Krispy Kreme takes delivery-only shops to the U.S.

The doughnut chain is planning to open what it calls “dark shops” for delivery orders to the U.S. and Mexico this year after testing the idea in the U.K.
Photograph: Shutterstock

Krispy Kreme, the brand that lured customers to its stores with a “hot doughnuts now” neon light, now hopes to get customers to order by going dark.

Specifically, the Charlotte, N.C.-based chain is planning to take its delivery-only “dark shops” concept to the U.S. and Mexico this year.

Speaking to investors on Tuesday, Krispy Kreme executives said they are working to provide new access points for delivery coverage. The company tested its delivery-only shops in the U.K., providing national coverage from more than 50 such locations. They said they are “building up capabilities into the U.S. and Mexico markets” this year.

“It’s a low-cost investment, but it gives you a fresh doughnut drop that you can then get to that customer in there,” Krispy Kreme CEO Mike Tattersfield told investors, according to a transcript on the financial services site Sentieo.

The dark shops are not ghost kitchens because the company doesn’t actually prepare any food there. It’s just a location where the company brings its doughnuts to every day. Customers within a 20-minute radius can then order doughnuts delivered from such shops.

Krispy Kreme has converted its business to a “hub-and-spoke” model, in which it delivers doughnuts from larger shops where it makes doughnuts, or “hubs,” to smaller shops and in-store kiosks, or “spokes.”

The company credits that model for a 290-basis-point improvement in profit margins in the U.S. and Canada in the fourth quarter ended Jan. 22. The company has more than 10,000 global points of access and believes it can get to 50,000 long-term.

But it also is making a big push for e-commerce sales, which can give the company even more reach.

Last year, 17.2% of the company’s sales came from various digital channels, up 130 basis points from 2020.

Krispy Kreme wants to increase its e-commerce sales by increasing the number of homes that can get the chain’s doughnuts delivered. Company executives said the delivery-only locations cost less than one of its traditional kiosks or shop “spokes.” The company is now testing the idea in the U.S.

The idea “looks really promising as a way of getting more access to people in a low-cost way,” CFO Joshua Charlesworth said.

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