Fall of Krispy Kreme

[monsoon]

[MathNerd05]

I was unaware that Krispy Kreme was in trouble. What happened?

[Matthew]

Krispy Kreme sponsors the Bookmark Festival and Rock The Block, but that's it. There are other sponsors for those events also. They were asked to sign a lease for space in the planed Unity Place project, but now the owner of that property (Tom Fowler) and Lincoln-Harris have hired Boulevard Centro / architect David Furman to design another mixed use development for that property. Some of us are guessing it could be a condo tower? The new site is smaller and the theatre is almost three times as big as originally proposed. A condo tower would be much better than the 2-5 storey buildings proposed by Krispy Kreme. David Furman is also one of my favorite architects. He uses contemporary designs instead of trying to design something that looks historic like most architects.

Keep checking the papers for news on this project. They are still working on the design. A high-rise condo tower would be great for that location. Lincoln-Harris had over 100+ preleases in one day for the old proposed residential development with Krispy Kreme. All units preleased as soon as they were announced. More than enough to do a highrise. The view from there is excellent! It's where I take my "West" skyline photos. If the IMAX multiplex is built there, and it more than likely will be, they won't have much room. They'll have to go up.

[monsoon]

What is going on with Unity Place these days? I have not heard much about it since it was announced two years ago. Is it canceled now because of KK?

[Matthew]

What is going on with Unity Place these days? I have not heard much about it since it was announced two years ago. Is it canceled now because of KK?

now the owner of that property (Tom Fowler) and Lincoln-Harris have hired Boulevard Centro / architect David Furman to design another mixed use development for that property. Some of us are guessing it could be a condo tower?

<{POST_SNAPBACK}>

Unity Place will be replaced by a larger residential proposal that will include a 14 screen theatre and 3D IMAX along with retail. First Krispy Kreme has to officially cancel Unity Place. I think Tom Fowler has talked about going ahead with his new condo development with Boulevard Centro, even if Krispy Kreme doesn't cancel. He is tired of waiting and wants to do something with this valuable piece of property. You can read more about this in the thread titled "Boulevard Centro Condo Project in Winston-Salem" The architecture of David Furman's condo projects will now appear on Winston-Salem's 4th Street. A Condo Tower will fill the area where Krispy Kreme's building was proposed nicely.

[Spartan]

Has the recent downfall of Krispy Kreme affected Winston-Salem's work towards downtown revitalization?  I was under the impression they were a big corporate donor to several DT projects.

<{POST_SNAPBACK}>

I gues I haven't been watching the news enough. What is this downfall? I thought Krispy Kream was doing great? I had heard the low carb thing was working against them though.

[TheAnk]

I gues I haven't been watching the news enough. What is this downfall? I thought Krispy Kream was doing great? I had heard the low carb thing was working against them though.

<{POST_SNAPBACK}>

Along with donuts, they started cooking books...

[eddard]

This was in the Winston Salem Journal:

Unity Place rethought

Landowner suspects Krispy Kreme is out

By Victoria Cherrie

JOURNAL REPORTER

Thursday, January 6, 2005

Krispy Kreme Doughnuts Inc.'s new headquarters appears unlikely to anchor the proposed $60 million office, retail and entertainment project called Unity Place in downtown Winston-Salem, said Tom Fowler, whose company owns most of the property involved.

It has been two years since the project was announced with much fanfare.

Fowler, whose family owns the car dealership that left the site at the corner of Fourth and Broad streets to make way for Unity Place, said he has to move forward with his own plans.

"Everyone involved in Unity Place is still officially committed to the project," Fowler said. "But realistically, it doesn't seem to me it is likely to go forward."

Scott Livengood, the chairman and chief executive of Krispy Kreme, has said little publicly about his dream of the new headquarters. It was to be surrounded by stores, restaurants, a performing-arts center and movie theaters in a pedestrian-friendly courtyard. Krispy Kreme has endured a series of legal and financial setbacks since the Unity Place announcement.

A company spokeswoman declined yesterday to comment on the project.

Until details are completed, Fowler won't elaborate on what he is creating with Lincoln Harris, a commercial real-estate company, and Boulevard Centro, a Charlotte architect and developer.

"I think we've got the potential for a very exciting development," he said, adding that his work is still in the beginning stages.

Fowler and others speak cautiously about Unity Place because there has been no official announcement that the project as originally conceived is dead. But even those who have been involved with Unity Place from the beginning are abandoning the initial vision.

Dale Pollock, the dean of the School of Filmmaking at the N.C. School of the Arts, is scouting a new location for a multiplex theater that was once planned for Unity Place. He got a letter of intent from Consolidated Theatres of Charlotte that says the company is interested in building a complex in downtown Winston-Salem, he said.

Pollock said he sees the letter as a sturdy commitment and he wants to proceed with finding a place for it to be built.

"It's clear to me that nothing is moving forward specifically with what was originally planned for Unity Place," he said.

The theater could possibly fit into Fowler's new plans. Pollock said he has been looking at several downtown properties but would not disclose the sites.

The Winston-Salem Alliance, a nonprofit economic-development group, is considering other options for the property it assembled along Brookstown Avenue last year. The property was bought through the Millennium Fund, a pool of money designated for various economic-development projects. It was to be sold to the city and developed into a public parking deck to support the Unity Place project.

"We've had conversations with Tom Fowler about adding (the property) to whatever revised plans he may have," said Allen Joines, who is the president of the Alliance and the mayor of Winston-Salem. "It (the property) is an asset and certainly makes sense to tie it in."

The plans, which are preliminary, don't include Krispy Kreme's headquarters.

"As much as anything we're understanding of what Krispy Kreme is going through. But at some point you've got to decide (if it's time to move on)," said Ralph Womble, the chairman of the Alliance's board of directors. "We are also sympathetic to Tom Fowler."

Options the Alliance had on several other properties needed for Krispy Kreme's headquarters were signed over to the company months ago, Joines said.

In August, Livengood issued a statement that said his company was "committed to moving its headquarters downtown to anchor a retail and entertainment complex first proposed almost two years ago."

And those involved with the project said that he told them a few weeks ago that he is still committed. But to this day no paperwork has been signed.

"I think it's possible for people to be committed to a concept," Fowler said.

The original Unity Place deal was put together by representatives from the School of the Arts, Krispy Kreme, the city of Winston-Salem, Forsyth County, Lincoln Harris and the Arts Council of Winston-Salem/Forsyth County.

The School of the Arts created a nonprofit organization called Unity Development Corp. that was supposed to develop the Krispy Kreme headquarters and the movie-theater complex.

The goal was for Unity Development to sell bonds underwritten by Bank of America to pay for developing the headquarters and theater complex. Krispy Kreme would have leased its building for 20 years. NCSA also would have paid rent and participated in running the theaters. Pollock was hired by Unity Development Corp. to bring the theater component together. A spokesman for the group could not be reached for comment yesterday.

The Unity Place project has changed considerably since its inception. Trouble assembling enough property for the vision created some of the first setbacks. They were followed by the arts council backing out of its plans to include a performing-arts center in Unity Place and Unity Development Corp. struggling to get bond financing for Krispy Kreme. The company became the subject of an investigation by the Securities and Exchange Commission last year.

"Unity Place was really a fresh paradigm," said Tom Calloway, the chief executive of Calloway Johnson Moore & West, the architecture firm hired by Krispy Kreme to design its headquarters. "We worked very hard to understand and create Scott Livengood's vision. It was a good one. And if it doesn't happen the way we envisioned it, it is my hope that the owners and developers of that property will create an equally appropriate concept."

[monsoon]

I gues I haven't been watching the news enough. What is this downfall? I thought Krispy Kream was doing great? I had heard the low carb thing was working against them though.

<{POST_SNAPBACK}>

The executive there were discovered to have been cooking the books so to speak. The company has never done as well as they were stating and their stock is in the toilet. It is a big blow to Winston's redevelopment plans it seems.

[Matthew]

It's not a blow. It's a positive if they go with a condo tower with multiplex threatre plan. Just yesterday, Magnolia Partners (planning a 14 storey skyscraper with retail on 2nd Street near the old Unity Place) purchased an entire street of properties connecting the old Unity place project and their baseball stadium and skyscraper project. I would much rather have another tower on 4th Street than a 5 storey school house looking building Krispy Kreme wanted to build. Something is about to happen on the 14 storey tower and ballpark. The new Boulevard Centro proposal to replace Unity Place has Magnolia in a rush to buy up property!

[PghUSA]

Looks like they've shifted their corporate focus to Metro Pittsburgh:

http://www.pittsburghfirst.com/pg/05017/443578.stm

and 48 days ago:

http://www.pittsburghfirst.com/pg/04333/417852.stm

I knew there was a reason I thought they were HQed up here

[eddard]

Krispy Kreme ousts Livengood as CEO

BLOOMBERG NEWS

Tuesday, January 18, 2005

The board of Krispy Kreme Doughnuts, Inc. ousted Scott Livengood, the chairman, chief executi and president today and brought in two turnaround specialists to run the company.

The board also warned of a possible loss in the current quarter as sales continue to decline and legal costs mount in the face of an SEC and internal accounting investigations, and said that more operational changes are likely, including possible store closures.

Its stock price, which has dropped dramatically over the past year, rose 13 percent or $1.10 to $9.80 on the news of the management reshuffle.

Stephen F. Cooper has been named chief executive replacing Livengood, who has retired and will become a consultant to the company on an interim basis. Steven G. Panagos has been named the president and chief operating Officer.

James H. Morgan, who has served as a director of the company since July 2000 and as vice chairman since March 2004, has been elected chairman of the board. Morgan is the chairman of The Morgan Crossroads Funds, having previously served as the chairman and chief executive officer of Wachovia Securities, Inc. In addition, Robert L. Strickland has been elected the company's vice chairman. Strickland, a Krispy Kreme director since 1998, is the retired chairman of Lowe's Cos. Inc.

Cooper is the chairman and Panagos is a managing Director of Kroll Zolfo Cooper LLC, which Krispy Kreme has retained to be its financial advisor and interim management consultant. KZC is one of the world's leaders in this field, Krisopy KReme said. Cooper has more than 30 years' experience leading companies through operational and financial restructurings and currently acts as interim chief executive, president and chief restructuring officer of Enron Corp. and prior to that acted as vice chairman of Laidlaw.

Panagos is the National Practice Leader of KZC's domestic Corporate Advisory and Restructuring Group and has more than 20 years' experience leading companies through operational and financial restructurings. He formerly served as interim chief executive but currently serves as the chief restructuring officer of The Penn Traffic Company. They will be joined by a team of KZC professionals who will assist the company's management in strengthening Krispy Kreme's position as a leading provider of premium quality doughnuts.

Cooper, Panagos and their team will begin working immediately with the company, its management and the board. "I am looking forward to working with all of the Company's employees, franchisees, vendors and other business partners to strengthen Krispy Kreme," Cooper said.

KZC has worked on numerous complex engagements, including Enron, The Penn Traffic Company, NRG Energy, Inc., Federated Department Stores, Sunbeam, Laidlaw, Washington Group International, Polaroid Corporation, Morrison Knudsen and ICG Communications. KZC has a demonstrated track record in stabilizing businesses while developing strategic plans for long-term financial strength, Krispy KReme said.

"I believe that the Company's employees, franchisees, vendors and shareholders will be excited with the energy, experience and vision which Mr. Cooper and the KZC team will bring to the company. On behalf of the Board, I want to thank Scott for his years of dedicated service to the company and for making himself available to Krispy Kreme as a consultant to facilitate the transition," Morgan said.

Krispy Kreme also reported that the lenders under its ceedit facility have agreed to defer until January 24, the date on which an event of default would occur by reason of its failure to deliver financial statements for the quarter ended October 31, 2004. "While the Company will need a further waiver of the date for such delivery, the Company anticipates that the actions discussed above will be viewed positively by its lenders as its discussions with its lenders continue. As previously disclosed, the Company is currently unable to borrow funds under the Credit Facility," it said.

The company also announced that the results for its fourth quarter ending January 30 have been, and may continue to be, adversely impacted by significant sales declines. For the eight weeks ended December 26, 2004, systemwide and Company average weekly sales per factory store have decreased approximately 18% and 25%, respectively, compared to the corresponding weeks of the prior year. The quarter is also being adversely impacted by the substantial costs associated with the legal and regulatory matters previously disclosed. "These factors may result in the company experiencing a loss for the current quarter. KZC will work with the company to review whether it should take certain operational actions, which could include the consolidation of store locations. Any such actions could result in substantial losses, although it is expected that any restructuring charges largely would be non- cash charges. Systemwide sales data include sales at all company and franchise stores.", it said.

Founded in 1937 in Winton-Salem, Krispy Kreme operates 435 stores (comprised of 399 factory stores and 36 satellites) in 45 U.S. states, Australia, Canada, Mexico and the United Kingdom.

[PghUSA]

Woah--sounds like things were worst then originally reported on KrispyKreme. I know Livengood was being portrayed in the Pittsburgh press as the antichrist (but that was because of a local issue). Wonder why he had so much time filing lawsuits against small companies when Krispy was under investigation by the feds and their share price was falling.

[yadkinv]

Bummer. I knew it had to be mismanagement since the carb crap did not seem to be affecting Dunkin', which is three times larger.

I hope they turn it around, and stay in Winston-Salem!

[monsoon]

So what's the deal with KK today? Its been a little more than a year since this was posted. Have they recovered and whats up with the project they were originally involved with?

[cityboi]

There is a report in the Triad Business Journal this week that Krispy Kreme suffered a loss in 2005. I think Krispy Kreme will always be around though becasue their doughnuts are too good. I think the low carb diet plans that have going around and corporate scandal have had some affect on Krispy Kreme.

http://www.bizjournals.com/triad/stories/2...tml?jst=b_ln_hl

[rooster8]

I think the previous management used the whole carb craze as an excuse for their shady business deals and overambitious sales forecasts.

[ezcheese]

I think the previous management used the whole carb craze as an excuse for their shady business deals and overambitious sales forecasts.

they did indeed. dunkin' donuts didn't suffer much at all around this same time.

[RALBOI]

they did indeed. dunkin' donuts didn't suffer much at all around this same time.

You hit it right on the head, krispy kremes has the best doughnuts in the world,i think the company also is the victim of bad and shady business pratices!

[suburban george3]

I hope Krispy Kreme is on the rebound. With the selection of new leaders who have turned around other distressed companies, restating earnings, and trying to correct the misdeeds of those in the past, I hope they will again be a shining star for Winston-Salem. I have noticed that as of the past 2 months, Krispy's stock has gone from around $5 to over $9 per share. While that nowhere near it's lifetime high, let's hope it is a sign of better things to come for this embattled company!

[AnEverydayJo]

The only bad thing is there's no new KK headquarters coming into Downtown WS. There's only one KK store in Winston that I know of so I don't see how it can be called a blow? The Unity Place has been replaced with a larger development which is now under construction.

[twincity]

I hope Krispy Kreme is on the rebound. With the selection of new leaders who have turned around other distressed companies, restating earnings, and trying to correct the misdeeds of those in the past, I hope they will again be a shining star for Winston-Salem. I have noticed that as of the past 2 months, Krispy's stock has gone from around $5 to over $9 per share. While that nowhere near it's lifetime high, let's hope it is a sign of better things to come for this embattled company!

Krispy Kreme stock on slow rise

[ncbrian]

If they put a doughnut shop that bakes the doughnuts on site like the Stratford Rd store on Trade St next to the bus terminal putting it within walking distance of nearly every tower downtown, they will do roaring business there without cutting too much into the business of the other coffee shops downtown who normally do not sell doughnuts and sell variety coffees unlike KK's straight java.

[twincity]

^ thats true and i think KK already knows the potential for a downtown location. Unity Place was supposed to have one with a museum. think of the tourism that would bring. hopefully, they are still commited to building a downtown HQ...thats if they continue to bounce back.

[suburban george3]

Krispy Kreme stock still heading upwards! $10.07 per share today! (hopefully that will hold by the bell!)

Check it out, symbol KKD.

Just to update this, the stock closed @ $10.10 today!!!