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TheStreet Open House

Why Franchises Are Good for Investors

Krispy Kreme Doughnuts (KKD - Get Report)
Company Profile: Krispy Kreme is a retailer and wholesaler of doughnuts and packaged sweets. The company owns and franchises locations in the U.S. and internationally.
Share price return: 23% this year
Franchise locations: Krispy Kreme ended the first quarter with a total of 652 stores. As of May 1, there were 86 company-owned stores and 566 franchises.
Revenue from franchises: Franchise-related revenue accounted for 31% of Krispy Kreme's $104.6 million in total revenue last quarter. Domestic franchise revenue totaled $2.4 million in the first quarter, and international franchise revenue was $5.6 million. External supply chain revenue, which does include sales to company-owned stores, totaled $27.1 million in the first quarter. By comparison, company-owned Krispy Kreme locations had revenue of $69.5 million last quarter. Krispy Kreme noted that international franchise revenue in the first quarter benefited from a recognition of $375,000 related to Krispy Kreme Mexico. This revenue was accrued in prior quarters but not recognized because collection was uncertain. On May 5, the company said it sold its equity interest in Krispy Kreme Mexico.
Franchise costs: Brian Little, director of corporate communications for Krispy Kreme, didn't immediate reply to a request for franchise cost information.
Analyst view: Four analysts, or 50% of those following Krispy Kreme, rate the stock "buy." Among them are analysts from CL King and Sidoti & Co. Another three firms recommend investors hold shares, while a lone analyst has a "sell" rating.

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