McDonald’s is adding Krispy Kreme doughnuts to its menu

Krispy Kreme doughnuts will soon be available at select McDonald’s locations for a limited time.

The two rival restaurant chains announced today that nine McDonald’s locations in Louisville, Kentucky will start selling Krispy Kreme doughnuts starting October 26th as part of a test.

What Krispy Kreme doughnuts will be available at McDonald’s?

Throughout the entire test, McDonald’s customers will be able to order Krispy Kreme’s original glazed, chocolate iced with sprinkles, and raspberry-filled doughnuts, either individually or in packs of six. While the doughnuts will be offered all day in-store, the treats won’t be available for delivery, according to CNBC.

McDonald’s will not be the one making the doughnuts. The treats will be made at one of Krispy Kreme’s large doughnut shops and will be delivered to participating McDonald’s locations.

What is the purpose of the test?

McDonald’s said the test will help the fast-food giant learn more about how offering third-party products like Krispy Kreme doughnuts would affect its operations.

“McDonald’s is always looking for ways to give our fans more of what they crave, and we often conduct tests to inform future menu decisions,” McDonald’s said in a statement. “This small-scale test will help us understand how offering new bakery items like Krispy Kreme could impact operations in our restaurants.”

Since the test will focus on the operating impact of the sale, it’s not clear how revenues would be split between McDonald’s and Krispy Kreme. It’s also uncertain how this would affect franchise restaurants, as the nine locations involved in the test are all company-operated units.

It also remains to be seen how the sale of Krispy Kreme doughnuts inside these McDonald’s locations would affect the chain’s own line of pastries under its McCafé lineup.

Which company benefits more from the test?

For McDonald’s, selling Krispy Kreme doughnuts could attract new customers and bring back cash-strapped diners. According to research firm NDP Group, the business has remained steady during the morning, but other parts of the day, including lunch and dinner, have declined in the midst of rising menu prices.

CNN pointed out that the test comes as consumers have been cutting back on restaurant visits as rising inflation pressures their budgets. In fact, McDonald’s said that lower-income customers in the country were spending less at its restaurants during the first half of the year.

Krispy Kreme CEO Mike Tattersfield, meanwhile, said the doughnut chain has strong pricing power because customers are willing to splurge on affordable treats like its fresh doughnuts. Case in point, Krispy Kreme reported 7.5% revenue growth for its U.S. and Canada division in the second quarter of the year. The doughnut chain, however, trimmed its full-year forecast for earnings and revenue, citing a stronger dollar and weaker performance from U.S. production hubs.

According to Restaurant Business Magazine, the test is potentially more advantageous to Krispy Kreme, as the partnership can help the doughnut chain expand in the country. Krispy Kreme operates a hub-and-spoke model where it makes doughnuts at 245 large retail shops in the U.S. and Canada. Those shops supply more than 5,500 kiosks inside grocers and other retailers, collectively called as DFD Doors, which stands for delivered fresh daily doors.

Krispy Kreme is hoping that DFD Doors can anchor a network of more than 10,000 points of access in the U.S. And teaming up with Mcdonald’s, which has more than 13,000 U.S. locations, could certainly help the doughnut chain reach its goal.

Source: CNBC, CNN, Restaurant Business Magazine

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