Krispy Kreme is making a comeback to Minnesota in early 2024, nearly two decades after leaving the market. The popular North Carolina-based donut chain will open a new retail and dine-in location in Fridley, which will also feature a drive-thru. However, the primary focus of the new site will be a donut production facility that will supply its products to other locations, such as restaurants and retail stores.
In 2002, Krispy Kreme opened its first Minnesota location in Maple Grove to record-breaking sales, generating over $480,000 in its first week. Despite the initial success, the company abruptly closed its Minnesota store just six years later. So, what went wrong, and why is the company returning now?
According to Jonathan Maze, editor-in-chief of Restaurant Business, Krispy Kreme’s earlier exit was due to an overestimation of customer demand. The brand’s glazed donuts developed a cult-like following, and their scarcity in Minnesota fueled high initial sales. However, Maze explains that after the novelty wore off, sales dropped. “The mistake they made was assuming that they could keep generating those high sales from the same locations,” Maze said. “Donuts are a treat, not an everyday item like coffee.”
Krispy Kreme also faced challenges with its business model. While it is one of the few donut chains that bakes its donuts fresh in-store, donuts have a short shelf life and don’t hold up well over time. In contrast, competitors like Dunkin’ benefit from a wider range of products that allow for more cost-effective operations.
Though Krispy Kreme attempted to sell its products through gas stations and other outlets, it wasn’t enough to sustain the brand in Minnesota. “The stores were expensive to operate, and the sales weren’t strong enough to cover the high costs,” Maze explained.
In 2008, Krispy Kreme struggled nationwide. The company faced declining sales, and many franchise locations closed, leading to a sharp drop in stock prices. The health-conscious movement of the time also hurt the chain, as Krispy Kreme, like other fast food brands, had to replace ingredients with healthier alternatives. As a result, the company pulled back from several markets, including Minneapolis.
A New Strategy for Success
Krispy Kreme’s return to Minnesota is made possible in part by a new national partnership with McDonald’s. The fast food giant will begin offering Krispy Kreme donuts at its U.S. locations, with nationwide availability expected by 2026. This collaboration is central to the brand’s new approach, which involves a “hub-and-spoke” model. Krispy Kreme will operate fewer large donut stores and use these central facilities to supply donuts to other locations.
The company launched this “Delivered Fresh Daily” (DFD) expansion in the U.S. in 2022. This strategy has already proven successful internationally in the U.K. In fact, Krispy Kreme reported a third-quarter net income of $37.6 million in 2024, marking its first positive quarter after three years of losses.
Krispy Kreme is using this model to open its Fridley location, strategically located near Interstate 694 for easy distribution to surrounding areas. The city is still awaiting the approval of a building permit for the store, with the contractor selection process still underway.
Maze predicts that the Fridley location will be Krispy Kreme’s only store in Minnesota, at least for the time being. By limiting its presence, Krispy Kreme can maintain the exclusivity of its product while expanding its reach through its distribution model. “Krispy Kreme has figured this out,” Maze said. “They’ve perfected this hub-and-spoke system.”
A Warm Welcome for Krispy Kreme
Krispy Kreme’s return is expected to spark excitement among Minnesotans. The brand’s signature glazed donuts have remained popular in the state, even without a local location. Maze recalls a story of a Minnesota college student who drove to Iowa to buy Krispy Kreme donuts and resell them in the Twin Cities, capitalizing on the brand’s elusive appeal.
Maze also believes that Krispy Kreme’s reentry into the market won’t hurt other donut chains. Instead, he predicts it will increase overall demand for donuts in Minnesota. “Krispy Kreme will get everyone thinking about donuts again,” he said.
With its new strategy in place, Krispy Kreme seems poised for a successful comeback in Minnesota—this time, with a more sustainable and accessible model.
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