Losing Dough From Low-Carb Diet, Krispy Kreme Franchise Files For Bankruptcy And Closing Stores

Livin' la vida low-carb is STILL haunting Krispy Kreme doughnuts

One of the most difficult guessing games that happens behind the scenes of the American economy is figuring out how to create a product that people will want often enough to turn a consistent profit. It is this decision-making process that will either make or break a company.

You hate to gloat when a company has to file for bankruptcy (although the media certainly didn't mind doing it when Atkins Nutritionals did in 2005 but then they completely ignored it when they emerged from bankruptcy stronger in January 2006). But when that company is Krispy Kreme doughnuts and they continue to struggle to remain viable promoting high-sugar, high-carb products as their mainstay, it's hard to feel sorry for them.

I first blogged about Krispy Kreme closings in June 2005 and then again in July 2006 when it placed the onus on "the low-carb Atkins diet fad for its troubles." Hmm, it seems that darn low-carb "fad" is still haunting them in September 2007 according to this Chicago Tribune story.

The Illinois franchise called Sweet Traditions LLC of St. Louis who owns the Krispy Kreme doughnut stores in the Chicago, Illinois area is in such dire straits financially that they have been forced to close half of the stores in that area and file for Chapter 11. Not surprisingly, the owner blames high rent and a declining customer base for the closings and economic losses, but does that REALLY explain it?

I'm willing to give them the benefit of the doubt regarding the idiocy of the corporate headquarters requiring gargantuan stores costing $3 million a piece, but what explains the loss of people coming into the Krispy Kreme stores? This is a trend that's happening nationwide as this once-mighty company is crumbling.

Again I must ask--WHY?! It's not difficult to figure out.

As I shared in this recent podcast, doughnuts are about the worst possible food you could eat if you are trying to lose weight and get healthy. With half of Americans on a controlled-carbohydrate nutritional approach, the frequency of doughnut consumption has become less and less.

Although Vegas Krispy Kreme franchisee Lincoln Spoor arrogantly declared last Fall that "everybody cheats" and his doughnuts are the best food to eat on a cheat (I'm not kidding, he REALLY said that!), the fact of the matter is livin' la vida low-carb is putting a serious hurtin' on this chain of stores whose stock dropped nearly 40 percent on Friday after poor second quarter sales reports. Krispy Kreme is expected to close SEVERAL more stores in the rest of this fiscal year. YIKES!

They've tried gimmicks like making "healthy" (translated LOW-FAT!) doughnuts and they announced late last month they were removing trans fats from their menu. While that's a nice PR move and all, it just further proves they don't get it. The business dynamic has RADICALLY changed over the past three years and Krispy Kreme hasn't adjusted to it.

If they want to survive and thrive again, then they will need to seriously consider trying to reach the low-carb market rather than shunning it and thumbing their nose at us. I'm not saying I would necessarily eat there because even a sugar-free, low-carb doughnut would likely be made with inferior sweeteners like the sugar alcohol maltitol, it would at the very least be a "if you can't beat 'em, join 'em" strategy for survival. Maybe.

It may be their only hope.

9-8-07 UPDATE: You get all kinds of people writing to you when you start talking about business failures like Krispy Kreme. Here's what one egocentric gentleman penned in an e-mail responding to my post:

Are you kidding me? You’re still spouting that low-carb crap. What are you, a shill for Krispy Kreme?

Take a look at Dunkin Donuts and Tim Horton’s. Why wasn’t their business adversely affected by the low carb craze?

Krispy Kreme went down because of bad management, not because of carb counting.

FYI The low carb craze has been dead for some time. Perhaps Krispy Kreme should look for a way to blame the weather for their poor performance.

Um, yes, that "low-carb crap" has helped me lose 200 pounds and keep it off for the past four years. I have no dog in this hunt with Krispy Kreme, but I'm simply calling it as I see it. Sure, they've made some management blunders, but they are the #1 doughnut company in the United States.

It shouldn't be lost on anyone that low-carb has made an impact on their business and they've even said as much as I noted in my column. Face it, people are eating healthier nowadays and Krispy Kreme has failed to change with the times. That's it, pure and simple.

As for the "low-carb craze" being "dead for some time," perhaps you should come visit my blog more often. Since April 2005 when I created this blog and when low-carb was supposed to be dead then, I have a blog that's about to hit 2 million pageviews since then, a successful podcast show, an independent book release, a fantastic new discussion forum, engaging and fun videos on YouTube, and even my own low-carb, sugar-free chocolate bar coming out later this month.

Does this sound like low-carb is dead? Me thinks not, my friend. Nice try, though.