ESTABLISHING KRISPY KREME FRANCHISE BUSINESS IN SOLANO,

NUEVA VIZCAYA
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Establishing Krispy Kreme Franchise Business in Solano, Nueva Vizcaya

Feasibility Study Presented to

The Faculty of the School of Accountancy and Business

Saint Mary’s University

Bayombong, Nueva Vizcaya

In Partial Fulfillment

of the Requirements in Acctg. for the Degree

Bachelor of Science

in Accountancy

By

Naomi Ruth Bicera

Lailanie C. Dacquel

Katrina Luisa T. Jimenez

Marc Wendel T. Rivera

December 2019
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I. EXECUTIVE SUMMARY
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II. INTRODUCTION

Nowadays, many businesses are always flourishing in the market. Some

are successful and others strive hard to continue operating. Some of these have

various experiences towards economic, marketing, technical and also financial

aspects of the business. Many people form businesses in order to accumulate

profits through selling goods while others perform services to the public.

Different industries start to emerge and as this continues many businesses are

born. One of the most flourishing, most sought-out businesses nowadays is in the

“Doughnut Industry”. In here, comes our view of the Krispy Kreme franchising

business.

Krispy Kreme Doughnut Corporation is a global retailer of premium-

quality sweet treats, including its signature Original Glazed doughnut.

Headquartered in Winston-Salem, N.C., the company has offered the highest-

quality doughnuts and great-tasting coffee since it was founded in 1937. Krispy

Kreme Doughnuts is proud of its Fundraising program, which for decades has

helped non-profit organizations raise millions of dollars in needed funds. The

Company has more than 1,300 retail shops in 31 countries.

At the very start of this business, Vernon Carver Rudolph founded a secret

formula which is borrowed from Chef Joe LeBeau who correspondingly formed

the secret formula. Mr. Vernon decided to put up a store in a local province which

consists of doughnuts. The first doughnut shop (partnered) was in Paducah, KY.

Operations there were moved to Nashville; TN. Mr. Vernon Rudolph opened his
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own shop in Winton-Salem, NC in 1937 with only $25 dollars and a 1936

Pontiac. Never did he know that this will become a multi-national company with

many branches and franchises around the world. This is where the idea of

franchising Krispy Kreme comes to as the study and proposal of this project.

III. PROJECT BACKGROUND

The project will undertake a franchising business of Krispy Kreme in the

locality of Solano, Nueva Vizcaya. Franchising is a continuing relationship in

which a franchisor provides a licensed privilege to the franchisee to do business

and offers assistance in organizing, training, merchandising, marketing and

managing in return for monetary consideration. In undertaking a franchising

business, the franchisee (holder of franchise) pays an initial fee and ongoing

royalties to a franchisor this will enable him/her to gain the use of a trademark,

ongoing support from the franchisor, and the right to use the franchisor’s system

of doing business and sell its products or services.

The propose project considers the following which are franchise fees that

are in dollars, the costs of importing ingredients, costs of labor for construction

and operations, costs of land rental or acquisition and costs of building store. An

upfront territorial fee is required to be paid by Krispy Kreme franchisees. The

amount is dependent on the market size and the number and type of stores that

would be developed. The initial franchise fee of Krispy Kreme ranges from

12,500 dollars to 25000 dollars; this will grant the business to run using the trade

name. The group launched this project with the reason that the brand is timeless,
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global and most of all it offers sweet fun to its customers. It is an established

market in the food industry specifically in the brand of doughnuts and coffee. The

perfect reason is, Krispy Kreme provides training and support and this include:

business strategy, market planning, site selection, store design, production

planning and execution, beverage/coffee production, retail operations, crew

member training, hospitality, equipment maintenance and marketing.

The said project will be undertaken in the locality of Solano, Nueva Vizcaya on

the actual place inside SM Savemore which is the business of Mr. Henry Sy. The

project will rent a space in the Savemore to operate well; this was proposed to

give attention on the emerging doughnut industry nowadays. The idea here is to

have transparent walls so the people or willing buyers and consumers will see the

doughnut making process and be enlightened at such process.

Sweet tantalizing doughnuts are the new trend which individuals of all

ages would love to indulge. Filipinos in particular loves to eat out and share time

with friends and loved ones over dessert or a cup of coffee. This is one simple

distressing activity that busy people would like to do. This makes the doughnut

experience simply awesome, doughnut also have effect on one’s mood and can

change one’s mood into good vibes. Thus, Having Krispy Kreme franchise

business in the proposed place will not only be a dessert haven but definitely a

chill out place for friends too.

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IV. MARKETING ASPECT

A. Description of the Product

The proposed project is the establishing of Krispy Kreme

franchise business in the locality of Solano, Nueva Vizcaya. This project will be

undertaken due to the increasing demand for Krispy Kreme products in the

market especially in cities not only outside the country but also within

Philippines.

Krispy Kreme is best known for fresh, glazed, yeast-raised doughnuts,

especially the “Krispy Kreme Original Glazed”, its first and best-known

doughnut. All of its doughnuts are made from a secret recipe that has been in the

company since 1937. Unlike other doughnut shops and restaurants, Krispy Kreme

serves its doughnuts hot, which had undoubtedly added to their popularity. Along

with the original glazed, company stores offer a variety of doughnut styles

including chocolate iced, chocolate iced with sprinkles, maple iced, chocolate

iced crème filled, chocolate iced custard filled, raspberry filled, lemon filled,

cinnamon apple filled, powdered blueberry filled, glazed crème filled, traditional

cake, chocolate iced cake, glazed cruller, powdered cake, glazed devil’s food,

chocolate iced cruller, cinnamon buns, and several varieties of snack foods. Its

shops also serve coffee and juices.

Krispy Kreme not only sells its doughnuts in its shops, it also packages

and markets its products for sale in supermarkets, convenience stores and other

retail outlets throughout the country.

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B. Target Markets

The age of the target market will be between 16 and 60. The target

markets include young teenagers and students, less-educated and low income

consumers, some of them might be students, workers and group of families and

friends. People want nowadays are something that could relieve them out of their

stressful day and this business’s products (doughnuts) are just the right one to get

them relax. The benefit of this comes with “Hot Doughnut Experience”, family-

friendly image, affordable, brand/novelty and iconic which can satisfy them and

make these target markets loyal customers.

C. Competitor Analysis

At present the only business competition of the proposed

project in Solano, Nueva Vizcaya is “Mister Doughnut” in terms of selling their

main product which is also doughnuts.

Mister Doughnut has been one of the fastest growing food brands in the

country. Currently, they have over 2000 shops nationwide. They sell thousands of

doughnuts and other baked products each day continuously bring smiles to

millions of Filipinos. Although Mister Doughnut is has been well accepted,

Krispy Kreme gains the most influence nowadays especially with their “Original

Glazed Doughnut” this can’t be surpassed by anyone because the classic pastry is

made fresh at every store and coated with most amazing sweet glaze that has been

perfected since 1945. Their coffee is ethically source for they support the smaller

farms that still “care deeply about the welfare of their workers and the
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environment” unlike other doughnut industries who bought coffee grains from

large plantation with no benefits to the farmers.

These areas of services by Krispy Kreme serves as major advantage and

benefits to other services of Mister Doughnut or any Doughnut Industry.

D. Production Requirements and Process

a. Krispy Kreme’s Raw Materials

i. The “SECRET YEAST-RAISED DOUGHNUT

RECIPE”

These are Krispy Kreme Doughnut mix, water, yeast, sugar,

doughnut filling, and other packed ingredients.

b. How Krispy Kreme’s Work

i. Mixing

- A batch of “Original Glazed” starts with Krispy Kreme

doughnut mix, water and yeast, (the same single-cell

fungi used to make bread rise).

- The yeast is what makes the “Original glazed” so light –

it puffs the dough up with air, so it’s not dense like a cake

doughnut.

- The bakers mix the ingredients to form a dough, which

they pour into a hopper

ii. Extruding
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- The hopper feeds into an extruder, the device that forms

the dough rings that eventually become doughnuts.

- The extruder machine uses pressurized air force dough

through a ring-shaped cutter – a cylindrical cutter around

another round cutter.

- The extruder deposits the rign-shaped dough onto the

rack conveyer belt that takes the doughnut to its next

stop, proof box.

iii. Proof Box

- The purpose of the proof box is to surround the

doughnuts with heat and humidity

iv. Frying

- The doughnuts have to be cooked to 85 to 87 degrees

Fahrenheit (about 30 degrees Celsius) which takes about

45 seconds for each slides

- The bakers have to fry the doughnuts for a very specific

amount of time in order to ensure the right taste and

texture.

v. The Cooling Belt

- The cooling belt is one way to get rid of the excess

oil/fat/grease in the fried doughnut.

vi. The Glazing

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- The glaze is a mixture of sugar, milk, and other

ingredients.

- As each doughnut passes through the waterfall, it’s

completely coated in glaze.

vii. The Glazing and Cooling\

- The long slow ride (it lasts about 40 minutes) gives the

doughnuts plenty of time to cool before they’re packed in

boxes and on trays for delivery

viii. Customizations

- Right at the end of the line, the doughnuts pass through

the chocolate icer, which bakers uses to make chocolate

covered doughnuts.

ix. Packaging and Deliveries

- After the customization process, the doughnuts are ready

to go. Packers load them in boxes and on trays, and then

stack them onto carts and put them to the delivery trucks.
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E. Marketing Strategies

In this proposed project, the marketing strategy that will subside is

the same as in the original business of Krispy Kreme.

a. Competitive Price Strategy

The business will adopt the pricing strategy of the original

Krispy Kreme business. It uses comparative and consistency in the sales every

year to compare the benefits of increasing or decreasing prices. It kept its prices

quite similar to that of its competitors.

b. Service Strategy

The proposed business franchise will use its friendly

employees, who are trained to provide excellent customer service and market the

company, as its main marketing tool. It will likely get involve of local community

outreach programs, where it will donate doughnuts to raise funds for community

initiatives and to market its product in the town of Solano.

c. Place Strategy

The proposed business will be strategically located inside the SM

Savemore Inc. in Solano, Nueva Vizcaya. It will use the unique design of the

store, which allows customers to view the making of doughnuts, as a marketing

strategy. The business Krispy Kreme is increasing its retail operations by opening

more stores across the country. And this proposed project will be well-operated in

terms of these strategies adapted from the original Krispy Kreme business.
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d. Promotional Strategy

This uses a bare-bones marketing strategy that relies on word-on-mouth

marketing by its satisfied customers, in addition to cause marketing. It will also

dominate or use social media to promote the business’ products in the assigned

place of the project. This will also use flyers to enhance more customers to buy

the products or doughnuts.

F. Marketing Budget

In actual, Krispy Kreme doesn’t need such marketing costs because the

name itself is a world-famous company. It can be searched around the internet

and can also allocate or sell some of their products with the use of the internet.

In terms of the proposed franchise business, the marketing costs will be

the following:

SCHEDULE OF ADVERTISING AND SELLING EXPENSES

Promotional Budget Monthly Year 1 Year 2 Year 3

Radio Advertising 200 2400 2880 3456
Billboards 1500 1500 1500
Streamers 1750 1750 1750
Selling Budget
Transportation 500 6000 6600 7260
Freight Out 200 2400 2640 2904
Total 14050 15370 16870
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G. Sales Forecasts / Estimated Market Share

PARTICULARS Year 1 Year 2 Year 3

Potential Market Size 150 180 216
Estimated Market Share 75% 85% 95%
Market Size 135 150 175
Average Sales Weekly 200 250 500
Weekly 27, 000 37, 500 87, 500
Monthly 104, 000 150, 000 350, 000
Annual Sales 1, 248, 000 1, 800, 000 4, 200, 000

Note: 20% increase in the potential market share

10% increase in the estimated market share

H. Demand:

A. PROFILE

Table 1 FREQUENCY DISTRIBUTION ACCORDING TO GENDER

Respondents Frequency (f) Percentage (%)

Male 75 40.11%
Female 112 59.89%
Total 187 100

Table 2 FREQUENCY DISTRIBUTION ACCORDING TO AGE

According to Age Frequency (f) Percentage (%)

16-26 70 37.43%
27-37 20 10.70%
38-48 15 8.02%
49-59 35 18.72%
60 and above 47 25.13%
Total 187 100
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Table 3 FREQUENCY DISTRIBUTION ACCORDING TO

ALLOWANCE PER DAY

According to allowance Frequency (f) Percentage (%)

per day
50 - below 25 13.37%
51 - 100 35 18.72%
101 - 150 65 34.76%
151 - 200 32 17.11%
200 and above 30 16.04%
Total 187 100

A. RESULTS AND DISCUSSION

Personal Profile of the Respondents

The survey and data gathered were mostly online surveys due to the fact

that no establishment yet of Krispy Kreme business in the Nueva Vizcaya.

Though, some of the respondents in Bayombong and Solano have experienced

buying the products in Manila and have seen their services.

To present the results and discussion, there are 3 tables that present the

profile of the respondents, which include gender, age and the respondent’s

allowance per day.

Gender: Table 1 shows that out of 187 respondents, majority are males. As

statistics show, more females go to Krispy Kreme as compared to males.

Evidently, more females have filled up the survey questionnaires. Females find

Krispy Kreme an important place to relax and savor the product of delicacies and

sweetness it gives.
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Age: Table 2 shows the age bracket of the respondents. As shown, a great

majority ranges from 16-26 years old.

Respondent’s allowances per day – Table 3 shows that most of the respondent’s

allowance per day is 101 – 150 php.

B. VIABILITY OF THE PROJECT

Table 4 TARGET MARKETS CUSTOMERS WILLINGNESS TO

AVAIL OF THE PROPSED ESTABLISHMENT FRANCHISE OF KRISPY

KREME

Response Frequency (f) Percentage (%)

Yes 177 94.65%
No 10 5.35%
Total 187 100

The table shows that majority of the respondents’ agreed or willing to the

proposed establishment of franchise of Krispy Kreme if this project will be

established.

Table 5 AVERAGE AMOUNT OF TARGET CUSTOMERS’

WILLINGNESS TO SPEND

Amount Frequency (f) Percentage (%)

75 - 150 20 10.70%
151 - 300 105 56.15%
301 - 400 15 8.02%
401 - 500 20 10.70%
500 and above 27 14.43%*
Total 187 100
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Customers’ willingness to spend: The table shows that many respondents are

willing to spend 151 – 300 php in every products offered by the Krispy Kreme.

All of the respondents are willing to be surveyed for the amount they want to

spend with regards to the products offered by Krispy Kreme.