements of the company and thereby drives earnings per share and return on equity (ROE). Alongside, free cash flow will continue to grow, allowing reinvestment for increasing brand recognition and enhancing shareholder return.

While restaurateur Burger King expects to have 100% of its system franchised by 2013, another burger-giant, McDonald’s Corp. (MCD - Analyst Report) currently has around 81% of its restaurants franchised.

As of May 5, 2013, this Zacks Rank #2 (Buy) company operated 95 company outlets and 678 franchises globally. Management intends to own over 400 domestic shops by Jan 2017 most of which are likely to be franchised.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
DIXIE GRP IN DXYN 15.84 +7.90%
BOFI HLDG IN BOFI 85.30 +4.97%
RAMBUS INC RMBS 12.31 +4.41%
VIPSHOP HOLD VIPS 148.73 +4.35%
NETFLIX INC NFLX 345.74 +4.32%