Dough boy fries up Krispy Kreme revival

The doughnuts need to shine with glaze, no spots of crystallized sugar allowed. The hole in the middle must be symmetrical.

Lincoln Spoor takes his baked goods very seriously -- as the son of a former Pillsbury Co. CEO, it's hard not to.

He has another reason as well. Last week Spoor scooped up rights to the Krispy Kreme doughnut franchise throughout Minnesota, Wisconsin and Colorado.

Now the Minnesota native is strategizing to build the doughnut chain back into a coveted brand after over-expansion turned Krispy Kremes into a commodity.

His plan: Create scarcity.

"When you're everywhere, then the specialty factor goes to zero," he said.

Spoor is pulling the popular glazed doughnuts out of half of their 1,400 wholesale locations -- no more Krispy Kremes in Cub Foods, SuperTargets, Wal-Mart stores or several convenience-store chains, although they'll stay in Holiday Stationstores.

He's slashed the number of Krispy Kreme stores as well, from 20 to 12 throughout the three-state area. Three closed in Minnesota: Rochester, St. Cloud and the Mall of America. Five remain in the metro area.

Spoor is responding to the state of his franchisor, Krispy Kreme Doughnuts Inc. The Winston Salem, N.C.-based company has fallen hard from its 2001 sugar-high, when its stock shot up over $40 per share and Krispy Kreme expanded throughout the country. Fans clamored for the chain's hot, glazed doughnuts.

But by October 2005, the sweet ride was over. Sales slumped and shares dropped below $5. The company's accounting methods came under fire and the U.S. Securities and Exchange Commission started asking questions.

But things are looking better for Krispy Kreme, said Ralph Massetti, president and CEO of The Franchise Builders, a franchise development firm in Phoenix, Ariz. The doughnut maker just named a new CEO, Daryl Brewster, from Kraft Foods Inc. He's known as a meticulous bookkeeper and turnaround master.

Spoor is confident he can bring back Krispy Kreme fanaticism, especially in the Midwest, which he deems one of the best doughnut markets in the country. "When it's cold and cloudy, people eat doughnuts," he said.

Spoor has a history in dough. His father is William Spoor, the man who spent 15 years in the top job at Pillsbury Co. during the early 1970s and '80s, when it was based in Minneapolis.

Lincoln grew up in Deephaven and thought the best doughnuts in the world were the ones at the Buck Hill ski area in Burnsville.

That was until he tried a Krispy Kreme in 1992 on vacation in Virginia. He was hooked, and instantly knew he wanted to do business with the doughnut maker. At the time, Spoor was working as an investment banker and asked Krispy Kreme officials if they wanted to go public, raise money, do anything, really. They didn't bite.

But eventually Spoor got his chance. He was granted development rights in 1996 and opened his first store in Las Vegas two years later under a company called Westward Dough. Since then, he's added locations in Nevada, Utah, Wyoming, Montana and Idaho. He now owns 27 Krispy Kreme stores, including the 12 he just bought from Glazed Investments, the previous regional franchisee.

Spoor also inherited Glazed Investments' 500 employees, who are a major part of the doughnut re-do. They're being retrained on how to make the perfect doughnut -- that smooth glaze, no spots, symmetrical hole.

Each Krispy Kreme location will soon adhere to strict "hot light" hours. The doughnut maker built its strong fan base in part because of its "Hot Doughnuts Now" light, which meant the store was in the midst of making fresh doughnuts. At his West Coast stores, Spoor instituted "hot light" hours between 5:30 to 11 a.m. and 5:30 to 11 p.m.

© Business Journal - April 14, 2006

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