Krispy Kreme case demonstrates the downfall of a franchise based donut maker, Krispy Kreme. Krispy Kreme is an example of a franchise-gone-wrong. The Krispy Kreme craze in the early 2000s drove millions of customers to stores, waiting in line for the cherished fresh glazed delicacies. As a result of the demand, the number of Krispy Kreme franchises exploded, with new entrepreneurs trying to enter in the market. New stores emerged in 400 locations all over the country and the world, and the Krispy donut that enjoyed a large fan base in the South soon had customers in New York, LA, Seattle, Las Vegas, and almost everywhere else. However, the rapid growth became a problem for Krispy Kreme, and a few years later, the financial fallout became apparent.

In order to survive the incessant pressure faced by a public company to increase earnings and shareholders value, the company succumbed to unsustainable tactics such as:

1) Become ubiquitous: The key value proposition of the Krispy Kreme donut was its exclusivity and that customers could watch the donut being prepared(donut factory). The company however started opening new stores aggressively to the extent that sales became a zero sum game of one franchisee profiting at the cost of another. This was because of allowing franchise locations that are too close in proximity. A new store may offer additional revenue to the home office, but the overall result is less profit for each individual store owner. Between 2003 and 2004, second quarter revenues increased by 15%, but same store revenues had only increased by .1%. These numbers pointed to oversaturation in the market, which did not bode well for the franchisees themselves.
Additionally, the company started selling pre made donuts which decreases the core popularity of the product.

2) Practiced fraudulent practices:
a) unethical accounting systems such as