In an effort to expand in the flourishing South American market, famous doughnut maker Krispy Kreme Doughnut Inc. (KKD) recently entered into a franchise development agreement with IRCC Ltda., a Bogota-based restaurant operator. As per the deal, the restaurateur will launch 25 restaurants across Colombia’s key cities such as Bogota, Medellin and Barranquilla by 2018.
IRCC, a branch of VA! Group, is operating in the Colombian and Latin American food service market for more than 30 years. The company has a proven track record of operating in the premium retail industry as well as managing food and beverage companies in Colombia.
Armed with superior knowledge about the market and local food habits, the franchisee is hopeful of successfully spreading the menu offering of a global brand like Krispy Kreme among brand-conscious consumers.
The Zacks Rank #3 (Hold) company sees tremendous growth potential in this emerging market where it finds under-penetration of quick-service restaurants as against the saturated North American countries. Increasing disposable income has enabled the residents to spend on branded food items. This, along with the growing middle-income population, makes Colombia a lucrative investment proposition for Krispy Kreme.
Krispy Kreme, boasting more than 785 restaurants across 21 countries, has been concentrating on international expansion for the past few years. The company opened its first overseas unit 11 years ago. Since then, the company has made its presence felt at 22 locations across Latin America, the United Kingdom, Russia, the Asia Pacific and the Middle East.
Earlier this month, the restaurateur debuted in Moscow, Russia. This restaurant opening came in the wake of signing a development agreement with the franchisee, LLC Doughnuts Café, in Apr 2012 to unveil 40 restaurants in Moscow in the coming years.
Others players in the same industry, which look attractive at current levels include AFC Enterprises Inc. (AFCE), Domino's Pizza, Inc. (DPZ) and CEC Entertainment Inc. (CEC). All these stocks carry a Zacks Rank #2 (Buy).