I have some concern about KREM growing too quickly. But, my sense is the company is far from that particular problem right now, at least in new markets.
Two quick questions, anyone, (1) what is the history and current performance of KK in Arizona, Iowa, Kansas, Missouri, Nebraska, and Nevada? (2) How is performance in states where serious chain competitors exist (e.g., Dunkin Donuts)?
in the Chicagoland area. There are plans to open a Super Kreme(a store plus a plant that will produce product for various retail outlets)and none other than Mr.Restaurant himself (in Chitown anyway) Rich Melman,of Lettuce Entertain You Enterprises Inc. and Icon LLC have agreed to develop KKD in Chicago and the Pacific NW. Anything Melman touches turns to gold and if he's in you can take it to the bank it will make a large pile of dough. PI.
The folks here are dying for a Kreme to open in their neighborhood and to say it has a tremendous cult following is an understatement. Being in a large market there is competetion from DD, family bakeries, Safeway,you name it.The two stores in Summit and Midlothian have lines inside and out.If they ever decide to open in Naperville, Schaumburg or Gurnee, lookout. The store/plant in Elk Grove will be in the middle of one of the largest industrial parks in the U.S. We're talkin non stop, 24/7 folks. It's a knock down that it will make a mint.
If that's not enough DD just did a study and found that doughnut consumption in this market is up 30% from last year. Make all the obvious jokes you want but the KKD Kool-Aid is flowin. What does this mean to the stock? Who the hell knows. It's all a gamble anyway. Maybe short,maybe long, but one things for certain,you would be crazy not to want a piece of a Chicagoland franchise. That my friends is a fact.
"Lettuce Entertain You Enterrprises" buying a franchise does not mean krem will be worth more than a .50 (half a buck)more than than current book. If they buy one! And only if they make it work. They have to learn how sell into retail food distribution which will not happen overnight. I would suggest you look at SARA LEE and what they had to do to make money selling product even with NATIONAL NAME RECOGNITION, remember "nobody does't like Sara Lee", check that stock out and how they produce product. KK product can be copied by any food producer and they will be if the public creates a real demand and being in business since 1937 they have not become a household name. 63 years to build a cult following to make a 2% profit? Selling at 89 times earnings! You had better know more about this stock than the cost Pepto Bismo for the indigestion you are going have.
That is why KK went public when they did. Sell the sizzle, bail after the lockup, continue to pull down outrageous salaries and let the ninnies take the risk with the growth strategy that is unproven in these relatively new markets.
I don't think they will receive significant competition from Dunkin' or Winchells, since the product and "donut theater" they profess to sell is eatertainment. And we all know how well that is playing (PHL (now bankrupt), RAIN, DAB, etc.) With their high fixed costs relative to other donut sellers, they need to keep increasing the revenue stream or they will fail.
the locals have gone crazy for KREM. Stores are popping up all over and there are even stores in some casinos (Excalibur, Texas Station.) I also think that KREM won the "best of Vegas" doughnut in the local paper. I always take a box home to Reno, and when people see me with it in the airport in Vegas they always make positive comments.
There is currently no store in Reno, but one is planned. I know it will be a huge hit here also.