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No Dough for Krispy Kreme Australia


Once high-flying Krispy Kreme has placed itself into voluntary administration, the Aussie equivalent of bankruptcy.  Krispy Kreme Australia, which is a chain of doughnut retailers as opposed to the automated doughnut factories that bake them before your eyes in the U.S., blames soft sales and rising costs for its need to restructure.

Its insolvency comes just as the Baskin-Robbins master franchise of Dunkin’ Brands has gone south.

That has the local media wondering if the problem has less to do about the troubles with a contract requiring rapid roll-outs but rather if this is a reflection of changing tastes - ones that don't like American food. “Their predicaments raise questions about whether Australian consumer tastes have evolved to such a degree that it is now near-impossible for US brands to find long-term success on our shores,” observes Australia’s Herald Sun. Don Meij, who bought the Australian franchise rights for Domino’s Pizza told The Australian, “It's a really tough market for an American. We might talk the same, dress similar, feel similar as countries, but we're very different."

How are they different? Apparently, unlike Americans, Australians like independent restaurants over big chains, where the food is the same – with the exceptions of McDonald’s, Hungry Jack, etc. Another difference? Australian experts believe that their unionized labor market makes its workers, largely students, among the best skilled and paid in the world.

As they tweak the concepts of what works in America to fit what they feel will work in Australia, American scholars and businessmen Down Under feel that U.S. brands like Krispy Kreme and Baskin-Robbins may be on the decline.

The Australian reports that the company blames high rents, declining sales, and high distribution costs.The company has operated in Australia for 7 years and has 50 stores.

Shares of the US-based parent company once traded at almost $49 but are now down to under $6. In early trading, KKD inched up a few pennies and is trading near a 52-week high, and now at an astronomically high P/E ratio.

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About Lionel Hutz PA

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Mr. Hutz, paralegal adviser extraordinaire to Louey the Lawyer, recaps important news.

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Franchise Operations