Do you want to start a donut shop by buying Krispy Kreme franchise? If YES, here is how much it cost to open a Krispy Kreme franchise and their requirements.
Krispy Kreme Doughnuts, Inc., together with its subsidiaries, operate as a branded retailer and wholesaler of doughnuts, coffee and other complementary beverages, treats and packaged sweets. The company operates through four segments: Company Stores, Domestic Franchise, International Franchise, and KK Supply Chain.
It owns and franchises Krispy Kreme stores. As of August 01, 2018, the company operated approximately 1,400 retail shops in 32 countries (Franchisees in USA: 190, Franchisees in other countries: 869). It also produces doughnut mixes and doughnut-making equipment. The company was founded in 1937, started franchising in 1947 and is headquartered in 370 Knollwood St., #500, Winston-Salem, NC 27103, USA.
Table of Content
Types of Krispy Kreme Franchises Available
The franchisor is Krispy Kreme Doughnut Corporation. Krispy Kreme stores may be operated in four different formats. Each store is a retail facility used principally for on-premises sales of a variety of fresh doughnuts, beverages, and other related food products that the franchisor prescribes.
Please note that there are different types of facilities for which the franchisor grants franchises and they are;
- Tunnel Oven Shop
A retail sales facility with an impinger oven and limited manufacturing capabilities (e.g., icing and filling equipment) that receives doughnuts from a Factory Store or a Commissary Facility and finishes them as necessary to sell in accordance with System Standards.
- Fresh Shop
A retail sales facility with limited manufacturing capabilities (e.g., icing and filling equipment), or no manufacturing capabilities, that receives doughnuts from a Factory Store or a Commissary Facility and finishes them, as necessary, to sell in accordance with System Standards.
- Box Shop
A retail sales facility with no manufacturing capabilities that receives doughnuts from a Factory Store or a Commissary Facility to sell in accordance with the franchisor’s system standards. It is a prefabricated, free-standing self-contained unit resembling a Krispy Kreme doughnut box and is typically located in an enclosed retail area.
Franchises are also offered for Commissary Facilities that produce doughnut products for Tunnel Oven Shops, Fresh Shops and Box Shops. Commissary Facilities are not Krispy Kreme stores, they are not used for retail sales.
Financial Requirements and How Much It Cost to Buy Krispy Kreme
Estimated Initial Investment
- Development Fee (per Fresh Shop): $12,500 – $25,000
- Initial Franchise Fee (per Fresh Shop): $12,500 – $25,000
- Real Estate and Improvements – 3 Months: $8,000 – $75,000
- Construction Costs: $15,000 – $1,600,000
- Equipment/Signage/Furniture/Fixtures: $85,000 – $230,000
- Truck (per truck): $50,000
- Equipment and Displays for Authorized Off-Premises Sales (excluding truck costs): $100,000
- Initial Inventory: $5,000 – $50,000
- Production Equipment: $380,000
- Grand Opening Marketing Program: $20,000 – $45,000
- Training Expenses: $15,000 – $50,000
- Security Deposits and Other Pre-Paid: $2,500 – $20,000
- Additional Funds (3 months): $25,000 – $100,000
- ESTIMATED TOTAL: $200,500 – $2,750,000
Please note that the estimated initial investment range covers from a Box Shop up to a Factory Store, including Fresh Shops and Tunnel Oven Shops.
Estimated Initial Investment for a Commissary Facility
- Development Fee (per Commissary Facility): $25,000 – $25,000
- Initial Franchise Fee (per Commissary Facility): $25,000 – $25,000
- Real Estate and Improvements – 3 Months: $20,000 – $75,000
- Construction Costs: $1,000,000 – $2,500,000
- Equipment/Signage/Furniture/Fixtures: $90,000 – $250,000
- Truck (per truck): $25,000 – $50,000
- Equipment and Displays for Authorized Off-Premises Sales (excluding truck costs): $90,000 – $210,000
- Initial Inventory: $40,000 – $50,000
- Production Equipment: $175,000 – $760,000
- Grand Opening Marketing Program: $25,000 – $45,000
- Training Expenses: $45,000 – $50,000
- Security Deposits and Other Pre-Paid: $7,500 – $20,000
- Additional Funds (3 months): $75,000 – $100,000
- ESTIMATED TOTAL: $1,617,500 – $4,115,000
Aside from the fees listed above, below are other fees you would need to take note of;
- Royalties (Franchise Agreement only, except for Authorized Off-Premises Sales by a Commissary Facility): 4.5% of Net Sales of the Store, including Fundraising Sales, and excluding any Authorized Off-Premises Sales. For any Authorized Off-Premises Sales by a Store or a Commissary Facility, 4.5% of Net Sales.
- Transfer: $5,000, plus any applicable transfer fee for any other agreements, as well as costs and expenses (including legal and accounting fees) incurred in relation to the transfer.
- Opening Term Cost and expenses the franchisor’s opening team incurs in connection with the opening of the Store, other than travel, room and board and salaries, for which the franchisor is responsible.
- Brand Fund (Franchise Agreement only, except for Authorized Off-Premises Sales by a Commissary): Up to a maximum of 2% of Net Sales.
- Advertising Placement Fund (Franchise Agreement only, except for Authorized Off- Premises Sales by a Commissary): Up to a maximum of 1% of Net Sales.
- Additional Copies of Advertising (Franchise Agreement only): Cost associated with providing additional copies of advertising materials.
- Local Advertising Requirement (Franchise Agreement only): At least 2.5% of Net Sales.
- Local and/or Regional Cooperatives (Franchise Agreement only): Up to 3% of Net Sales.
- Required Purchases: Varies.
- Management Development Fee: $25,000 per hired employee.
- Hosting Fee: $150 per store per month.
- Maintenance Fee: $150 per store per month.
- Additional Service Fee : $65 per hour.
- Systems Fee: The then-current fees (currently $0).
- Replacement Fee for System Standards Manuals: Currently $1,000.
- Relocation Fee : Fee of $2,500 plus the franchisor’s expenses associated with the relocation of a Store or Commissary Facility.
- Audit / Inspection Expenses: Cost of audit or inspection, includes legal fees, accountants’ fees and travel expenses, room and board, per diem charges and other associated expenses.
- Costs and Attorneys’ Fees: Varies.
- Indemnification: Varies.
- Training of Additional Managers: Franchisees must pay their managers’ wages, salaries, travel, room and board, and living expenses during training.
- Additional or Special Training : The franchisor’s reasonable fee plus their managers’ wages, salaries, travel, room and board, and living expenses during training.
- Interest on Late Payment: 1.5% per month or the highest rate of interest permitted by law, whichever is less.
- Fees to Evaluate Proposed Alternative Suppliers: The franchisor’s reasonable costs and expenses.
- Successor Fee: $10,000
How to Get or Open Krispy Kreme Store Franchise
Once you’ve determined from the information above that you can meet the minimum financial requirements to become a franchisee, then you have to complete the request information form on the company’s website and submit to Krispy Kreme. Krispy Kreme will then contact you.
1. Once it has been determined that you meet the financial requirements and the area in which you wish to develop is available, you will then be considered an applicant for franchising with Krispy Kreme. Whereupon, you will be contacted by a member of the company’s New Business Development Team who will help guide you through the remainder of the process.
2. Once a member of the Team has contacted you and approved you to move forward in the franchising process, you will need to provide the following items;
- Company & Personal Financial Statements, Store Income Statements—(P&L) (Latest Annual & Interim)
- Business Operating Plan, Resume/Brief Biography
3. Before the company enters into a Development Agreement with you, they may be required to complete certain registration and disclosure processes as required by the governing authorities in your area of interest.