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WINSTON-SALEM - Krispy Kreme Doughnuts launched its North American invasion with an army of hand-picked franchisees, seemingly overnight growing the once Southeast-bound delicacy into a nationwide sensation.
Now, with hot-light stores open in virtually all the country's major markets, the pendulum is swinging the other way. In the past year, Krispy Kreme has bought out all or parts of four large franchisees, along the way enriching some of the company's longtime insiders.
The most recent deal came last week with the buyout of Golden Gate Doughnuts, the northern California developer.
Because of its franchisees' unique history in the company's development, Krispy Kreme has managed to avoid the pitfall of being accused of rewarding company insiders with lucrative franchise buyout offers.
Meanwhile, analysts say that if Krispy Kreme decides to buy back the reportedly for-sale southern California franchise, it could set the tone for how the local doughnut maker intends to shift from fast-growing phenomenon to mature cash cow.
"It's a pretty big franchise now," said Andy Wolf, a foods analyst with BB&T Capital Markets in Richmond, Va., referring to Golden Circle Family Foods, the 22-store franchisee in Los Angeles. "If the company ends up buying it the tilt in the near term is toward company-owned stores. If they end up selling to somebody else, then the tilt is to franchisees."
Krispy Kreme officials at its headquarters in Winston-Salem could not be reached for comment. In announcements of previous franchise acquisitions, Krispy Kreme has said it makes such purchases when it makes business sense to do so.
No matter which way Krispy Kreme proceeds, it has so far scored a nearly perfect record in its domestic expansion, analysts and other observers said. First with its public offering in April 2000, the company raised $72 million, watching its shares soar as high as 10fold...