So much for the dream of a McDonald’s breakfast sandwich featuring doughnuts for a bun.
The fast-food giant and Krispy Kreme have mutually decided to end their partnership just six weeks after it was delayed over sales and profitability concerns. McDonald’s restaurants will stop selling Krispy Kreme doughnuts next Tuesday.
Both companies highlighted the doughnut chain’s profitability challenges in ending the partnership, with Krispy Kreme’s CEO calling it “unsustainable.”
“Ultimately, efforts to bring our costs in line with unit demand were unsuccessful, making the partnership unsustainable for us,” Krispy Kreme CEO Josh Charlesworth said in a statement on Tuesday.
“While the partnership met our expectations for McDonald’s and owner/operators, this needed to be a profitable business model for Krispy Kreme as well,” Alyssa Buetikofer, chief marketing and customer experience officer for McDonald’s USA, said in a statement.
Krispy Kreme represented a “small, non-material part of McDonald’s breakfast business,” McDonald’s said.
Krispy Kreme stock was up slightly in morning trading on Tuesday.
Krispy Kreme sells doughnuts from kiosks at retailers and other locations that are made in its shops. The company and McDonald’s announced their partnership in 2023 and more McDonald’s locations had started selling doughnuts over the past year as part of a three-year effort to bring them to all 13,600 locations.
But the slow rollout means the partnership cannot benefit from McDonald’s marketing strength, and the fast-food chain has long had difficulty selling pastries and other sweet treats in the morning. McDonald’s own sales and traffic have struggled over the past year, which could also be contributing to the weakness.
Krispy Kreme’s sales have fallen this year, worsening the chain’s profitability problems. In May, with about 1,000 McDonald’s restaurants ready to start selling its doughnuts, according to multiple sources, Krispy Kreme surprisingly announced a delay in the rollout.
That delay came after Krispy Kreme announced a likely overhaul of its board of directors and a shift in focus by company management to cost cuts to address its profitability issues. Organic revenue in the U.S. declined 2.6% in the first quarter despite a 35% increase in the number of places where the chain’s doughnuts are sold.
Adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization, declined 63%.
The profit issues and the delay sent Krispy Kreme stock plunging, worsening a relatively steady decline since 2021 despite a temporary bump in 2023 from the McDonald’s announcement. Investors have sued the company over statements related to the partnership before the delay was announced.
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