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Krispy Kreme Doughnuts, Inc. Message Board

  • mungerian mungerian Nov 24, 2005 9:49 AM Flag

    "strictly a franchising operation"

    Here's the full Cooper interview from BW online. Part 1:

    You're 10 months into the job, and yet the company has operated in the dark during much of that time, which has many investors I talked to spooked. What's the prognosis?
    Things are going well. We've taken a number of steps to improve the business. We, first of all, ensured we had adequate liquidity, so we did the [refinancing] in February or March. We began to size the organization as appropriate with the existing levels of business. We've taken steps to deal with a very small number of troubled franchisees. All in all, we've made a lot of progress. That's not to say there's not a long way to go, but I'm very happy with where we are.

    There are some investors -- namely, short sellers -- who believe the company isn't out of the woods, and that Krispy Kreme is still at risk of slipping into bankruptcy.
    As I said about a year ago, I don't see any compelling reason why this company would be a bankruptcy candidate. We took care of the balance sheet. The company continues to perform well. The company-owned stores are continuing to do well. We have a couple of troubled joint venture or franchisee issues, but I'm comfortable that over time those will be resolved.

    The store count has fallen from a peak of 435 to around 350. Do you see it shrinking further? Or have you closed every store you need to close, and do you plan to start growing again?
    Today we have domestically 349 stores. My own personal view is as we go forward, particularly on an international level where we are tremendously underdeveloped, we will be strictly a franchising operation. With 349 stores, we are by no stretch of the imagination approaching the saturation point for our retail outlets.

    A big concerns among some investors is that your loan covenants give you until mid-December to produce restated financials and if you can't, you could be in default. How big a risk is that?
    We've thrown a lot of resources against [the December deadline]. I'm hopeful we're going to meet that. While I'm very hopeful, if it seems that date is in question we'll go back to our lenders to deal with it.

    This is a technical issue. The lenders lent us the money without financials being available. That gives you a sense of the value they see in Krispy Kreme. I don't look at this as anything that is going to be an insurmountable issue.

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    • the following quote from your post is quite interesting when viewed in the context of the "smaller regional" comment.

      <<Today we have domestically 349 stores. My own personal view is as we go forward, particularly on an international level where we are tremendously underdeveloped, we will be strictly a franchising operation. With 349 stores, we are by no stretch of the imagination approaching the saturation point for our retail outlets.>>

      This BW interview was done after the mass-closure campaign began.

      2 possibilities:

      a) the "smaller regional" idea already existed at that time, so Cooper here was implying that some surviving AD's/associates will take over some surviving company-owned stores, and the rest would be shut. This would mean the blogger is wrong about cooper giving up territory spin-offs.

      b) the "smaller regional" idea is brand new and came as result of some decision following the FR financials or something. if that's the case, cooper was mass-closing already, but now he will be super-closing.

      the "strictly franchising" comment means cooper is saying that they don't want to own many stores, probably because of the negative cash flow. they'd rather have royalties and other intangibles. But how does that square with rolling up territories? that's where the "smaller regional" comment comes in: leave franchisees in the south east + a bit more, roll-up all the other territories in restructurings, and that's your new asset ready for sale or development. i.e. almost total liquidation.

      IMO it's a good idea. some buyer needs to hold intangibles while franchisees etc take 1-2-3 years to develop a nice new busines plan, if at all.

    • Cooper is strictly self-centered and a slippery character, and as you say, whatever comments he makes are for a purpose and entirely self-serving. Reading between the lines, it seems likely that Silver Point is looking to foist its position off on another Hedge Fund -- the greater fool. or perhaps the objective is DIP financing.

      It is interesting to note that all comments relate to Krispy as a going business without reference to the Class Action, SEC, Justice, and ERISA suits, as if these matters will go away, which of course they would in the event of bankruptcy.

    • I think this statement reallt takes the wind out of believing Cooper:

      "As I said about a year ago, I don't see any compelling reason why this company would be a bankruptcy candidate. We took care of the balance sheet. The company continues to perform well. The company-owned stores are continuing to do well."

      - ANY reason?? not even one?
      - "perform well" - this is a lie
      - "continuing to do well" - as per FR filing, this is a lie too.

      I think we're not yet done figuring out why he came out with this interview. is he possibly close to being kicked out? something's wierd here

    • let's pasre this a bit

      "My own personal view is as we go forward, particularly on an international level where we are tremendously underdeveloped, we will be strictly a franchising operation. With 349 stores, we are by no stretch of the imagination approaching the saturation point for our retail outlets."

      1) OWN PERSONAL VIEW - interesting...
      2) particularly on an international level - that is to say, this comment pertains particularily to international.

      I think that Cooper is saying "we plan to re-franchise the company-owned stores". Of course, in a normal retail business that gets turned around nicely (See CHKR 2-3 years ago as an example) company-owned stores often get refranchised to pay down debt. Cooper knows it's gonna hard to do, but his official line is: "we're getting rid of these stores because it makes no sense to operate them, and our current plan is get restatements and refranchise them".

      however, both cooper and SP agree that there's saturation in the US (FR filing) and this can leed to bk. of subs.

      • 1 Reply to mememe765445
      • <<"My own personal view is as we go forward, particularly on an international level where we are tremendously underdeveloped...>>

        What Livengood did to domestic franchisees Cooper is about to do to the international franchisees.

        Remember, KKD franchising is nothing but a Ponzi scheme. There's no way to rehabilitate Ponzi. Characteristically, the turnaround wizard is willing to repeat the scheme in other lands.

    • chm, Jennifer is on the rebound... You never know how low someone in her situation will stoop, don't count yourself out.

      ===
      This is good news about Jennifer. Think she likes older men?

      How about my chances as Bill Gates's heir? LOL.

    • chm, Jennifer is on the rebound... You never know how low someone in her situation will stoop, don't count yourself out.

      I would count our arb and six, minimal intelligence would obviously be necessary.

    • I think the real game here is a game of roulette. Can Cooper keep KKD listed untile the SEC/DOJ investigations are complete and charges are brought forward?

      I don't think Cooper or PWC has any intention of releasing the financials until they know what the government has discovered.

      Releasing financials before the government investigations are complete would be alot like defense lawyers telling the prosecutors their entire defense strategy before the trial.

    • Got it, now.

      Thanks. :)

    • Nor can I.

      It was solely my point that once their financials are in order, alternatives can be engaged. On that, I think we're agreed.

    • lord,
      I am presuming that the reason Nyse delists is due to not producing financials. If financials were not available for the Nyse, neither the Nas nor the OTCBB would take KKD.

      At some later point, if KKD does come into compliance with their financials then yes, they could just reapply.

      This is a somewhat circular arguement tho. The delisting is somewhat like a civil court case, with arguements on both sides and extensions. If KKD was at all close to getting their financials in order I can't imagine them letting their equity get delisted.

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