Accounting Case Study: Krispy Kreme

Paper Summary:

This paper explains that, although the road had been a bit rocky, Krispy Kreme's financial position has substantially improved in the five years since 1998. The author points out that the ratio of company and franchised stores sales are somewhat disturbing. The paper indicates that, after 2002, a series of problems developed for the chain, which could not have been foreseen previously. The author relates that Krispy Kreme's managerial accounting report did not address how a company in good financial position can change once it goes public, expands to foreign countries, looses control of its franchisees and does not keep up its market research program to determine changing social dynamics. The paper stresses that the forward-looking statements of the managerial accounting involve risks and uncertainties, which may cause the actual results to differ materially from expectations.

From the Paper:

"These figures do represent the continued investment within the capital expenditures of the company. Otherwise, the depreciation figures would not continue to go up. Krispy Kreme restructured in 1999, a $9,466 cost, which may reflect the poor performance.
Their income from operations is doing well. We see $5,420 in 1998; a loss of $3,702 for 1999; a major payoff for 200 with $10,828 and likewise for 2002, $23,507 and $41,887. However, we do see an equity loss in joint ventures in 2001 and 2002, showing the company, as stated in the report, has ventured into new areas - the real estate."

Sample of Sources Used:

• Hoovers investment website : www.hoovers.com/krispy-kreme/--ID__53559--/free-co-factsheet.xhtml - 49k -
• CFO Magazine, June 1, 2005, "Kremed! - The rise and fall of Krispy Kreme is a cautionary tale of ambition, greed, and inexperience", Kate O'Sullivan, http://www.cfo.com/printable/article.cfm/4007436?f=optionsKrispy Kreme, corporate website: http://www.krispykreme.com/faq.html
• Business Week, DECEMBER 5, 2005 , :Krispy Kreme's Problems: Not Fatal:, www.businessweek.com/magazine/content/05_49/b3962081.htm
• USATODAY.com - Krispy Kreme delays financial reportwww.usatoday.com/money/industries/food/2006-09-12-krispy-kreme-delay_x.htm?

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