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Krispy Kreme Doughnuts, Inc. Message Board

  • di_vur_se_fi di_vur_se_fi Sep 30, 2003 1:43 AM Flag

    Report: SoCal Not Actively Seeking Sale

    According to the Sep 29 edition of Nation's Restaurant News

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    • Theory, hypothesis, accusation, or speculation?

    • It's a $5 stock. After the next round ther'll be about 75m shares. $375 million for 120 or so "vertically integrated" donut stores is about right. Actually, quite generous.

    • "Normally one would have to go to a penny stock board to find the drivel that is posted here."

      Are you inferring this isn't
      a 'penny stock'?

    • "I hope you guys are retired because if you are employed, unemployed, living on
      welfare, etc. you have no excuse for this behavior."

      Not a problem here.

      I'm Scott Lovengood's nephew, and I get paid as a KKD plant here on the KKD board.

      By the way, Uncle Scott and his staff, SEC regulators, business journalists....the whole world reads this board, so be careful what you say.

    • Thanks for your contribution to the KKD forum.

      Had just the right amount of drivel.

    • oh yes, here's a couple of links to one of the hypotheses we studied in graduate level math. notice that it is called "riemnann's hypothesis" because it hasn't been conclusively proven that all zeros lie on the critical line...

    • A theory:: Logic tells me that SoCal's looking to find an outside buyer was somewhat of a ruse. It all happened right after the Dallas buyout announcement and appeared to be a reaction to it. After all, if five Dallas stores and market rights were worth $67 million, then the 22 southern California stores plus market rights (LA/San Diego/Bakersfield) should be worth $200 million by the same metric. But the LA franchisee says to KKD 'we'll be ultrareasonable, just give us $80 milion and assume the debts and lease obligations and we hand you the keys'. KKD balks and the franchise offers to sell to the general public to put presssure on KKD. No offers. KKD doesn't want outsiders looking at books. Now KKD has quietly strikes deal with franchisee for a buyout, but franchisee has to wait until after closing of new syndicated bank loan and new secondary offering of the stock. Again, this is just theory.

      • 3 Replies to genericwhiteguy47
      • not "theory", next time try "hypothesis". a hypothesis is something you make up, a story, an idea, hoping it is true.

        a theory is a proven hypothesis, something that you can actually prove over and over.

      • Southern Cal is probably a break even operation at best. A contact in San Diego tells me that the stores there are as quiet as they are here in the Bay Area: no lines ever. The numbers in the WSJ article bears that out. I remember a comment in the conference call that a store can be break even at $18k per week. I'm sure that's with minimum overheads: no regional corporate office, minimal trucking expenses etc. But throw in some regional corp exec salaries and the start-up costs of an off-site operation and that breakeven probably jumps to $40k or so -- and there are all kinds of variables e.g. real estate costs that are much higher in California. Bottom line, the thing's not making any money and the franchisee doesn't want to pony up any more money for expansion. In fact, it's already a mature operation. You can find a KK donut anywhere in the greater LA/SD area without problem. In a way, SoCal is a microcosm of the whole KK story. You can make a few bucks, pay a few salaries even when the fad part is over and things are relatively quiet. But it's no cash dynamo. Just another niche donut company. As everyone wakes up to this reality, the stock's worth about $5 to $8 per share. Livengood and McAleer certainly realize it. That's why they're such big sellers. Meanwhile the carnival atmosphere promotionals continue on a worldwide basis. And the Reinis' are quietly told they'll have their $80 million within six months. Just be quiet and cooperative.

      • There is nothing in the article to refute the scenario that you've laid out.

    • di_vur_se_fi, are you a paid subscriber to NRN? If not, can you please give more details on how to access the article to which you refer? (A search on "Krispy" does not seem to yield the correct article.)


      • 2 Replies to no_fear_go4it
      • Sufficient time has passed to let the article be disseminated.


        Here is the sequence of events as described by the SoCal franchisee, Great Circle Family Foods (GCFF) President Glickman:

        1) GCFF held discussions with KKD regarding franchise buyback. The discussions ended when the two sides couldn't agree on a price.

        2) GCFF hired a "valuation specialist" (I'm assuming the Florida firm mentioned in previous news items) to justify GCFF's asking price to KKD and "satisfy other franchisors" (from other food companies) who GCFF was contemplating adding to its own stable.

        3) Somebody who saw the books leaked to the wsj.

        4) GCFF not actively seeking a buyer, but would sell to KKD if it received "a price that's fair".


        The above is not consistent with GCFF CEO Reinis quote from the summer in which he said that he wanted to close on sale by mid-September. If the franchise wasn't for sale, how could they close?

        It also doesn't make sense in the context of the leak. If the numbers were only seen by a "valuation specialist" then why would they leak it to the wsj when they're the only ones who would have been entrusted to see the numbers, i.e. it would be obvious who spilled the beans. IMO, the leak came from a prospective buyer (SoCal has no interest in leaking that their market is deteriorating).

        My guess is that GCFF is backtracking because no decent offer was forthcoming from a third party and to admit to such would further diminish the "value" of their franchise. In the meantime, though, my guess is that they're out of money (or see no reason to invest further) and development activity in SoCal will be at a standstill until things improve or KKD buys them out (or injects capital).

        Aside: COO Tate was also quoted in the article as stating that the Q2 average unit volumes weren't so hot because the 22nd and 23rd SoCal franchises were opened during that period (among other somewhat mature markets including Chicago). That's not true, according to my records. The 22nd and 23rd SoCal franchises were opened in Q4 of the previous fiscal year. Maybe he was misquoted.

      • No, I happened across a print copy.

        The newspaper is a weekly. It sells for $5.

        My guess is that the newswires will pick up on the story in the next day or two.

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