Krispy Kreme reported its first quarter earnings results Thursday morning, but oftentimes the call sounded more like it was coming from McDonald’s. No surprise really, as it was the first time we heard from Krispy Kreme executives since the two chains announced their agreement to sell doughnuts at McDonald’s restaurants nationwide by the end of 2026.
That announcement came in late March after about a year and a half-long test in select Kentucky McDonald’s locations that exceed expectations at both companies, according to Krispy Kreme CEO Josh Charlesworth. As such, the test expanded to 160 locations in February 2023 and it continues to include Krispy Kreme’s most popular doughnuts – original glazed, chocolate iced with sprinkles, and chocolate iced Kreme-filled – delivered to restaurants every day. They’re available in-store and at the drive-thru, individually or in boxes of six, starting at breakfast and lasting throughout the day while supplies last.
The companies’ expanded agreement continues for one year after the last rollout in 2026 and can be renewed after that. Charlesworth is optimistic about the partnership’s success, noting that the addition of Krispy Kreme doughnuts into McDonald’s restaurants is simple to execute operationally.
“They just need to be taken from the tray, put in the bag or even six-count and handed to the customer,” he said. “So, the real focus is just great doughnuts.”
The win/win potential
McDonald’s could likely benefit from such a seamless integration. In a statement earlier this year, McDonald’s chief marketing and customer experience officer Tariq Hassan said the partnership offers McDonald’s a “chance to unlock new business opportunities in the breakfast category and throughout the day.” Of course, there’s also the opportunity for incremental revenue for franchisees. In a note published in March, Mark Kalinowski, CEO/president of Kalinowski Equity Research, estimated that the initiative could drive added weekly revenues of $1,032 to $1,432 with a per-doughnut retail price of $1.29 to $1.59. This would equate to about $53,600 to $74,400 in incremental sales per restaurant.
“If the doughnuts are sold at 10,000 to 13,000 McDonald’s U.S. restaurants, this may suggest an incremental annualized addition to McDonald’s U.S. systemwide sales of $550 million to $715 million,” Kalinowski wrote.
Importantly, most McDonald’s franchisees seem to be on board with the menu addition. In July 2023, Kalinowski’s franchisee survey asked operators if they would like to sell Krispy Kreme doughnuts in their restaurants; 57% said yes and just 29% said no.
Growing this partnership throughout McDonald’s giant domestic system will also help Krispy Kreme achieve a few of its biggest goals – adding points of access and driving profitable growth through its hub and spoke operating model. Charlesworth expects 15,000 new points to be added by the end of 2026 in large part because of its McDonald’s rollout, in addition to grocers and convenience stores. Executives expect to generate $340 million to $430 million in annualized incremental revenue from those 15,000 points of access.
“We’re excited about our national rollout with McDonald’s, which is expected to add more than 12,000 new points of access alone,” Charlesworth said.
Throughout the past three years, Krispy Kreme’s points of access have grown by about 20% each year. With the McDonald’s tailwind considered, the company expects 33,000 global points of access by the end of 2026 and has raised its long-term global goal from 75,000 to 100,000 points. Although the company is expanding in new markets like Germany, France, and Brazil, it expects the U.S. to be its biggest driver of “profitable expansion,” again because of that powerful tailwind created by the Golden Arches.
Notably, the McDonald’s rollout will be phased and will begin by the end of this year. Much of the rollout can be facilitated using Krispy Kreme’s existing capacity, Charlesworth said, but the company will also invest in increased production capabilities. Krispy Kreme CFO Jeremiah Ashukian said the company is now in “the investment phase” and incurring startup costs.
“We're not disclosing exactly how much we're spending on that, but we are pleased that we can reaffirm our guidance assuming those costs are in our business beginning in Q1,” he said.
Charlesworth added that the McDonald’s partnership opens up an even bigger opportunity to expand with other retailers as well, including Walmart and Target, as “they can see we’re able to build out our operating model on a national scale and therefore serve them nationally.”
“It’s going to be exciting to bring Krispy Kreme to Minneapolis, the home of Target, or to bring Krispy Kreme to Walmart in Arkansas,” he said. “Our focus is awesome doughnuts every time, every day, delivered at the right time … We’re really focused on … modernizing and improving how we make and move doughnuts. I think all our customers expect that whether it's a McDonald's franchisee, Walmart, Kroger, our international partners. That’s where our Krispy Kremers excel.”
Contact Alicia Kelso at [email protected]
