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Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is -0.42pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
+0.07pp
Flat
Net-tone change vs last year's 10-K.
MD&A
-0.90pp
Lean -
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
adverse+21
failure+14
impairment+14
unable+6
harm+6
Positive rising
successfully+7
profitability+3
adequately+3
profitable+3
able+2
Risk Factors (Item 1A)
15,354 words
Item 1A. Risk Factors
Investing in our securities involves a variety of risks and uncertainties, including those discussed below. These disclosures reflect the Company’s beliefs and opinions as to risks or uncertainties that could have a material adverse effect on the Company, our business, financial condition, prospects, results of operations, cash flows, and stock price. The risks discussed below are not the only risks we face. Additional risks or uncertainties not currently known to us, or that we currently deem immaterial, may also have a material adverse effect on our business, financial condition, prospects, results of operations, cash flows, or stock price. References to past events are examples only and are not intended to be a complete listing or to indicate the likelihood of similar events occurring in the future.
Summary Risk Factors
Risks Related to Food Safety and Consumer Preferences
• Our business may be adversely affected by food safety issues, including food-borne illnesses, tampering, contamination, or cross-contamination.
• Changes in consumer preferences and demographic trends could negatively impact our business.
Risks Related to Cybersecurity, Data Privacy, Information Technology, and Internal Controls
• Any material , , or of our information technology has and may in the future affect our ability to effectively operate our business and result in financial or other .
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
loss+23
decline+14
impairment+10
incident+7
declined+6
Positive rising
profitable+5
improving+3
opportunities+2
gains+2
efficiently+2
MD&A (Item 7)
10,734 words
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read together with our audited Consolidated Financial Statements and related notes included elsewhere in this Annual Report. This section of the Annual Report generally discusses fiscal 2025 and fiscal 2024 items and year-to-year comparisons of fiscal 2025 to fiscal 2024. Discussions of fiscal 2023 items and year-to-year comparisons of fiscal 2024 and fiscal 2023 are not included in this Annual Report and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report for the year ended December 29, 2024. This discussion contains forward-looking statements that involve risks and uncertainties. For more information, see the section of this Annual Report titled “Cautionary Note Regarding Forward-Looking Statements.”
Overview
We operate and report financial information on a 52 or 53-week fiscal year ending on the Sunday closest to December 31. Fiscal 2025 reflects our results of operations for the 52-week period ended December 28, 2025. Fiscal 2024 reflects our results of operations for the 52-week period ended December 29, 2024.
We conduct our business through the following three reported segments:
• U.S.: Includes all Company-owned operations in the U.S., and Insomnia Cookies Bakeries globally through the date of deconsolidation (refer to Note 3 , Acquisitions and Divestitures, to the audited Consolidated Financial Statements for more information);
• Breaches or failures of our information technology systems or other cybersecurity or data security-related incidents have and may in the future have an adverse effect on our business, financial condition, and results of operations.
• If we, our franchisees, or our third-party service providers fail to protect, or to comply with laws and regulations governing our data, we or our franchisees could be exposed to data loss, litigation, fines, and other liabilities that could harm our reputation and have a material adverse effect on our business, financial condition, and results of operations.
• If our remediation of the previously identified material weakness is not effective, or if we fail to develop and maintain an effective system of internal controls, our ability to produce timely and accurate financial statements may be impaired, investors may lose confidence in our financial reporting, and the price of our common stock may decline.
Risks Related to Executing Our Business Strategy
• We may be unable to successfully execute our business strategy, including our turnaround plan.
• We may not realize the anticipated benefits from past or potential future acquisitions, divestitures (including refranchising), investments, or other strategic transactions.
• We have recognized significant impairment charges for our goodwill and long-lived assets and may be required to recognize additional impairment charges in the future for goodwill and other assets. Future impairment of these assets could have a material adverse effect on our financial condition and results of operations.
• We have limited influence over the operations of our franchisees and subfranchisees, and any failure by them to operate effectively or to maintain safety and quality standards in compliance with applicable law could have a material adverse effect on our operating results and reputation.
• Our fresh delivery business channels depend on key customers and are subject to risks if such key customers reduce their purchases or terminate their relationships with us.
• Our reputation and brand image are essential to our business success and a failure to protect our brand image could have a material adverse effect on our business, results of operations or financial condition.
• Our success depends on our ability to compete with many food service businesses.
• If we cannot keep pace with technological changes impacting our industry, we may be unable to compete effectively, and our results of operations could be negatively affected.
• Our significant indebtedness could adversely affect us.
Risks Related to Our Global Expansion and Growth
• A key portion of our growth strategy depends on opening new and maintaining existing Krispy Kreme shops and Points of Access both domestically and internationally.
• Our future growth and profitability will depend on our ability to successfully accelerate international development with strategic partners and joint ventures.
• We face risks as we continue to focus on profitable expansion of our fresh delivery and digital channels.
• Political, economic, currency, and other risks associated with our international operations could have a material adverse effect on our and our international franchisees’ operating results.
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Risks Related to Our Supply Chain
• We are the exclusive or primary supplier of doughnut mixes and other key ingredients to shops worldwide and any problems supplying these ingredients could negatively affect our and our franchisees’ ability to make doughnuts.
• We are the only manufacturer of our doughnut-making equipment. Any problems producing this equipment could negatively affect our shops’ ability to make doughnuts.
• We have limited vendors for many of the product components and services that we rely on, and we have a single vendor for our glaze flavoring. Any interruption in supply could impair our ability to make and deliver our signature products, adversely affecting our business, financial condition, and results of operations.
• Our reliance on a single vendor for nearly all distribution of materials and supplies in the U.S. and Canada poses risks to our and our franchisees’ ability to make doughnuts.
• Our profitability is sensitive to changes in the cost of commodities and we may not be able to increase prices to fully offset inflationary pressures on costs, which may adversely affect our financial condition or results of operations.
Risks Related to Our Human Capital
• An inability to recruit and retain personnel could have a material adverse effect on our operations.
• Changes in the cost of labor could adversely affect our business, financial condition, and results of operations.
Risks Related to Regulation, Litigation and Intellectual Property
• We may be subject to litigation that could adversely affect us by increasing our expenses, diverting management attention, or subjecting us to significant monetary damages and other remedies.
• Our business may be adversely affected by litigation, regulation and publicity concerning food or occupational safety, quality, health, and other issues, which could negatively affect public policy and consumer preferences toward our products.
• We are subject to franchise laws and regulations that govern our status as a franchisor and regulate some aspects of our franchise relationships. Our ability to develop new franchised shops and to enforce contractual rights against franchisees may be adversely affected by these laws and regulations, which could cause our franchise revenues to decline.
• Healthcare and employment legislation could adversely affect our business, financial condition, and results of operations.
• Changes in tax laws and regulations could have a material impact to our tax expense or cash tax obligations.
• Our annual effective income tax rate can change materially as a result of changes in our geographic mix of U.S. and foreign earnings and other factors, including changes in tax laws and changes made by regulatory authorities.
• The full realization of our deferred tax assets may be affected by a number of factors, including future earnings and the feasibility of ongoing planning strategies.
• We may be affected by matters related to environmental, social, and governance (“Responsibility”) trends and events, including governmental regulation and supply chain disruptions, that may adversely affect our business and reputation.
• Our failure or inability to obtain, maintain, protect, and enforce our trademarks or other intellectual property could adversely affect our business and the value of our brand.
Risks Related to Crises, Catastrophic Events, and Business Continuity
• Public health outbreaks, epidemics, or pandemics have disrupted and may in the future disrupt, our business, and could have a material adverse effect on our business, financial condition, and results of operations.
• Adverse weather conditions, natural disasters, war or terrorist attacks, pandemics, or other catastrophic events could have a material adverse effect on our business.
Risks Related to Ownership of our Common Stock
• Certain provisions of Delaware Law, our governing documents, and the ownership of approximately 43% of our common stock by JAB (defined below) could delay or prevent a change in control, which could adversely affect the price of our common stock.
• If the ownership of our common stock continues to be highly concentrated, it may limit stockholders other than JAB from influencing significant corporate decisions and may result in conflicts of interest.
• Sales of substantial amounts of our common stock could negatively affect the price of our common stock.
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Risks Related to Food Safety and Consumer Preferences
Our business may be adversely affected by food safety issues, including food-borne illnesses, tampering, contamination, or cross-contamination.
We operate in the food service and manufacturing sector and are subject to food safety concerns, which are common both in the food service industry and the food supply chain. These concerns include risks of food-borne illnesses/injuries, tampering, contamination, and cross-contamination. Although we maintain a food safety system, such system may be insufficient in design and execution to prevent or avoid risks associated with such food safety concerns. These risks may escalate as we launch new products, broaden our distribution through channels such as our fresh delivery operations and digital channels, and expand our manufacturing and production facilities.
Inadequate food safety measures, including in our facilities and Points of Access, could lead to shutdowns or other interruptions, disrupting operations in both our in-shop and fresh delivery operations. Moreover, we and our franchisees rely on domestic and international suppliers to provide quality ingredients and to properly handle, store and transport our ingredients for delivery to our shops in compliance with our established procedures and standards and in compliance with applicable laws and regulations, including sanitation and pest control standards. Any failure by our domestic or international suppliers to meet our quality standards, or to comply with domestic or international food industry standards, could cause our ingredients to be contaminated, which could be difficult to detect and could jeopardize the safety of our food. Food safety incidents might also negatively impact the cost and availability of ingredients, leading to supply chain disruptions or reduced profit margins for us and our franchise partners. Any such disruption in our supply chain could negatively impact our brand and our results.
Moreover, our dependence on third-party delivery services and third-party Points of Access heightens the risk of these food safety issues. While we oversee some of these third parties’ operations, the quality and service they provide could be compromised by various factors, including factors that are beyond our control or are unforeseeable, making it challenging to identify contamination or other defects.
Additionally, food safety concerns may expose us to legal actions, regulatory investigations, product recalls, and financial consequences, including penalties. Any association of our brand, our franchisees, or the broader food service industry with food safety issues could harm our reputation, leading to a decline in revenue and profitability and could have a material adverse effect on our business, financial condition, and results of operations.
Changes in consumer preferences and demographic trends, including in response to unfavorable economic conditions, could negatively impact our business.
The food service industry is highly susceptible to shifts in consumer preferences, including dietary choices and health concerns, as well as broader factors like economic conditions, spending habits, demographic changes, traffic trends, and competition from other brands. In addition, our products fall into the category of indulgences, making them particularly sensitive to shifts in discretionary spending patterns and dietary trends (including use of weight loss medication). Shifts in consumer behavior based on any of these factors may lead to reduced sales. In the event of unfavorable economic conditions where we or our franchisees operate, our consumers may have reduced disposable income, leading to potential reductions in their consumption of our products. Any such reductions could have a material adverse effect on our business, financial condition, and results of operations.
Risks Related to Cybersecurity, Data Privacy, Information Technology, and Internal Controls
We rely on information technology in our operations. Any material failure, inadequacy, or interruption of that technology has and may in the future adversely affect our ability to effectively operate our business and result in financial or other loss.
Our business and that of our franchisees significantly depend on computer systems and information technology. Among other things, the effectiveness of our business management is closely tied to the reliability and capacity of these systems, and our omni-channel strategy relies heavily on robust information technology systems. As we diversify and grow our business channels, our susceptibility to related risks intensifies.
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We also have experienced business disruptions due to failures in critical information technology platforms and continue to face potential business disruptions due to such failures, including those hosted or provided by third parties. These disruptions can stem from hardware and software issues; cyber-attacks, such as those involving computer viruses, ransomware, other malware, distributed denial-of-service attacks, and nation-state sponsored malicious cyber activity; natural disasters, such as earthquakes, hurricanes, floods, and fires; power outages; telecommunications failures; human errors; criminal activities; and intentionalvandalism. For example, during fiscal 2024, unauthorized activity on a portion of our information technology systems resulted in the Company experiencing certain operational disruptions, which materially affected the Company’s business operations and results of operations. For further information regarding the 2024 Cybersecurity Incident (defined below), see “Cybersecurity” in Item 1C of Part I of this Annual Report and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in Item 7 of Part II of this Annual Report.
Adapting to evolving consumer expectations and technological advancements is crucial. Any interruption, delay, or flaw in developing and implementing such advancements, or misjudging the costs and revenue potential of these initiatives, can hamper our essential business functions. This could negatively impact our reputation, competitive edge, operational results, and financial health.
Moreover, to the extent we invest in and utilize emerging technologies, including artificial intelligence and machine learning, such technologies may not deliver expected efficiencies and could introduce new risks, such as those related to cybersecurity, data privacy, inaccuracies, hallucinations, bias or discrimination and intellectual property infringement, which may become more pronounced as our reliance on such technologies increases.
We strive to keep our systems updated. However, maintenance of our information technology systems can interrupt access to our systems. If our mitigation controls fail, especially when updates are not feasible, it could lead to outages, including digital outages, information technology system disruptions, and heightened vulnerability to cyber threats.
Our business interruption insurance might not fully cover losses from service disruptions caused by system failures or similar events. Therefore, significant impacts from system failures have and may in the future materially and adversely affect our business, financial condition, and results of operations.
Breaches or failures of our information technology systems or other cybersecurity or data security-related incidents have and may in the future have an adverse effect on our business, financial condition, and results of operations.
Our and our franchisees’ information systems and records are at risk of cyber-attacks and security incidents. We regularly experience directed attacks intended to lead to interruptions and delays in operations as well as loss, misuse or theft of personal information and other data, confidential information, or intellectual property. Such attacks or security incidents have occurred and could occur as a result of hacking attempts, software or system failures, viruses, operator errors, and accidental data leaks. Cyber-attacks are increasingly sophisticated and varied, often involving phishing, social engineering, service disruption attacks, malware, or ransomware, and they may not be detected until they have been active for some time. Further, these types of threats may be exacerbated by recent developments in artificial intelligence and its increased use to produce sophisticated malware, ransomware, phishing schemes, and other fraudulent activities. Additionally, internal threats exist from employees, franchisees, contractors, or third parties who might bypass security measures to access or leak sensitive, regulated, or personally identifiable information, either maliciously or inadvertently. We have in the past experienced cybersecurity incidents, such as the 2024 Cybersecurity Incident, which materially affected the Company’s business operations and results of operations. For more information regarding the 2024 Cybersecurity Incident, see “Cybersecurity” in Item 1C of Part I of this Annual Report and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in Item 7 of Part II of this Annual Report.
The security measures and controls implemented by us or our third-party providers are not foolproof against such incidents and may be inadequate to prevent a cyber-attack or security breach. Any interruption, such as those caused by a breach, in our or our third-party providers’ information technology systems could severelyinterrupt our operations, negatively affect our business, financial standing, and operational results, and harm our reputation and brand credibility among consumers and business partners. As a result of the 2024 Cybersecurity Incident, the Company experienced certain operational disruptions that resulted in lost sales and increased expenses related to remediation.
Furthermore, significant incidents involving unauthorized access to, theft, exposure, alteration, or misuse of consumer, employee, or proprietary data, such as the 2024 Cybersecurity Incident, may lead to legal actions, regulatory investigations, and non-compliance penalties, which could disrupt our operations, tarnish our reputation, and have a material adverse effect on our business, results of operations, and financial condition.
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Our cybersecurity insurance may not fully cover the consequences of potential future security breaches or cybersecurity incidents, and future coverage may not be available at reasonable costs or at all. Insurers might also denyclaims for cybersecurity incidents. Addressing a security breach requires substantial financial and operational resources, including remediation of security vulnerabilities, legal defense, and compliance with notification obligations. Such efforts divert management attention and resources away from our business activities, adversely affecting our business operations, financial condition, and results. Additionally, our efforts to remedy these issues may not be successful, and we might face challenges in implementing, maintaining, and upgrading effective safeguards.
If we, our franchisees, or our third-party service providers fail to protect, or to comply with laws and regulations governing, our consumer and employee data and other regulated, protected, or personally identifiable information, we or our franchisees could be exposed to data loss, litigation, fines, and other liabilities that could harm our reputation and have a material adverse effect on our business, financial condition, and results of operations.
We collect, transmit, and store large amounts of data regarding our consumers and employees, including personally identifiable details. This data is housed in our own and our franchisees’ information technology systems, as well as those of third-party service providers. A failure to protect our systems, or those provided by our third-party service providers and franchisees, from damage, disruption, fraud or cyber-attacks, could harm our reputation, result in significant fines or penalties, and have a material adverse effect on our business, financial condition, or results of operations.
We operate under various data privacy and security laws, directives, and regulations, both domestically and internationally. The U.S. has a complex landscape of federal and state data protection regulations, with some state laws offering more stringent protections. The potential introduction of a comprehensive federal data privacy law could increase complexity and compliance costs, impact data use strategies, and necessitate additional investments in compliance infrastructure.
Internationally, we are subject to regulations like the European Union’s General Data Protection Regulation (“GDPR”) and the U.K.’s GDPR and Data Protection Act of 2018. These laws impose strict requirements on data handling, including consent, individual rights, cross-border data transfer, breach notifications, and data security and confidentiality. Non-compliance with these international regulations could result in significant penalties and legal liabilities for us or our franchisees. Adapting our systems to these evolving requirements may require substantial investment and time.
The interpretation and enforcement of data privacy and security laws and standards are evolving, leading to potential inconsistencies with our data processing practices and policies. Any non-compliance or perceived non-compliance could lead to fines, audits, investigations, lawsuits, and other penalties. Additionally, any failure to adhere to our public statements and privacy policies could expose us to legal action, harm our reputation and have a material adverse effect on our business, financial condition, and results of operations.
Further, the standards and technology currently used for transmission and approval of electronic payment transactions are determined and controlled by the payment card industry. If we or our franchisees fail to comply with these standards or if a third party circumvents our data security measures or those of our franchisees or vendors, we and our franchisees could be exposed to litigation, liability, reputational harm, fines from the payment card companies and increased costs, which could have a material adverse effect on our business, financial condition, and results of operations.
We identified a material weakness in our internal control over financial reporting in fiscal 2025. If our remediation of the material weakness is not effective, or if we fail to develop and maintain an effective system of internal controls, our ability to produce timely and accurate financial statements may be impaired, investors may lose confidence in our financial reporting, and the price of our common stock may decline.
We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and other laws and regulations applicable to public companies. These laws and regulations require, among other things, that we maintain effective internal control over financial reporting and disclosure controls and procedures. They also require management to perform an annual assessment of the effectiveness of our internal control over financial reporting and disclosure of any material weaknesses in such controls. We are required to have our independent registered public accounting firm provide an attestation report on the effectiveness of our internal control over financial reporting.
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We identified a material weakness in our internal control over financial reporting in the second quarter of fiscal 2025. While we believe we have remediated the material weakness identified during fiscal 2025 as of December 28, 2025, there is no assurance that our remedial measures have been effective or that additional material weaknesses will not be identified. We have had errors in our financial statements in the past that have required the revision of our financial statements. In the future, controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial statements. For additional information related to previously identified material weaknesses in internal control over financial reporting identified and the related remedial measures, see Item 9A, “Controls and Procedures,” of Part II of this Annual Report. There is no assurance that additional material weaknesses will not be identified. In addition, in the future, controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial statements.
Any deficiency in our internal control over financial reporting and disclosure controls and procedures, or any difficulties encountered in their implementation or improvement, could result in a restatement of our consolidated financial statements for prior periods, cause us to fail to meet our financial and other reporting obligations, result in an adverse opinion regarding our internal control over financial reporting from our independent registered public accounting firm, or lead to investigations or sanctions by regulatory authorities or other potential claims or litigation. Any of the foregoing could have a material adverse effect on our business, financial condition, and results of operations, and could cause our investors to lose confidence in the accuracy and completeness of our financial reports and the price of our common stock to decline.
Risks Related to Executing Our Business Strategy
We may be unable to successfully execute our business strategy, including our turnaround plan.
During fiscal 2025, we implemented a turnaround plan to de-leverage the balance sheet and deliver sustainable, profitable growth. Our growth strategy is supported by a focus on growing our fresh delivery business with new and existing customers, accelerating growth in our digital channel, driving retail sales, and growing with new and existing international franchise partners.
However, we may be unable to deliver global sales growth or grow our fresh delivery or digital channels due to competitive pressures and other factors. Furthermore, growth may be contingent upon consumer tastes and preferences, the effectiveness of our marketing and advertising programs, the successful development and launch of new products, commodity and labor costs, or our ability to provide consistent, high-quality doughnuts and customer and consumer experiences, accelerate our digital business and technological enhancements, drive new shop development, or obtain the support and engagement of franchisees.
Moreover, our turnaround plan includes a focus on driving returns on invested capital by reducing capital intensity and expanding margins by simplifying and optimizing the business. Our actions in support of these initiatives may not have the expected result or may have unintended or unexpected outcomes. Furthermore, insufficient investment in our business could result in our inability to keep pace with technological changes, adequately invest in the business, including marketing or shop, factory and equipment maintenance and enhancements, or effectively compete with competitors, any of which could have a material adverse effect on our business, financial condition and results of operations.
If we are delayed or unsuccessful in executing our strategies, including our turnaround plan, if the execution of our strategies proves to be more costly or time consuming than expected, or if our strategies do not yield the desired results, our business, financial condition and results of operations may suffer.
We may not realize the anticipated benefits from past or potential future acquisitions, divestitures (including refranchising), investments, or other strategic transactions.
We periodically assess and may engage in mergers, acquisitions, full or partial divestitures (including refranchising), joint ventures, strategic partnerships, minority investments, or other strategic initiatives to execute our growth strategy. We make these decisions based on individual circumstances. The success of these endeavors is dependent upon many factors, such as the availability of sellers and buyers, the availability of financing, the ability to negotiate transactions on terms deemed acceptable and the ability to successfully transition and integrate shop operations.
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In addition, such strategic endeavors come with inherent risks, including but not limited to:
• The challenges, delays, and costs associated with integrating acquired Krispy Kreme franchised shops, Points of Access, and strategic partnerships into our existing structure, including potential failure to achieve expected cost savings and operating efficiencies or to retain key personnel;
• Diverting management focus from everyday operations or other important initiatives to effectively implement our growth strategy;
• Not achieving expected benefits, including revenue, profit, or cash flow, from acquisitions (including newly acquired Krispy Kreme franchised shops), full or partial divestitures (including in connection with refranchising transactions), investments or other strategic transactions;
• Risks related to divestitures, such as challenges transitioning a divested business to a new owner or failing to select a high-quality, long-term partner that will adhere to any franchise and development agreements and meet growth expectations for development of new shops in their region;
• The potential to inherit significant contingent or unforeseen liabilities through acquisitions or other strategic dealings; and
• The risk of significant value depreciation in our investments, which has in the past and could in the future lead to goodwill impairment charges for acquired entities or loss upon divestiture.
Our past strategic transactions have not always yielded, and future strategic transactions may not yield, the anticipated benefits, and could negatively impact our reputation and have a material adverse effect on our business, financial condition, and results of operations.
We have recognized significant impairment charges for our goodwill and long-lived assets and may be required to recognize additional impairment charges in the future for goodwill and other assets. Future impairment of these assets could have a material adverse effect on our financial condition and results of operations.
A significant portion of our long-term assets consists of goodwill and other intangible assets. We do not amortize goodwill and indefinite-lived intangible assets but rather review them for impairment on an annual basis or more frequently when events or changes in circumstances indicate that their carrying value may not be recoverable. If the carrying value of the reporting unit exceeds its fair value, the Company recognizes an impairment charge for the difference up to the carrying value of the allocated goodwill. The process of evaluating the potential impairment of goodwill and other intangible assets requires significant judgment. In the second quarter of fiscal 2025, we recorded a $356.0 million non-cash, partial goodwill impairment charge. For more information, see the section entitled “Goodwill and Other Intangible Assets” in Item 8, Note 1 of this Annual Report.
The occurrence of certain events or circumstances has resulted in, and could continue to result in, a downward revision in the estimated fair value of one or more of our reporting units or intangible assets. For example, negative industry or economic trends, reduced estimates of future cash flows, disruptions to our business, slow or slower than expected growth rates, lack of growth in our business, or a significant decline in the Company’s stock price could lead to further impairment charges against our goodwill and other intangible assets. If we determine that our goodwill or other intangible assets are impaired, we may be required to record a significant charge to earnings that could adversely affect our financial condition and results of operations.
Moreover, if certain stores, manufacturing facilities, strategic transactions, or corporate assets do not perform as expected, we have recognized in the past, and may in the future be required to recognize, non-cash impairment charges related to such assets. These charges could result from, among other things, lower-than-expected sales, rising costs, changes in strategic priorities, or underperformance of newly opened locations or Points of Access. During fiscal 2025, we recorded $ 39.4 million non-cash long-lived asset impairment charges and $ 37.0 million non-cash lease impairment and termination costs in response to management’s updated forecasts and the termination of our Business Relationship Agreement with McDonald’s USA, LLC (“McDonald’s USA”). For more information, see the section entitled “Goodwill and Other Intangible Assets” in Item 8, Note 1 of this Annual Report.
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We have limited influence over the operations of our franchisees and subfranchisees, and any failure by them to operate effectively or to maintain safety and quality standards in compliance with applicable law could have a material adverse effect on our operating results and reputation.
Our ability to influence the management of our franchisees’ businesses is limited, and their failure to operate effectively could negatively impact our operating results and reputation. The operational quality of franchised shops may suffer due to factors outside our control such as our limited influence over their operations, limited ability to facilitate changes in shop ownership, and limited ability to enforce franchise obligations due to bankruptcy or insolvency proceedings. Franchisees might not manage their shops in compliance with our established procedures, standards and requirements or standards set by applicable laws and regulations, including sanitation and pest control standards, or data processing, privacy and cybersecurity requirements. Furthermore, we rely on franchisees to participate in our strategic initiatives. While we can mandate certain strategic initiatives through enforcement of our franchise agreements, we will need the active support of our franchisees if the implementation of these initiatives is to be successful. The failure of franchisees to support our strategic initiatives could adversely affect our ability to implement our business strategy and could materially harm our business, results of operations and financial condition.
In certain markets, we permit subfranchising arrangements. In those structures, we are not party to the agreements with the subfranchisees and we rely on our franchisees to oversee subfranchisees’ compliance with brand standards and applicable laws. Because we are further removed from day-to-day operations in such arrangements, our ability to directly monitor performance and compliance may be more limited, which could increase operational, regulatory and reputational risk. While we provide training and support to our franchisees, our franchisees and subfranchisees run their own independent businesses. Moreover, as our business becomes more franchised, including through international refranchising transactions, we will become more reliant on franchisees. The risks of a franchise business model, including those outlined above, may become heightened.
On occasion we have encountered, and may in the future encounter, challenges in receiving specific financial and operational results from our franchisees in a consistent and timely manner. Further, the information we receive from franchisees, including regarding their revenue, may not be audited or subject to a similar level of internal controls as our processes. To the extent that we are not able to obtain transparency into their operations, it could impair our visibility and resulting royalty and fees, our understanding of systemwide sales, our ability to forecast performance, or our ability to respond quickly to operational challenges, any of which could negatively impact our operating results.
Currently, we maintain generally positive relationships with our franchisees. However, future developments, some of which may be beyond our control, could potentially strain relationships with both existing and new franchisees. Should our franchisees fail to operate successfully or adhere to our standards and requirements, it could substantially harm the image and reputation of both individual franchisees and our overall brand. Such scenarios could lead to a marked decline in Krispy Kreme-branded sales, adversely affecting our revenue and profitability.
Our fresh delivery business channels depend on key customers and are subject to risks if such key customers reduce their purchases or terminate their relationships with us.
A considerable portion of our revenue comes from sales to retail customers via our fresh delivery channels, which necessitate a substantial infrastructure with notable fixed and semi-fixed costs. In our global operations, we serve a number of large retail customers, yet no single customer contributed more than 10% of our total revenue in the fiscal years ending December 28, 2025, December 29, 2024, or December 31, 2023. These customers are not committed to purchase any particular quantities and purchases are influenced by factors like pricing, product quality, consistency, consumer demand, and service excellence. Customers may reduce their purchases or terminate their relationship with us based on our failure, or perceived failure, to deliver on any of these or other factors. Moreover, if we fail to adhere to the terms of our agreement with a customer, such customer may be entitled to remedies under the contract such as money damages or early termination. In addition, there is a possibility that customers receiving fresh delivery might reallocate their shelf space or menu offerings, currently occupied by our products, to other items, possibly including private label goods. A loss or significant decrease in sales to one of these key retail customers, including due to any of the above factors or if they encounter substantial financial issues, could adversely affect our business, financial condition, and results of operations.
Our reputation and brand image are essential to our business success and a failure to protect our brand image could have a material adverse effect on our business, results of operations or financial condition.
Our brand image and reputation are critical to our business success and financial performance. Our ability to grow and succeed depends in significant part on our and our franchisees’ ability to consistently maintain brand standards as we enter new markets and distribution channels, introduce new products, and deliver high-quality products to consumers.
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We invest in marketing initiatives designed to support and enhance our brand, including traditional advertising, consumer promotions, and digital marketing. A substantial portion of our marketing efforts rely on social media and other digital platforms, which increases the speed and breadth with which information, including misinformation and negative commentary, may be disseminated. Adverse publicity, consumer or customer complaints, or negative perceptions regarding our brand or products, whether accurate or not, may spread rapidly and could materially harm our brand reputation.
Our reputation is influenced by consumers’ and customers’ subjective perceptions. Actual or perceived quality or food safety concerns, or failures to comply with applicable food regulations and requirements, whether or not ultimately substantiated and whether or not directly involving us, such as incidents involving competitors, could result in negative publicity and reduced consumer or customer confidence in our brand, products, or the broader industry. This could in turn harm our reputation and sales, and could have a material adverse effect on our business, financial condition, and results of operations.
Moreover, any regulatory or legal challenges, product recalls, or other negative publicity could tarnish our reputation and brand image, erode consumer and customer trust, and diminish demand for our products. Failure to effectively maintain our brand image could have a material adverse effect on our business, financial condition, and results of operations.
Our success depends on our ability to compete with many food service businesses.
We operate in a highly competitive food service landscape. With relatively low start-up costs for retail indulgence and similar food service ventures and few barriers to entry, our competitors include a variety of independent local operators, in addition to well-capitalized regional, national, and international players and franchises, and new competitors may emerge at any time. We face competition from a diverse array of indulgence retailers and bakeries, specialty coffee shops, other specialty shops offering doughnuts or other sweet treats, bagel stores, quick service restaurants, delicatessens, take-out services, convenience stores, and supermarkets.
Our ability to compete will depend on the success of our plans to effectively respond to consumer preferences, improve existing products, develop and roll-out new products, and manage the complexity of operations as well as the impact of our competitors’ actions. In addition, our long-term success will depend on our ability to strengthen our consumers’ digital experience through mobile ordering, delivery, kiosks, loyalty programs, and social interaction. Some of our competitors offer a broader product range and have substantially greater financial resources, higher revenues, and greater economies of scale than we do. These advantages may allow them to offer aggressive pricing, implement their operational strategies more quickly or effectively than we can, or benefit from changes in technologies, which could harm our competitive position. These competitive advantages may be exacerbated in a difficult economy, thereby permitting our competitors to gain market share. We may be unable to successfully respond to changing consumer preferences, including with respect to new technologies and alternative methods of delivery. In addition, online platforms and aggregators may direct potential customers to other options based on paid placements, online reviews or other factors. If we are unable to maintain our competitive position, we could experience lower demand for products, downward pressure on prices, reduced margins, an inability to take advantage of new business opportunities, a loss of market share, and reduced profitability.
Furthermore, our omni-channel strategy, particularly exemplified by our delivery offerings, competes in a fiercely contested arena with both local and international indulgence brands. While we manage our own digital platform, we depend on third-party delivery services for the final leg of product distribution. We also partner with third parties on these platforms, where they handle the entire consumer transaction, including delivery. Our consumers might opt for other indulgence providers’ digital platforms or delivery services due to factors like delivery reach, app usability, and overall market preference for food delivery services.
If we fail to compete effectively, our ability to sustain or grow our revenues and profits, as well as to capitalize on the expected growth through our omni-channel model, could be compromised which could have a material adverse effect on our business, financial condition, results of operations, and future prospects.
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If we cannot keep pace with technological changes impacting our industry, we may be unable to compete effectively, and our results of operations could be negatively affected.
Emerging technologies such as artificial intelligence, machine learning, and automation are impacting many industries and business operations, including ours. If we do not adequately invest in new technology, appropriately implement new technologies, or evolve our business at sufficient speed and scale in response to such developments, or if we do not make strategic investments to respond to these developments, our products, results of operations, and ability to develop and maintain our business could be negatively affected. Our competitors or other third parties may incorporate such technologies into their products and operations more quickly or more successfully than us, which could impair our ability to compete effectively and adversely affect our results of operations.
Moreover, we cannot predict consumer or team member acceptance of these developing technologies (e.g., automation, artificial intelligence, and new delivery channels) or their impact on our business, nor can we be certain of our ability to implement such technologies, any of which could result in loss of sales, dissatisfaction from our consumers and employees, or negative publicity that could adversely affect our reputation and financial results.
Our significant indebtedness could adversely affect us, including by decreasing our business flexibility and increasing our interest expense.
The Company’s significant level of indebtedness and related leverage carries potential adverse consequences, including, but not limited to:
• increasing our vulnerability to, and reducing our flexibility to respond to, changes in our business and general adverse economic and industry conditions;
• requiring the dedication of a substantial portion of our cash flow from operations to service our debt, thereby reducing the availability of such cash flow to fund working capital, capital expenditures, acquisitions, joint ventures, product research, or other corporate purposes;
• restricting us from making strategic acquisitions or causing us to make non-strategic divestitures;
• exposing us to the risk of increased interest rates for unhedged variable interest rate borrowings under our current credit facilities;
• making it more difficult for us to repay, refinance or satisfy our obligations with respect to our debt;
• limiting our ability to borrow additional funds in the future and increasing the cost of any such borrowing;
• imposing restrictive covenants that may hinder our ability to finance future operations and capital needs or to pursue certain business opportunities and activities, and which, in the event of non-compliance without a cure or waiver, could result in an event of default and the acceleration of the applicable debt and any debt subject to cross-acceleration; and
• exposing us to risks related to fluctuations in foreign currency as we earn profits in a variety of currencies around the world and substantially all of our debt is denominated in U.S. dollars.
Moreover, under the terms of the 2023 Facility (defined below), we are subject to certain financial covenants, including a requirement to maintain a bank leverage ratio of less than 5.00 to 1.00 as of the end of each quarterly Test Period (as defined in the 2023 Facility). If we are unable to meet the 2023 Facility financial or other covenants, it could limit our ability to draw on the revolving credit facility, could result in the lenders accelerating the maturity of such indebtedness and we may not have sufficient resources to repurchase, repay or redeem our obligations, as applicable, and could require the replacement of the 2023 Facility with new sources of financing, which we may be unable to secure on favorable terms or at all, any of which could negatively impact our liquidity. Also, if we were unable to repay the amounts due under our secured indebtedness, the holders of such indebtedness could proceed against the collateral that secures such indebtedness. In the event our creditors accelerate the repayment of our secured indebtedness, we and our subsidiaries may not have sufficient assets to repay that indebtedness.
Additionally, we may incur additional indebtedness, guarantees, commitments, or liabilities in the future. The need for refinancing, in part or in full, of our existing indebtedness before maturity is a possibility. There is no guarantee that we will be able to secure refinancing on favorable terms or at all. Should our business fail to generate sufficient cash flow from operations or if we encounter difficulty securing future debt or equity financing on acceptable terms and in sufficient amounts to meet our debt obligations or address other liquidity requirements, our financial health and operational results may suffer.
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Risks Related to Our Global Expansion and Growth
A key portion of our growth strategy depends on opening new and maintaining existing Krispy Kreme shops and Points of Access both domestically and internationally.
Our strategic focus includes expanding our Global Points of Access. This includes expansion through the establishment of new shops and fresh delivery doors by us and our franchisees, and through expanding our digital platforms, both in our current markets and new regions. We may be ineffective in implementing this expansion strategy including due to external factors outside of our control such as economic conditions, legal and regulatory developments, permitting delays, rising costs or availability of commodities, or ability to obtain or renew desirable locations for new shops on acceptable terms or at all. Additionally, operational challenges, such as difficulties in sourcing product components or logistical services, may impose limitations. If we or our franchisees are unsuccessful in expanding Global Points of Access, our overall growth objectives would be hindered.
Additionally, our presence and growth in certain international markets heavily depends on our franchisees. There is no guarantee that these franchisees will successfully develop or manage their Points of Access in alignment with our brand standards or develop additional Points of Access in line with established targets or our expectations. Moreover, their ability to effectively open, operate, and sustain these Points of Access in accordance with their agreements and our brand requirements may be constrained by their business capabilities or financial resources.
Moreover, as part of our growth strategy, we may decide to increase or decrease the number of Company-owned shops by purchasing existing franchised shops, by refranchising existing Company-owned U.S. or international equity markets, or by developing additional shops. Our failure to successfully execute any such transactions could have an adverse effect on our operating results.
Furthermore, some of our facilities, doughnut-making lines, and other equipment have been in service for extended periods and their remodeling, repair, or replacement may require substantial capital investment. As such assets continue to age, sourcing replacement parts and components may become increasingly difficult and required repairs may become increasingly extensive. If the costs associated with remodels, repairs, or replacements are higher than anticipated, downtimes are longer than planned, or upgraded assets do not perform as expected, we may not realize the desired returns on our investment. Further, our current levels of maintenance capital may not be sufficient to adequately address the condition of our assets. Failure to make necessary repairs could expose us to audits, fines, or penalties, and, in certain circumstances, could result in closures of facilities. Any of these outcomes could disrupt our operations, harm our reputation, and have a material adverse effect on our business, financial condition, results of operations, and future prospects.
Our future growth and profitability will depend on our ability to successfully accelerate international development with strategic partners and joint ventures.
We believe that our future growth and profitability will depend on our ability to successfully accelerate international development with franchisees and joint venture partners in new and existing markets. New markets may have different competitive conditions, consumer tastes and discretionary spending patterns than our existing markets. As a result, new shops in those markets may have lower average sales than shops in existing markets and may take longer than expected to reach target sales and profit levels or may never do so. Entering new markets will require building brand awareness through advertising and promotional activity, and those activities may not promote our brands as effectively as intended, if at all.
Our joint venture partners or franchisees typically have the right to develop and manage Krispy Kreme branded shops in a specific country or countries, including, in some cases, the right to subfranchise. A joint venture involves special risks, including: our joint venture partners may have economic, business or legal interests or goals that are inconsistent with those of the joint venture or us, or our joint venture partners may be unable to meet their economic or other obligations and we may be required to fulfill those obligations alone. Our franchise arrangements present similar risks and uncertainties. We cannot control the actions of our joint venture partners or franchisees, including any nonperformance, default or bankruptcy of joint venture partners or franchisees. In addition, the termination of an arrangement with a franchisee or a lack of expansion by certain franchisees has and m ay in the future result in the delay or discontinuation of the development of franchised shops, or an interruption in the operation of our brand in a particular market or markets. We may not be able to find another operator to resume operations and development activities in such market or markets. Moreover, franchisees may not achieve expected targets for new shop development, which could lead to slower than expected growth in our Global Points of Access. Any such delay, discontinuation, interruption, or failure could materially and adversely affect our business and operating results.
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We face risks as we continue to focus on profitable expansion of our fresh delivery and digital channels.
Our growth strategy includes expanding our fresh delivery business and digital channel, which involves substantial costs and uncertainties. These stem from various factors, including the expansion of Points of Access, requirements to enhance manufacturing capabilities and regulatory compliance, usage of information technology and logistics systems, and adjustments in our corporate structure and workforce.
The success of this expansion is contingent upon our ability to effectively leverage and realize certain objectives. These include finding suitable retail partners, extending our market reach, building and sustaining the manufacturing and logistical capabilities required to fulfill our delivery commitments, complying with regulatory requirements associated with growth in off-premise distribution at certain locations, and increased reliance on digital ordering and delivery technology, including apps owned by third-party delivery aggregators and payment processors or maintained by third party developers. Moreover, the complexity associated with off-premise distribution and potential disruption to shop operations has in the past and may in the future have an adverse impact on the experience for consumers and our Krispy Kremers. Furthermore, this expansion could intensify or be affected by other risk factors mentioned herein, particularly those concerning our logistical and manufacturing capacities and our competitiveness in the indulgence market.
Our omni-channel business model, in particular our fresh delivery business, also exposes us to heightened food safety and other regulations and requirements imposed by federal, state, and county regulators such as the Food Safety Modernization Act, as well as requirements that may be imposed by certain customers. Our failure to adhere to regulatory or customer requirements could lead to store closures, inability to maintain customer relationships, increased costs, or other impacts that could have a material adverse effect on our business, financial condition, and results of operations.
As we progress our initiative to outsource to 3PL carriers the delivery of fresh doughnuts to customers and consumers in our fresh delivery and digital channels, we have reduced control over the related processes, including delivery and merchandizing, costs, and quality control. Our reliance on third parties may lead to shipping delays and disruptions, unanticipated costs, and failures to provide adequate customer service that are outside of our direct control. If we are not satisfied with a 3PL carrier, we may be unable to quickly pivot away from utilizing its services and, even if we are able to do so, we may be subject to significant penalties for doing so. Any of these consequences could have a material adverse effect on our reputation, business, operating results, and financial condition.
There is no assurance that we will attain the expected benefits or achieve the cost savings, revenue growth, and other positive outcomes needed to counterbalance the costs and risks associated with this expansion.
Political, economic, currency, and other risks associated with our international operations could have a material adverse effect on our and our international franchisees’ operating results.
Our company operates a substantial portion of its business outside the U.S. As of December 28, 2025, there were 7,656 Krispy Kreme Points of Access internationally, excluding Doughnut Factories. This accounts for 50% of the total number of our Points of Access. Among these, 2,834 are managed by franchisees. Our international operations, encompassing various business segments, are subject to numerous risks inherent to foreign markets. These risks include, but are not limited to:
• Laws, regulations and policies adopted by foreign or U.S. governmental authorities to manage national economic conditions, such as increases in taxes, austerity measures that impact consumer spending, monetary policies that may impact inflation rates and currency fluctuations;
• The effects of legal and regulatory changes and the burdens and costs of our compliance with a variety of foreign laws;
• Changes in the laws and policies that govern foreign investment and trade in and among the countries in which we operate, including trade disputes, restrictive actions of foreign or U.S. governmental authorities affecting trade or foreign investment, potential imposition of or increase in tariffs, import restrictions or controls or similar trade policies;
• Exposure to recessionary or growth trends in global markets, impacting consumer spending and market stability;
• Ongoing reforms in areas like public health, food safety, tariffs, taxation, sustainability, and climate change response leading to regulatory uncertainties and potential spikes in compliance costs;
• Challenges in adhering to international food safety regulations and maintaining high standards of product quality and safety;
• Navigating varying import and business licensing requirements across countries;
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• Constraints in fund repatriation and foreign currency exchange, influenced by U.S. and international laws;
• Difficulties in managing and staffing international operations, supply chain logistics, and ensuring consistent product quality and service;
• Risks associated with franchisee disputes, operational failures, development delays, or site selection issues;
• Complexities and costs arising from local labor laws in hiring, retaining, or terminating staff;
• Facing strong competition in new markets with established local players;
• Political events and instability, conflicts, disputes or war, or labor unrest impacting countries in which we or our franchisees operate; and
• Potential increase in anti-American sentiment affecting brand image, as Krispy Kreme is widely recognized as an American brand.
Our financial performance and asset valuation in foreign markets are susceptible to currency exchange rate fluctuations and liquidity issues, which could negatively impact reported earnings. Royalties from international franchisees, calculated as a percentage of their net sales, are subject to currency conversion risks. An increase in our reliance on international operations amplifies our vulnerability to foreign political and economic instability, currency volatility, and regulatory constraints on currency conversion and remittance.
Moreover, our international operations predominantly rely on exporting doughnut mixes and concentrates to franchisees. These exports are governed by numerous U.S. and international regulations concerning food products. In the event of a ban or other restrictions on any of our ingredients, we may not be able to identify suitable alternatives on acceptable time frames or at all, potentially delaying our expansion plans.
Our expanding international presence heightens our exposure to a diverse range of risks associated with foreign market operations, regulatory environments, and global economic conditions.
Risks Related to Our Supply Chain
We are the exclusive or primary supplier of doughnut mixes and other key ingredients to shops worldwide and any problems supplying these ingredients could negatively affect our and our franchisees’ ability to make doughnuts.
We serve as the exclusive supplier of doughnut mixes to numerous domestic and international Krispy Kreme shops. In support of international markets, we produce a concentrate that is mixed with commodity ingredients in local markets to get to a finished doughnut mix. We serve as the exclusive supplier of such mix concentrate. Furthermore, we are the sole supplier of specific critical ingredients to all domestic Company-owned shops, the majority of domestic franchise shops, and select international franchise shops.
Our mix concentrate is manufactured at our facility located in Winston-Salem, North Carolina. Domestic doughnut mix production occurs at our Winston-Salem plant and a third-party facility in Pico Rivera, California. The distribution of doughnut mixes, essential ingredients, and flavors to Krispy Kreme shops, both domestically and internationally, is facilitated by a limited number of independent contract distributors. Any disruption in the production or distribution of our mixes and concentrates would have a cascading effect on our global supply chain, with no adequate alternative source available.
A production interruption at any significant manufacturing facility could hinder our, and our franchisees’, ability to produce doughnuts domestically. Internationally, we operate several plants for doughnut mix production, and any disruption at these facilities could impact doughnut production capabilities regionally, affecting our locations and those of our franchisees. Any such production disruptionposes a significant risk to revenue and could have a material adverse effect on our business, financial condition and results of operations.
Our international shipments of mixes and concentrates primarily depart from a single port in Florida. Any delays in shipping or disruptions in logistics chains could adversely affect our and our franchisees’ international operations. Such delays may result from known or unforeseen events, including those related to adverse weather conditions, customs and border closures, trade conflicts, and general trade route delays.
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Furthermore, unexpectedtermination of our relationships with raw material suppliers, even when multiple suppliers exist for the same ingredient, may hinder our ability to secure adequate quantities of high-quality ingredients at competitive prices. As we continue our global expansion, these risks may intensify, leading to supply shortages, logistical challenges, and increased operational costs associated with managing and supplying a global network of Krispy Kreme shops.
We are the only manufacturer of our doughnut-making equipment. Any problems producing this equipment could negatively affect our shops’ ability to make doughnuts.
Safeguarding our manufacturing operations to ensure a consistent supply of equipment to support our expanding network of shops and the maintenance requirements of our existing locations is essential to our business. Our custom doughnut-making equipment is exclusively manufactured at a single facility located in Winston-Salem. The process of manufacturing new equipment swiftly in the event of a disruption at our Winston-Salem facility would present significant challenges.
In the event of such a disruption, we would be compelled to explore alternative options, such as partnering with third-party manufacturers or relocating production to another facility. This transition may entail substantial delays in the manufacturing process and result in increased costs. Consequently, we may be unable to provide equipment to newly established shops or essential replacement parts for maintenance in existing shops on a timely basis or at all which could have a material adverse effect on our business, financial condition and results of operations.
We have limited vendors for many of the product components and services that we rely on, and we have a single vendor for our glaze flavoring. Any interruption in supply could impair our ability to make and deliver our signature products, adversely affecting our business, financial condition, and results of operations.
While we possess exclusive ownership of the recipes for our glaze flavoring and glaze base, we currently rely on a single vendor for the essential ingredients needed to produce glaze flavoring. Our dependence on this vendor exposes us to significant risks, including shortages, supply interruptions, and price fluctuations.
Any disruption in the supply chain of glaze flavoring could have adverse consequences on our ability to produce and deliver our signature products, including the Original Glazed doughnut, to our consumers in a timely and competitive manner. Such interruptions could also impact our operational performance. In the event of such an interruption, it is possible that suitable replacement products cannot be secured promptly or at all which could result in loss of revenue resulting from the inability to offer our products and the associated increase in administrative and shipping expenses.
Furthermore, our reliance on a sole vendor to produce glaze flavoring, and on a limited number of vendors for other product components and services, exposes us to heightened risks associated with the distribution networks of these vendors. Factors such as fuel price increases, labor strikes, organized labor activities, adverse weather conditions, and various unforeseen variables may hinder our provider’s capacity to meet our logistical requirements. If we encounter difficulties in sourcing alternative logistical providers, our costs may experience significant escalation. Additionally, we rely on independent service providers for payment processing. These service providers may be unable or unwilling to offer services or could increase costs for their services. If we are unable to maintain adequate vendors or are unable to pass on any increased costs to our consumers through higher product prices, it could adversely affect our business, financial health, and operational results.
Our reliance on a single vendor for nearly all distribution of materials and supplies in the U.S. and Canada poses risks to our and our franchisees’ ability to make doughnuts if the vendor fails to provide these materials and supplies for any reason.
The reliability and continuity of our supply chain is critical to the seamless operation of our shops in the U.S. and Canada. We have established an exclusive distribution partnership with BakeMark USA LLC (“BakeMark”), which grants the exclusive rights to BakeMark to distribute ingredients, packaging, and supplies to both Company-owned and franchise shops in all regions of the U.S. other than New York City, and Canada. If BakeMark encounters economic or operational challenges, fails to provide materials and supplies for any reason, or otherwise breaches their contractual obligations, it may be difficult to, or we may be unable to, identify one or more suitable alternative distributors in a timely manner or at all. Even if we do identify a suitable alternative, we may be unable to establish business arrangements that are, individually or in the aggregate, as favorable as the terms and conditions we have established with Bakemark. The occurrence of any of the foregoing could lead to disruptions within our supply chain in the U.S. and Canada or could cause our net sales, margins and earnings to decrease, which could have a material adverse effect on our business, results of operations and financial condition.
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We may be unable to secure an alternative distribution channel in a timely manner or at all to mitigate these disruptions and challenges. In some cases, we may need to temporarily halt production at the affected shops until suitable alternative arrangements can be put in place.
Furthermore, the cost of a replacement distribution channel could negatively affect the financial performance of these shops. A severedisruption to our BakeMark distribution partnership has the potential to result in a significant and adverse effect on our overall business, consolidated financial position, results of operations, and cash flows.
Our profitability is sensitive to changes in the cost of raw materials and other commodities and we may not be able to increase prices to fully offset inflationary pressures on costs, which may adversely affect our financial condition or results of operations.
During recent years, our operating environment has been impacted by inflation. Increases in commodity and supply chain costs, such as the costs of raw materials, packaging materials, labor, energy, fuel, and transportation, have led to higher production and distribution costs for our products. Many of the costs referred to above are subject to fluctuations due to a number of factors, including, but not limited to, market conditions, economic and geopolitical uncertainty, demand for raw materials, weather, energy costs, currency fluctuations, supplier capacities, governmental actions, import and export requirements (including tariffs), armed hostilities, and other factors beyond our control. Among our essential ingredients, three stand out in significance: flour, shortening, and sugar. Furthermore, we procure a significant quantity of gasoline for our delivery vehicle fleet serving our fresh delivery business, as well as significant amounts of packaging materials, including our boxes for dozens, half-dozens, and three-packs of doughnuts. The prices of key inputs for the production and distribution of our products such as these have been volatile in recent years and may continue to be volatile in the future.
We employ forward purchase contracts, futures contracts, and options on such contracts to mitigate the risks associated with commodity price fluctuations, however these contracts may not fully protect us against commodity price risk, particularly over extended timeframes. Additionally, the portion of our anticipated future commodity requirements covered by such contracts can vary over time.
Our attempts to offset these cost pressures, such as through increases in the selling prices of some of our products and leveraging our market size to secure economies of scale in procurement, may not be successful. Higher product prices may result in reductions in sales volume. Consumers may be less willing to pay a price differential for our branded products and may increasingly purchase lower-priced offerings, or may forego some purchases altogether, including during an economic downturn or times of increased inflationary pressure. To the extent that price increases or packaging size decreases are not sufficient to offset these increased costs adequately or in a timely manner, or if they result in significant decreases in sales volume, our financial condition, results of operations, and cash flows may be adversely affected.
Risks Related to Our Human Capital
An inability to recruit and retain personnel could have a material adverse effect on our operations.
Our success depends to a significant extent on the continued availability and service of our executive officers and other key personnel. Given our streamlined management structure, the departure of any key person could have a significant impact and would be potentially disruptive to our business until such time as a suitable replacement is identified. Moreover, significant leadership transitions, even with succession plans in place, can create risks as individuals are integrated into new roles and onboarding shifts management attention from business concerns. These changes may increase the likelihood of turnover amongst our Krispy Kremers and impact our relationships with our customers and other market participants. The loss of, or failure to engage in adequate succession planning for, any of our executive officers or other key personnel could harm our culture, reputation, or business.
Moreover, our shop-level management and hourly Krispy Kremers play a critical role in the operation of our Doughnut Shops, manufacturing facilities, and delivery logistics, and we rely on them to deliver operational and customer service excellence. Our ability to maintain the highest product quality heavily relies on our Krispy Kremers. Any failure to retain and adequately train key talent could have an adverse effect on our ability to maintain consistent product quality and deliver outstanding consumer experiences worldwide.
Furthermore, we could encounter challenges related to the availability of labor for in-shop positions. This shortage may be influenced by evolving economic, social, and generational trends, the emergence of new telecommuting job opportunities, labor shortages, shifting employee expectations, and other factors that can reduce the pool of qualified talent for critical roles within our organization.
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A failure to maintain an adequate number of employees with appropriate skill sets and talent could increase our costs or negatively impact our ability to execute our business strategy, result in loss of institutional knowledge, and reduce our supply of future management skill. Any of these consequences could adversely affect our business, operating results and financial condition. If we encounter difficulties in recruiting, retaining, and motivating Krispy Kremers to support our projected growth and strategic initiatives, it could have a material adverse effect on our overall operations.
Changes in the cost of labor could adversely affect our business, financial condition, and results of operations.
Our business is susceptible to potential adverse impacts arising from rising labor costs, encompassing wages and employee benefits. These cost increases may stem from various factors, including state and federal legislation, regulatory actions related to wages, scheduling, and benefits, as well as escalating healthcare and workers’ compensation insurance expenses. Additionally, there may be a need to enhance wages and benefits to attract and retain highly skilled employees with the requisite expertise. Moreover, failure to adequately monitor and proactively respond to employee dissatisfaction could lead to poor guest satisfaction, higher turnover, litigation and unionization efforts, which could have an adverse effect on our results of operations.
The fluctuating landscape of labor costs could adversely affect our business, financial condition, and results of operations.
Risks Related to Regulation and Litigation
We may be subject to litigation that could adversely affect us by increasing our expenses, diverting management attention, or subjecting us to significant monetary damages and other remedies.
From time to time, we are party to various claims, disputes, or legal proceedings. These disputes could encompass a wide range of issues, including employment, intellectual property, operational, regulatory compliance, foreign exchange, tax, franchise, and contractual matters. They may also pertain to diverse areas such as personal injury, franchisee employment, real estate, environmental, tort claims, intellectual property disputes, breaches of contract, data privacy issues, securities litigation, derivative actions, and various other legal matters. Notably, plaintiffs often seek substantial or undetermined amounts in damages, and lawsuits inherently carry uncertainties, some of which are beyond our control.
We manage and mitigate certain legal risks through policies, terms of use, arbitration agreements, limitations of liability, venue selection, choice-of-law, and indemnification requirements. These requirements may be subject to differing interpretations, rulings, and legal frameworks in different U.S. federal, state, and foreign courts, and may not be enforceable in some jurisdictions.
Regardless of the merits of such lawsuits or our ultimate liability or settlement outcomes, legal proceedings can be costly to defend, divert management attention away from our operations, and potentially impact our financial performance. While we have insurance coverage, such coverage is subject to deductibles, self-insured retentions, limits of liability, stop loss limits and similar provisions that we believe are prudent but that could nonetheless limit the nature and amount of recoveries. Further, there are types of losses that we cannot insure against or that we believe are not economically reasonable to insure. In the event of an uninsured claim, or an insured claim for which a judgment for monetary damages exceeds our insurance coverage or for which the deductible is significant, we may be required to pay for all or a portion of the related losses out of pocket, which could have an adverse effect on our financial position and operational results. In addition, because we are self-insured for certain claims up to applicable retention limits, we bear the financial risk of losses within those limits, and if actual losses for those claims exceed our reserves, our financial position and operational results could be adversely affected. For more information, see the section entitled “Self-Insurance Risks and Receivables from Insurers” in Item 8, Note 1 of this Annual Report.
Moreover, any adverse publicity resulting from allegations in any such claims or disputes could negatively impact our reputation, potentially affecting our operational performance.
Our business may be adversely affected by litigation, regulation and publicity concerning food or occupational safety, quality, health, and other issues, which could negatively affect public policy and consumer preferences toward our products.
As a food service business, we face potential adverse impacts stemming from litigation, regulatory actions, and consumer or government complaints related to food or occupational safety, food quality, illness, injuries, health concerns, environmental, or operational issues. These concerns may arise from individual shops or a limited number of shops, including those operated by our franchisees. Additionally, such risks may increase as we introduce new products or expand distribution channels, such as our fresh delivery business channel, and our business becomes subject to new regulations and higher regulatory scrutiny.
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There is increasing legal, legislative and regulatory focus on the industry, including areas such as menu labeling, packaging, food additives and other ingredients. This scrutiny is largely due to concerns that the practices and offerings of food service companies may contribute to issues like poor nutrition, excessive caloric intake, obesity, or other health issues among consumers. Class action lawsuits have been filed against various food service businesses, including quick service restaurants. These lawsuits may allege, among other things, the failure to disclose health risks associated with high-fat foods and marketing practices that encourage obesity or may challenge a company’s classification of its ingredients or products. Given that one of our core competitive advantages lies in the taste and quality of our doughnuts, adverse publicity or regulations related to food quality or similar concerns have a more pronounced impact on our business compared to food service businesses that primarily compete on other factors.
Changes in regulations addressing such health issues, including new or changing restrictions on the inclusion of certain products in benefit programs, such as the U.S. supplemental nutrition assistance program known as SNAP, changes in interpretations of such regulations by relevant regulators, or the introduction of new legislation could affect any of our operational markets and result in decreased demand for our products. Failure to effectively adapt to these changes or to comply with new or existing regulations could adversely affect our business, financial condition, and results of operations.
Furthermore, we may face significant liabilities from any such lawsuits or claims that result in unfavorable judgments or due to litigation costs, regardless of the final outcome.
We are subject to franchise laws and regulations that govern our status as a franchisor and regulate some aspects of our franchise relationships. Our ability to develop new franchised shops and to enforce contractual rights against franchisees may be adversely affected by these laws and regulations, which could cause our franchise revenues to decline.
As a franchisor, we operate within the regulatory framework established by the Federal Trade Commission and various domestic and foreign laws governing the offer and sale of franchises. These laws regulate both the procedural aspects of franchise offerings, including disclosure, registration, and renewal requirements, and substantive aspects of the franchisor-franchisee relationship. Any failure to obtain or maintain approvals for offering franchises could result in the loss of potential franchise revenues and revenues generated through our Market Development segment.
Franchise laws and regulations vary significantly across jurisdictions and are subject to change. Compliance may require significant time and expense and may limit our ability to expand into new markets or offer franchises on terms consistent with our business objectives. Any failure to obtain or maintain required registrations or approvals, or to comply with applicable disclosure or relationship laws, could result in governmental investigations, fines, rescission rights, civil liability, suspension of franchise sales, or reputational harm.
Furthermore, certain laws and regulations may restrict our ability to terminate, not renew, enforce non-competition obligations with respect to, or transfer franchises, impose “good faith” standards on our conduct, or otherwise limit our ability to enforce contractual rights or resolvedisputes with franchisees. Compliance with these regulations is integral to the successful operation of our franchising business model and the maintenance of harmonious relationships with our franchisees. Failure to comply with any applicable laws or regulations, or adverse interpretations of such laws, could have a material adverse effect on our business, financial condition, and results of operations.
Healthcare legislation and potential employment legislation could adversely affect our business, financial condition, and results of operations.
Federal legislation concerning mandated health benefits and state minimum wage regulations has led to increased costs for our organization. Over recent years, several U.S. states have already raised their minimum wage rates, and the U.S. federal government or certain other states and localities may also elect to do so. Additionally, for employees whose compensation is set above but tied to the applicable minimum wage, further increases in the minimum wage could result in higher labor expenses. These cost increases may also be influenced by inflationary pressures and potential labor market shortages.
Our relationships with employees are governed by various federal and state labor laws, which play a pivotal role in shaping our operational costs. These laws encompass aspects such as employee classifications as exempt or non-exempt, minimum wage stipulations, unemployment tax rates, workers’ compensation rates, overtime regulations, family leave policies, safety standards, payroll taxes, citizenship requirements, and other wage and benefit prerequisites for employees classified as non-exempt.
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The future trajectory of government regulations in these areas remains uncertain, and we may be subject to substantial changes or reforms stemming from legislative initiatives related to labor laws, healthcare laws, or other regulations impacting our labor costs. The imposition of additional government regulations may introduce heightened compliance costs, and noncompliance with these regulations could potentially lead to litigation.
Additional labor-related regulation or further increases in labor expenses could increase our costs and adversely affect our business, financial condition, and results of operations.
Changes in tax laws and regulations could have a material impact to our tax expense or cash tax obligations.
We are subject to federal, state, and local income taxes both in the U.S. and in foreign jurisdictions. The impact of potential changes in tax laws or changes in the interpretation of such laws could materially increase our tax expense or cash tax payments and adversely affect our business, financial condition, and results of operations. Additionally, our income tax returns are subject to examination by the Internal Revenue Service and other tax authorities. While we have taken measures to provision for taxes in the jurisdictions where we operate, challenges from tax authorities could result in assessments that increase our tax liabilities. Furthermore, the cost of complying with new legislation could adversely affect our results of operations.
Our annual effective income tax rate can change materially as a result of changes in our geographic mix of U.S. and foreign earnings and other factors, including changes in tax laws and changes made by regulatory authorities.
Our overall effective income tax rate is calculated as our total income tax expense relative to earnings before income tax. Income tax expense and benefits are recognized on a jurisdictional or legal entity basis, rather than on a consolidated global basis. As a result, our effective income tax rate could be adversely affected by changes in the distribution of our earnings among jurisdictions with differing tax rates because losses incurred in one jurisdiction may not be used to offset profits in other jurisdictions. Moreover, changes in our operating results by jurisdiction, including the generation or utilization of net operating losses, could cause volatility in our effective tax rate. In addition, changes to tax laws or changes in the interpretation of such laws have the potential to significantly impact our effective income tax rate.
The full realization of our deferred tax assets may be affected by a number of factors, including future earnings and the feasibility of ongoing planning strategies.
We hold deferred tax assets, encompassing federal, state, and foreign net operating loss carryforwards, accruals not yet deductible for tax purposes, tax credits, and other items. The realization of these deferred tax assets hinges on our ability to generate future taxable income within each respective jurisdiction during the periods when these temporary differences reverse, or on our capability to carry back any losses resulting from the deduction of these temporary differences. Our existing deferred tax assets and tax credits could potentially expire or become unavailable to offset future income tax liabilities due to legal or regulatory changes. Such changes include suspension on the use of deferred tax assets and tax credits imposed by certain jurisdictions from time to time, possibly with retroactive effect.
If we determine that it is more likely than not that some portion or all of our deferred tax assets will not be realized, we may be required to record additional valuation allowances, which would increase our income tax expense and impact our effective tax rate.
We may be affected by matters related to environmental, social, and governance (“Responsibility”) trends and events, including governmental regulation and supply chain disruptions, that may adversely affect our business and reputation.
Interest in as well as dissatisfaction with Responsibility considerations by consumers, investors, governmental authorities, and various stakeholders may impact our operations and compliance obligations. Responsibility encompasses a broad spectrum of factors, including climate change, greenhouse gas emissions, packaging and waste management, human rights, sustainable supply chain practices, animal welfare, deforestation, and responsible use of land, energy, and water resources.
Recent years have seen the introduction of new Responsibility disclosure requirements in various jurisdictions. The evolving nature and complexity of these rules and regulations, together with evolving stakeholder expectations, render compliance more challenging and uncertain.
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Moreover, we have and in the future may establish certain commitments, targets, or goals related to Responsibility matters. Our ability to meet these commitments and navigate the associated risks is subject to various external factors and uncertainties, many of which are beyond our control. If we are not successful or are perceived as ineffective in achieving our stated goals, or if stakeholders are dissatisfied with our Responsibility strategy or actions we take in response to Responsibility-related matters, we could be exposed to market, operational, or reputational challenges and costs. Any failure or perceived failure to adequately address these considerations in line with legal requirements or stakeholder expectations could have an adverse effect on our business or brand reputation.
Risks Related to Our Intellectual Property
Our failure or inability to obtain, maintain, protect, and enforce our trademarks or other intellectual property could adversely affect our business and the value of our brand.
We possess common-law trademark rights in the U.S. as well as numerous trademark and service mark registrations both domestically and internationally. Our continued success depends, to a significant degree, upon our ability to protect and preserve our intellectual property, including our formulas, trademarks, trade dress, copyrights, patents, business processes, and other trade secrets. To safeguard these assets, we rely on legal protections offered by trademark registrations, contracts, confidentiality agreements, copyrights, patents, and common law rights, such as protections againstunfair competition, passing off, and trade secret violations.
We enter into non-disclosure and confidentiality agreements with employees, corporate collaborators, contractors, consultants, advisors, suppliers, and other individuals and entities who may have access to this confidential information. However, such agreements may not be in place with every relevant party, any of these parties may breach these agreements, and our confidentiality agreements may otherwise not effectively prevent disclosure of our proprietary information. Furthermore, pursuing legal action against a party alleged to have unlawfullydisclosed or misappropriated a trade secret is a challenging, costly, and time-consuming process with an uncertain outcome, and we may not obtain an adequate remedy in the event of unauthorized disclosure of such information. In addition, others may independently develop formulas and processes that are the same or similar to our trade secrets, which could limit our ability to enforce trade secret rights against such parties.
Despite our efforts to secure, maintain, safeguard, and enforce our trademarks, service marks, and other intellectual property rights, these efforts may not be sufficient. Challenges such as potential infringements, challenges to validity, declarations of generic status, circumvention, or violations may arise. Furthermore, the effectiveness of intellectual property protection may vary across countries where our brands have existing or potential shops or facilities. The intellectual property laws of certain foreign countries may not provide the same level of protection as those in the U.S.
Additionally, our franchisees may fail to consistently uphold the quality of goods and services under our brand trademarks or consistently adhere to the guidelines we establish for preserving our brand’s intellectual property rights. The defense and enforcement of our trademarks and other intellectual property could entail substantial resource allocation and potentially impact our business, reputation, financial standing, and operational results.
Furthermore, our brands may become targets of infringementclaims, potentially impacting the use of specific names, trademarks, or proprietary knowledge, recipes, and trade secrets integral to our business. The defense against such claims can be costly, and in some cases, it may lead to restrictions on our use of proprietary information in the future or require the payment of damages, royalties, or other fees for the continued use of such proprietary information. Any of these outcomes could have a negative impact on our business, reputation, financial condition, and operational results.
Risks Related to Crises, Catastrophic Events, and Business Continuity
Public health outbreaks, epidemics, or pandemics have disrupted and may in the future disrupt, our business, and could have a material adverse effect on our business, financial condition, and results of operations.
Health epidemics or pandemics can have detrimental effects on consumer spending, confidence levels, supply chain availability, and associated costs within the markets where we and our franchisees operate. These factors can collectively influence our business, financial condition, and operational results. A notable instance of this was the global spread of the COVID-19 epidemic in recent years, which disrupted global health, economic conditions, consumer behaviors, and food service operations.
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While we have implemented measures to address significant public health risks on a large scale, we acknowledge the potential for future outbreaks to impact our shops and other facilities. Such outbreaks may result in a substantial portion of our workforce or the workforce of our business partners being unable to work.
Furthermore, our business is influenced by shifting consumer preferences and perceptions. Concerns regarding virus transmission have prompted employees and guests to avoid congregating in public places, leading to adverse effects on guest traffic at our locations and the ability to adequately staff our shops. The COVID-19 pandemic triggered changes in consumer behaviors, some of which have endured and may continue to evolve even though the pandemic has subsided. These shifts have already had and may continue to exert negative impacts on consumer traffic and the sales of both our Company-owned and franchisee-operated shops. We remain attentive to evolving consumer trends and their potential implications for our business and operational performance.
Adverse weather conditions, natural disasters, war or terrorist attacks, pandemics, or other catastrophic events could have a material adverse effect on our business.
Unforeseen events such as severeadverse weather conditions, earthquakes, hurricanes, tornadoes, flooding, and other natural disasters, wars or terrorist attacks, pandemics, or other catastrophic events, as well as the actions taken in response to these unforeseen events, could affect guest traffic at our Company-owned and franchisee-operated shops or in more extreme scenarios, could result in the closure of shops, factories, or a mix or equipment manufacturing plant. If our disaster recovery and business continuity plans do not resolvedisruptions caused by these unforeseen events in an effective and timely manner, they could result in prolongedinterruptions in our operations and could have a material adverse effect on our sales, business, financial condition, and results of operations.
Moreover, fluctuations in weather patterns can lead to construction delays, disruptions in the availability of utilities, and potential shortages or interruptions in the supply of food items and other essential supplies. In addition, actual or threatened armed conflicts, such as the war in Ukraine and conflicts in the Middle East, terrorist attacks, efforts to combat terrorism, or heightened security requirements have and may in the future adversely affect our operations. These developments could increase our operational costs and pose challenges to our supply chain and could have an adverse effect on our business, financial condition, and results of operations.
Risks Related to Ownership of our Common Stock
Certain provisions of Delaware Law, our certificate of incorporation, our bylaws, and the ownership of approximately 43% of our common stock by JAB Holdings B.V. (including certain of its affiliated entities, "JAB") could hinder, delay, or prevent a change in control of us, which could adversely affect the price of our common stock.
Provisions of Delaware Law, our certificate of incorporation, and our bylaws create obstacles for third-party acquisition attempts without the consent of our Board of Directors or JAB, our largest stockholder.
We are subject to Delaware General Corporation Law (“DGCL”). Section 203 of the DGCL restricts certain stockholders owning over 15% of our outstanding common stock (referred to as "interested stockholders"), including JAB, from engaging in specific business combinations without approval from at least two-thirds of our outstanding common stock not held by the interested stockholder.
Moreover, JAB wields substantial voting power over shares of our common stock eligible to vote in director elections and other shareholder votes through its affiliate, potentially influencing outcomes significantly.
Additionally, our certificate of incorporation grants our Board of Directors the authority to issue preferred stock at its discretion, without the need for stockholder approval. This flexibility extends to the issuance of authorized but unissued shares of our common stock. These provisions can complicate and protract the process of replacing incumbent directors and could dilute voting and other rights of holders of our common stock.
These measures may make it costly and challenging for a third party to initiate a tender offer, execute a change in control, or attempt a takeover that faces opposition from JAB, our management, or our Board of Directors. Public stockholders interested in participating in such transactions may find it difficult to do so, even if the transaction would be beneficial for stockholders. Ultimately, these anti-takeover provisions could significantly hinder public stockholders’ ability to realize benefits from a change in control or alterations in our management and Board of Directors, potentially impacting the market price of our common stock and the opportunity to secure any potential change of control premium.
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Under our Investor Rights Agreement with JAB, they have specific rights to access certain Company information, which JAB is obligated to treat as confidential. This information includes management’s monthly financial review reports, consolidated financial results for each fiscal quarter, and other information reasonably requested by JAB. Given these rights and JAB’s representation on our Board of Directors, JAB enjoys privileged access to our management and early insights into our financial results compared to our other investors. Although JAB must adhere to relevant U.S. securities laws governing the trading of our securities while in possession of material non-public information, it will still have a more comprehensive understanding of our business and financial condition than individual stockholders for as long as its information rights persist under the Investor Rights Agreement.
If the ownership of our common stock continues to be highly concentrated, it may limit stockholders other than JAB from influencing significant corporate decisions and may result in conflicts of interest.
As of December 28, 2025, JAB held approximately 43% of our common stock, conferring upon it significant influence over crucial matters requiring stockholders’ approval. This influence extends to decisions such as electing directors, facilitating mergers, consolidations, and acquisitions, disposing of substantial assets, and shaping our capital structure.
This level of concentrated ownership could potentially lead to delays, deterrents, or the prevention of actions that may be favored by our other stockholders. JAB’s interests may not always align with those of our broader stockholder base. Furthermore, this concentration of ownership has the potential to hinder or discourage any attempts at a change in control of the Company.
The concentration of voting power could also impact stockholders by limiting the opportunity to receive a premium for their common stock shares in the event of a sale of the Company, which, in turn, may affect the market price of our common stock. JAB might also seek to push us in directions that it deems beneficial for its own investment but could carry risks for other shareholders or negatively impact our Company and its stakeholders.
As a result, there is a possibility that the market price of our common stock could decline, or stockholders may not receive a premium above the prevailing market price in the event of a change in control. Furthermore, this concentration of share ownership adversely affects the liquidity of our common stock and might be viewed negatively by investors, potentially affecting the trading price of our common stock, as some may perceive drawbacks in owning shares in a company heavily influenced by a few significant stockholders.
The market price of our common stock could be negatively affected by sales of substantial amounts of our common stock in the public markets.
JAB may possess the capability to sell the shares of the Company’s common stock they hold to the public markets, following the stipulations outlined in Rule 144. The substantial sale of our shares by JAB, or the mere anticipation of such sales, could potentially exert a significant downward pressure on the market price of our common stock. A decrease in the value of our common stock could hinder our capacity to raise capital through the issuance of additional common stock or other equity securities.
• International: Includes all Company-owned operations in the U.K., Ireland, Australia, New Zealand, Mexico, and Canada, as well as Japan for all periods covered by this Annual Report; and
• Market Development: Includes franchise operations across the globe.
The following table presents a summary of our financial results for the periods presented:
Fiscal Years Ended
(in thousands, except percentages)
December 28, 2025 (52 weeks)
December 29, 2024 (52 weeks)
% Change
Net Revenues (1)
Net (Loss)/Income (2)
Net (Loss)/Income Attributable to Krispy Kreme, Inc. (2)
Adjusted Net (Loss)/Income, Diluted (3)
Adjusted EBIT (3)
Adjusted EBITDA (3)
(1) Organic revenue decline was (1.3)% in fiscal 2025. Refer to “ Results of Operations ” below for more information on and the calculation of organic revenue growth.
(2) “nm” as used here and within “ Results of Operations ” means “not meaningful.”
(3) Refer to “ Key Performance Indicators and Non-GAAP Measures ” below for more information as to how we define and calculate Adjusted EBITDA, Adjusted EBIT, and Adjusted Net (Loss)/Income, Diluted and for a reconciliation of Adjusted EBITDA, Adjusted EBIT, and Adjusted Net (Loss)/Income, Diluted to net (loss)/income, the most comparable measure calculated under accounting principles generally accepted in the U.S. (“GAAP”).
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Significant Events and Transactions
Our Turnaround Plan
During fiscal 2025, we implemented a comprehensive turnaround plan to deleverage the balance sheet and deliver sustainable, profitable growth through a focus on the following components:
• Refranchising : Improve financial flexibility through pursuit of opportunities to refranchise certain international equity markets, and to restructure our consolidated subsidiary in the western U.S., W.K.S. Krispy Kreme, LLC, which accounts for approximately 15% of revenues in the U.S. segment as of the fourth quarter of fiscal 2025, to a minority ownership interest while adding current Company-owned shops to the joint venture. In the first quarter of 2026, we completed the previously announced transaction to sell our operations in Japan, and we have taken steps towards refranchising our business in Canada;
• Improving return on invested capital: Reduce capital intensity by using existing assets and focusing on franchise development. We reduced capital expenditures by 18.9% from $120.8 million in fiscal 2024 to $97.9 million in fiscal 2025, and we expect to continue to reduce capital investment in fiscal 2026 compared to fiscal 2025. We are also making selective, capital-light investments in geographies which currently have limited access to our products or where we have insufficient production to meet demand. This includes opening in new international franchise markets such as Uzbekistan in the fourth quarter of 2025;
• Expanding profit margins: Expand profit margins through greater operational efficiency. During fiscal 2025, we focused on making doughnuts more efficiently through optimizing production, streamlining Hub activities, and improving labor productivity. In addition, we are focused on delivering fresh doughnuts more efficiently through outsourcing U.S. logistics and improving route management and demand planning, and through optimizing production and delivery schedules to support cost-effective expansion. During the fourth quarter of fiscal 2025, we continued to outsource some of our U.S. fresh deliveries to 3PL carriers, and expect to complete the transition to 3PL carriers during fiscal 2026; and
• Driving sustainable, profitable growth: Pursue U.S. growth based upon sustainable and profitable revenue streams. During fiscal 2025, we added more than 1,100 profitable fresh delivery doors with strategic partners and strategically closed approximately 1,400 underperforming fresh delivery doors in the U.S. (excluding McDonald’s USA doors). Our Global Points of Access at the end of fiscal 2025 of 15,194 represented a decrease of 13.5% compared to fiscal 2024, primarily driven by the strategic closure of underperforming fresh delivery doors including the exit of McDonald’s USA doors in the third quarter of fiscal 2025 discussed below.
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Digital, Brand, and Innovation
We continue to prioritize expanding our digital channel sales, which grew in fiscal 2025 compared to fiscal 2024. Growth in our digital channel is due to improvements in our branded digital platform as well as increasing product availability through third party digital channels, including delivery apps and our customers’ digital platforms. Innovation is also a significant driver of frequency as we create promotions and products that attract media outlets to our brand across our Global Points of Access. Additionally, we deliver new product experiences that align with seasonal and trending consumer and societal interests and create positive connections through simple, frequent, brand-focused offerings that encourage shared experiences. During the fourth quarter of fiscal 2025 we delivered the joy that is Krispy Kreme through powerful specialty doughnuts and seasonal activations including Halloween, Fall, and Christmas among many others around the world.
Termination of the Business Relationship Agreement with McDonald’s USA
On June 24, 2025, we and McDonald’s USA announced that our companies jointly decided to terminate the Business Relationship Agreement effective July 2, 2025, resulting in the reduction of approximately 2,400 fresh delivery doors in the third quarter of fiscal 2025. We worked to quickly remove costs related to the McDonald’s USA partnership which we expect to continue positively impacting profitability trends for our U.S. segment in the first half of fiscal 2026. Refer to Note 1 , Description of Business and Summary of Significant Accounting Policies, to the audited Consolidated Financial Statements for further information.
2024 Cybersecurity Incident
As previously disclosed, during the fourth quarter of fiscal 2024, unauthorized activity on a portion of our information technology systems resulted in our experiencing certain operational disruptions (the “2024 Cybersecurity Incident”). We incurred losses and costs from the incident, primarily in the fourth quarter of fiscal 2024 and early in the first quarter of fiscal 2025, which were estimated to have had an approximately $15 million aggregate impact on Adjusted EBITDA in those periods (includes margin on lost revenues, as well as operational inefficiencies). Our cybersecurity insurance offset a portion of the losses and costs from the incident. We accrued for $4.8 million of business interruption insurance proceeds during the fourth quarter of fiscal 2025 (subsequently received in the first quarter of fiscal 2026), resulting in cumulative business interruption proceeds of $14.1 million. In addition, we incurred $12.9 million of remediation costs, including fees for cybersecurity experts and other advisors, and received $2.4 million of insurance proceeds for these costs. The investigation of the 2024 Cybersecurity Incident was substantially completed in the second quarter of fiscal 2025.
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Tariffs and Global Trade Uncertainty
The imposition of tariffs by the U.S. on imports has heightened uncertainty in the global trade environment. These tariffs, along with retaliatory measures by other countries, may increase inflationary pressure and raise the costs of our imported commodities, including, but not limited to, vegetable oil. Additionally, the broader implications of tariff-driven price increases could influence consumer spending habits and negatively affect our business. These factors have caused, and may continue to cause, substantial uncertainty and volatility in financial markets, and may result in further retaliatory measures. We may be unable to fully offset the impacts of these factors by adjusting the pricing of our products.
Goodwill and Other Asset Impairments
We assess goodwill for impairment at least annually during the fourth quarter and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. During the second quarter of fiscal 2025, we identified events and conditions that required a quantitative assessment of goodwill, as well as other long-lived fixed assets and leases. Refer to Note 1 , Description of Business and Summary of Significant Accounting Policies, to the audited Consolidated Financial Statements for further information.
Revision of Financial Statements
As discussed in Note 2 , Revision of Financial Statements, to the audited Consolidated Financial Statements, the Company identified and corrected an error in the classification of its redeemable noncontrolling interests. Management determined the error did not materially misstate previously issued financial statements and would be appropriate to correct in the current period.
The Company has revised previously issued financial information included in this Annual Report . The revisions do not affect the Company’s previously reported operating results, cash flows, or financial condition apart from the reclassification within the equity section of the balance sheet and the required redemption value accretion recognized in fiscal 2025.
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Key Performance Indicators and Non-GAAP Measures
We monitor the key business metrics and non-GAAP metrics set forth below to help us evaluate our business and growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts, and assess operational efficiencies. The calculation of the key business metrics discussed below may differ from other similarly titled metrics used by other companies, securities analysts, or investors.
Throughout this Annual Report, we utilize “Global Points of Access” as a key performance indicator. Global Points of Access reflect all locations at which fresh doughnuts can be purchased. We define Global Points of Access to include all Hot Light Theater Shops, Fresh Shops, Carts and Food Trucks, fresh delivery doors, Cookie Bakeries (through the date of the Insomnia Cookies deconsolidation in fiscal 2024), and other points at which fresh doughnuts can be purchased, at both Company-owned and franchise locations as of the end of the respective reporting period. We monitor Global Points of Access as a metric that informs the growth of our omni-channel presence over time and believe this metric is useful to investors to understand our footprint in each of our segments and by asset type.
The following table presents our Global Points of Access, by segment and type, as of the end of fiscal 2025, fiscal 2024, and fiscal 2023:
Global Points of Access
Fiscal Years Ended
December 28, 2025
December 29, 2024
December 31, 2023
Hot Light Theater Shops
Fresh Shops
Cookie Bakeries (1)
Fresh Delivery Doors (2)
Total
International:
Hot Light Theater Shops
Fresh Shops
Carts, Food Trucks, and Other (3)
Fresh Delivery Doors
Total
Market Development:
Hot Light Theater Shops
Fresh Shops
Carts, Food Trucks, and Other (3)
Fresh Delivery Doors
Total
Total Global Points of Access (as defined)
Total Hot Light Theater Shops
Total Fresh Shops
Total Cookie Bakeries (1)
Total Shops
Total Carts, Food Trucks, and Other
Total Fresh Delivery Doors
Total Global Points of Access (as defined)
(1) Reflects the deconsolidation of Insomnia Cookies during fiscal 2024.
(2) Includes approximately 1,900 McDonald’s USA doors as of December 29, 2024, which were exited in the third quarter of fiscal 2025 due to termination of the Business Relationship Agreement with McDonald’s USA.
(3) Carts and Food Trucks are non-producing, mobile (typically on wheels) facilities without walls or a door where product is received from a Hot Light Theater Shop or Doughnut Factory. Other includes a vending machine. Points of Access in this category are primarily found in international locations in airports and train stations.
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During fiscal 2025, we added a net 47 Krispy Kreme branded Doughnut Shops globally, in countries such as Brazil, Canada, and France, among many others. The decrease to the total Global Points of Access in fiscal 2025 compared to the end of fiscal 2024 primarily relates to the strategic closure of underperforming fresh delivery doors including the exit of fresh delivery doors related to termination of the Business Relationship Agreement with McDonald’s USA.
We also utilize “Hubs” as a key performance indicator. We have an omni-channel strategy to reach more consumers where they are and drive sustainable, profitable growth, and this strategy is supported by a capital-efficient Hub and Spoke distribution model that provides a route to market and powers profitability. Our Hot Light Theater Shops and Doughnut Factories serve as centralized production facilities (“Hubs”). From these Hubs, we deliver doughnuts to our Fresh Shops, Carts and Food Trucks, and fresh delivery doors (“Spokes”) primarily through an integrated network of Company-operated delivery routes, designed to ensure quality and freshness. Throughout fiscal 2025, we continued to outsource some of our U.S. deliveries to 3PL carriers, and expect to complete the transition to 3PL carriers during fiscal 2026. Specific to the U.S. segment, certain legacy Hubs have not historically had Spokes. Many Hubs in the U.S. segment are being converted to add Spokes while certain legacy Hubs do not currently have the ability or need to add Spokes.
The following table presents our Hubs, by segment and type, as of the end of fiscal 2025, fiscal 2024, and fiscal 2023, respectively:
Hubs
Fiscal Years Ended
December 28, 2025
December 29, 2024
December 31, 2023
Hot Light Theater Shops (1)
Doughnut Factories
Total
Hubs with Spokes
Hubs without Spokes
International:
Hot Light Theater Shops (1)
Doughnut Factories
Total
Hubs with Spokes
Market Development:
Hot Light Theater Shops (1)
Doughnut Factories
Total
Total Hubs
(1) Includes only Hot Light Theater Shops and excludes Mini Theaters. A Mini Theater is a Spoke location that produces some doughnuts for itself and also receives doughnuts from another producing location.
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Non-GAAP and Operating Measures
We report our financial results in accordance with GAAP; however, management evaluates our results of operations using, among other measures, organic revenue (decline)/growth, Sales per Hub, Systemwide Sales, adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”), Adjusted EBIT, Adjusted Net (Loss)/Income, Diluted, and Adjusted EPS as we believe these non-GAAP and operating measures are useful in evaluating our operating performance. Management believes these measures are important indicators of operations because they exclude items that may not be indicative of our core operating results and provide a better baseline for analyzing trends in our underlying business, and they are consistent with how business performance is planned, reported and assessed internally by management and the Company’s Board of Directors.
Non-GAAP financial measures are not standardized and it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures having the same or similar names, limiting their usefulness as comparative measures. Other companies may calculate similarly titled financial measures differently than we do or may not calculate them at all. Additionally, these non-GAAP financial measures are not measurements of financial performance under GAAP or a substitute for results reported under GAAP. In order to facilitate a clear understanding of our consolidated historical operating results, we urge you to review our non-GAAP financial measures in conjunction with our historical audited Consolidated Financial Statements and notes thereto included in this Annual Report and not to rely on any single financial measure.
Organic Revenue (Decline)/Growth
Organic revenue (decline)/growth measures our revenue growth trends excluding the impact of acquisitions, divestitures, and foreign currency, and we believe it is useful for investors to understand the expansion of our global footprint through internal efforts. We define “organic revenue (decline)/growth” as the (decline)/growth in revenues, excluding (i) the impact of revenues of acquired shops owned by us for less than 12 months following their acquisition, (ii) the impact of foreign currency exchange rate changes, (iii) the impact of shop closures related to restructuring programs, (iv) the impact of the divestiture of a controlling interest in Insomnia Cookies, (v) the impact of the divestiture of shops through refranchising, and (vi) the impact of revenues generated during the 53 rd week for those fiscal years that have a 53 rd week based on our fiscal calendar defined in the “Overview” section. See “Results of Operations” for our organic (decline)/growth calculations for the periods presented.
Adjusted EBITDA, Adjusted EBIT, Adjusted Net (Loss)/Income, Diluted, and Adjusted EPS
We define “Adjusted EBITDA” as earnings before interest expense, net, income tax expense, and depreciation and amortization, with further adjustments for share-based compensation, certain strategic initiatives, acquisition and integration expenses, and certain other non-recurring, infrequent or non-core income and expense items. Adjusted EBITDA, both on a consolidated and at the segment level, is a principal metric that management uses to monitor and evaluate operating performance and provides a consistent benchmark for comparison across reporting periods. “Adjusted EBITDA margin” reflects Adjusted EBITDA as a percentage of net revenues.
We define “Adjusted EBIT” as earnings before interest expense, net and income tax expense, with further adjustments for share-based compensation, certain strategic initiatives, acquisition and integration expenses, amortization of acquisition-related intangibles, and certain other non-recurring, infrequent or non-core income and expense items. Adjusted EBIT is a metric complementary to Adjusted EBITDA that takes into account depreciation expense and amortization of right of use assets, allowing management to have a view of performance when including amortized costs from capital investments and lease obligations.
We define “Adjusted Net (Loss)/Income, Diluted” as net (loss)/income attributable to common shareholders, adjusted for interest expense, share-based compensation, certain strategic initiatives, acquisition and integration expenses, amortization of acquisition-related intangibles, the tax impact of adjustments, and certain other non-recurring, infrequent or non-core income and expense items. “Adjusted EPS” is Adjusted Net (Loss)/Income, Diluted converted to a per share amount.
Adjusted EBITDA, Adjusted EBIT, Adjusted Net (Loss)/Income, Diluted, and Adjusted EPS have certain limitations, including adjustments for income and expense items that are required by GAAP. In evaluating these non-GAAP measures, you should be aware that in the future we will incur expenses that are the same as or similar to some of the adjustments in this presentation, such as share-based compensation. Our presentation of these non-GAAP measures should not be construed to imply that our future results will be unaffected by any such adjustments. Management compensates for these limitations by relying on our GAAP results in addition to using these non-GAAP measures supplementally.
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The following tables present a reconciliation of net (loss)/income to Adjusted EBIT and Adjusted EBITDA, and net (loss)/income to Adjusted Net (Loss)/Income, Diluted and Adjusted EPS for the fiscal years presented:
Fiscal Years Ended
(in thousands)
December 28, 2025
December 29, 2024
December 31, 2023
Net (loss)/income
Interest expense, net
Income tax (benefit)/expense
Share-based compensation
Employer payroll taxes related to share-based compensation
Loss/(gain) on divestiture of Insomnia Cookies
Goodwill impairment
Other non-operating (income)/expense, net (1)
Strategic initiatives (2)
Acquisition and integration expenses (3)
New market penetration expenses (4)
Shop closure expenses, net (5)
Restructuring and severance expenses (6)
Gain on remeasurement of equity method investment (7)
Gain on sale-leaseback
Gain on refranchising (8)
Other (9)
Amortization of acquisition related intangibles (10)
Consolidated Adjusted EBIT
Depreciation expense and amortization of right of use assets
Consolidated Adjusted EBITDA
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Fiscal Years Ended
(in thousands, except per share amounts)
December 28, 2025
December 29, 2024
December 31, 2023
Net (loss)/income
Share-based compensation
Employer payroll taxes related to share-based compensation
Loss/(gain) on divestiture of Insomnia Cookies
Goodwill impairment
Other non-operating (income)/expense, net (1)
Strategic initiatives (2)
Acquisition and integration expenses (3)
New market penetration expenses (4)
Shop closure expenses, net (5)
Restructuring and severance expenses (6)
Gain on remeasurement of equity method investment (7)
Gain on sale-leaseback
Gain on refranchising (8)
Other (9)
Amortization of acquisition related intangibles (10)
Loss on extinguishment of 2019 Facility (11)
Tax impact of adjustments (12)
Tax specific adjustments (13)
Net loss/(income) attributable to noncontrolling interest
Adjusted net (loss)/income attributable to common shareholders - Basic
Additional income attributed to noncontrolling interest due to subsidiary potential common shares
Adjusted net (loss)/income attributable to common shareholders - Diluted
Basic weighted average common shares outstanding
Dilutive effect of outstanding common stock options, RSUs, and PSUs
Diluted weighted average common shares outstanding
Adjusted net (loss)/income per share attributable to common shareholders:
Basic
Diluted
(1) Primarily foreign translation gains and losses in each period, as well as equity method income from Insomnia Cookies following the divestiture of a controlling interest during fiscal 2024 until the sale of our remaining interest in the second quarter of fiscal 2025. Refer to Note 3 , Acquisitions and Divestitures, to the audited Consolidated Financial Statements for more information.
(2) Fiscal 2025 consists primarily of $33.6 million in costs associated with the U.S. national expansion (including McDonald’s USA), including exit costs associated with the termination of the Business Relationship Agreement with McDonald’s USA, and $2.8 million in costs for the evaluation of potential opportunities to refranchise certain equity markets. Fiscal 2024 consists primarily of $8.2 million in costs associated with the divestiture of the Insomnia Cookies business, $7.3 million in costs preparing for the U.S. national expansion (including McDonald’s USA), and $4.0 million in costs associated with global transformation. Fiscal 2023 consists primarily of costs associated with global transformation of $5.9 million and U.S. initiatives such as the decision to exit the Branded Sweet Treats business, including property, plant and equipment impairments, inventory write-offs, employee severance, and other related costs of $17.8 million.
(3) Consists of acquisition and integration-related costs in connection with the Company’s business and franchise acquisitions, including legal, due diligence, and advisory fees incurred in connection with acquisition and integration-related activities for the applicable period.
(4) Consists of start-up costs associated with entry into new countries in which the Company has not previously operated, including Brazil and Spain.
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(5) Includes lease termination costs, impairment charges, and loss on disposal of property, plant and equipment.
(6) Fiscal 2025 consists primarily of costs associated with restructuring of the U.S. and U.K. businesses. Fiscal 2024 consists primarily of costs associated with the restructuring of the U.S. and U.K. executive teams. Fiscal 2023 consists primarily of costs associated with restructuring of the global executive team.
(7) Consists of a gain related to the remeasurement of the equity method investments in KremeWorks USA, LLC and KremeWorks Canada, L.P. to fair value immediately prior to the acquisition of the shops. Refer to Note 3 , Acquisitions and Divestitures, to the audited Consolidated Financial Statements for more information.
(8) Includes gains and losses on the deconsolidation of assets and liabilities associated with the refranchising of certain Krispy Kreme shops.
(9) Fiscal 2025 and fiscal 2024 consist primarily of $7.4 million and $3.1 million, respectively, related to remediation of the 2024 Cybersecurity Incident, including fees for cybersecurity experts and other advisors, net of $2.4 million of insurance proceeds received in fiscal 2025 relating to these costs. Fiscal 2023 consists primarily of legal and other regulatory expenses incurred outside the ordinary course of business.
(10) Consists of amortization related to acquired intangible assets as reflected within depreciation and amortization in the Consolidated Statements of Operations.
(11) Includes interest expenses related to unamortized debt issuance costs from our prior credit agreement (the “2019 Facility”) associated with extinguished lenders as a result of the March 2023 debt refinancing.
(12) Tax impact of adjustments calculated by applying the applicable statutory rates. The Company’s adjusted effective tax rate is 17.9%, 34.0%, and 27.2%, for each of fiscal 2025, fiscal 2024, and fiscal 2023, respectively. Fiscal 2025 and fiscal 2024 also include the impact of disallowed executive compensation expense.
(13) Fiscal 2025 consists of the recording of valuation allowances of $4.9 million associated with tax attributes primarily attributable to incremental costs removed from the calculation of Adjusted Net (Loss)/Income, a discrete tax benefit unrelated to ongoing operations of $1.0 million, and the effect of various tax law changes on existing temporary differences of $0.2 million. Fiscal 2024 consists of the recognition of previously unrecognized tax benefits unrelated to ongoing operations of $0.3 million, a discrete tax benefit unrelated to ongoing operations of $0.5 million, the release of valuation allowances associated with the divestiture of Insomnia Cookies of $2.9 million, and the effect of various tax law changes on existing temporary differences of $0.3 million. Fiscal 2023 consists of the recognition of a previously unrecognized tax benefit unrelated to ongoing operations of $2.3 million, the effect of tax law changes on existing temporary differences $0.1 million, and a discrete tax benefit unrelated to ongoing operations of $1.0 million.
Sales Per Hub
In order to measure the effectiveness of our Hub and Spoke model, we use “Sales per Hub” on a trailing four-quarter basis, which includes all revenue generated from a Hub and its associated Spokes. Sales per Hub equals Fresh Revenues from Hubs with Spokes, divided by the average number of Hubs with Spokes for the period. Fresh Revenues include product sales generated from our Doughnut Shops (including digital channels), as well as fresh delivery sales, but excluding all Insomnia Cookies revenues as the measure is focused on the Krispy Kreme doughnut business. The average number of Hubs with Spokes for a period is calculated as the average of the number of Hubs with Spokes at the end of the five most recent quarters. The Sales per Hub performance measure allows us and investors to measure our effectiveness at leveraging the Hubs in the Hub and Spoke model to distribute product and generate cost efficiencies and profitability.
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Sales per Hub was as follows for each of the periods below:
Fiscal Years Ended
(in thousands, unless otherwise stated)
December 28, 2025 (52 weeks)
December 29, 2024 (52 weeks)
December 31, 2023 (52 weeks)
Revenues
Non-Fresh Revenues (1)
Fresh Revenues from Insomnia Cookies and Hubs without Spokes (2)
Fresh Revenues from Hubs with Spokes
Sales per Hub (millions)
International:
Fresh Revenues from Hubs with Spokes (3)
Sales per Hub (millions) (4)
(1) Includes the exited Branded Sweet Treats business revenues as well as licensing royalties from customers for use of the Krispy Kreme brand.
(2) Includes Insomnia Cookies revenues (through the date of deconsolidation) and Fresh Revenues generated by Hubs without Spokes.
(3) Total International net revenues is equal to Fresh Revenues from Hubs with Spokes for that business segment.
(4) International Sales per Hub comparative data has been restated in constant currency based on current exchange rates.
In our International segment, where the Hub and Spoke model originated, Sales per Hub was $9.7 million, down from the $9.9 million generated in fiscal 2024 and consistent with the $9.7 million generated in fiscal 2023. The International segment illustrates the benefits of leveraging our Hub and Spoke model as the most efficient way to grow the business, as shown by the largely consistent Sales per Hub and higher Adjusted EBITDA margins despite elevated commodity costs and macroeconomic conditions. In the U.S. segment, we had Sales per Hub of $4.7 million, down from the $4.9 million in fiscal 2024 and fiscal 2023. In the U.S., we continue our efforts to increase the number of quality Spokes served by our Hubs. During fiscal 2025, we identified and exited underperforming Spokes in line with our efforts to optimize the segment. We expect to increase the number of quality Spokes through growth with fresh delivery customers across the U.S. coupled with a continued focus on identifying and addressing underperforming fresh delivery doors.
Systemwide Sales
We also utilize “Systemwide Sales” as a key performance indicator. Systemwide Sales reflects global sales of all Krispy Kreme products, whether operated by the Company or franchisees, excluding mix, equipment, and royalty revenue. Sales from franchisees are reported to the Company by such franchisees and are not included in Company revenues. The Company believes Systemwide Sales information is important because it is indicative of the health of the Company’s brand and aids in understanding the Company’s financial performance.
In fiscal 2025, we generated Systemwide Sales of $1.96 billion.
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Results of Operations
The following comparisons are historical results and are not indicative of future results which could differ materially from the historical financial information presented.
Fiscal Year ended December 28, 2025 compared to the Fiscal Year ended December 29, 2024
The following table presents our audited consolidated results of operations for fiscal 2025 and fiscal 2024:
Fiscal Years Ended
December 28,
2025 (52 weeks)
December 29,
2024 (52 weeks)
Change
(in thousands, except percentages)
Amount
% of Revenue
Amount
% of Revenue
Net revenues
Product sales
Royalties and other revenues
Total net revenues
Product and distribution costs
Operating expenses
Selling, general and administrative expense
Marketing expenses
Pre-opening costs
Goodwill and other asset impairments
Other income, net
Depreciation and amortization expense
Operating loss
Interest expense, net
Loss/(gain) on divestiture of Insomnia Cookies
Other non-operating (income)/expense, net
(Loss)/income before income taxes
Income tax (benefit)/expense
Net (loss)/income
Net (loss)/income attributable to noncontrolling interest
Net (loss)/income attributable to Krispy Kreme, Inc.
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The following table presents a further breakdown of total net revenue and organic revenue growth by segment for the periods indicated:
(in thousands, except percentages)
International
Market Development
Total Company
Total net revenues in fiscal 2025 (52 weeks)
Total net revenues in fiscal 2024 (52 weeks)
Total Net Revenues (Decline)/Growth
Total Net Revenues (Decline)/Growth %
Less: Impact of Insomnia Cookies divestiture
Less: Impact of refranchising
Adjusted net revenues in fiscal 2024
Adjusted net revenue (decline)/growth
Impact of acquisitions
Impact of foreign currency translation
Organic Revenue (Decline)/Growth
Organic Revenue (Decline)/Growth %
Total net revenue declined $142.8 million, or 8.6%, primarily impacted by the $138.5 million reduction associated with the divestiture of a controlling interest in Insomnia Cookies in the third quarter of fiscal 2024. Organic revenue declined by $20.0 million, or 1.3%, primarily driven by lower Doughnut Shop transaction volume impacted by consumer softness in a challenging macroeconomic environment and by Global Points of Access decline of 2,363, or 13.5%, impacted by the strategic closure of underperforming fresh delivery doors, including those associated with the termination of the Business Relationship Agreement with McDonald’s USA. The organic revenue decline was partially offset by increased pricing of approximately 2% (primarily driven by our planned reduced discounting).
Our U.S. segment net revenue declined $145.7 million, or 13.8%, from fiscal 2024 to fiscal 2025, primarily due to the $138.5 million reduction associated with the divestiture of a controlling interest in Insomnia Cookies in the third quarter of fiscal 2024. U.S. organic revenue declined $32.0 million, or 3.5%, from fiscal 2024 to fiscal 2025, primarily driven by lower Doughnut Shop transaction volume impacted by consumer softness in a challenging macroeconomic environment. The organic revenue decline was also driven by Points of Access decline of 2,488, or 25.0%, impacted by the strategic closure of underperforming fresh delivery doors, including those associated with the termination of the Business Relationship Agreement with McDonald’s USA. The organic revenue decline was partially offset by increased pricing of approximately 2% (primarily driven by our planned reduced discounting).
Our International segment net revenue grew $16.0 million, or 3.1%, from fiscal 2024 to fiscal 2025 , in spite of foreign currency translation i mpacts of $4.0 million. International organic revenue grew $16.9 million or 3.3%, from fiscal 2024 to fiscal 2025, driven primarily by growth in Canada, Japan, and Mexico. The organic revenue growth was partially offset by lower transaction volume in the U.K.
Our Market Development segment net revenue declined $13.1 million, or 14.9%, from fiscal 2024 to fiscal 2025, due to the impact of franchise acquisitions in fiscal 2024 (the results of acquired franchise businesses are reported within the Market Development segment prior to the respective dates of acquisition, and are reported within the U.S. or International segments, as applicable, following the respective dates of acquisition). Market Development organic revenue declined $5.0 million, or 5.7%, from fiscal 2024 to fiscal 2025, as expansion of our international franchise business in new markets such as Brazil and Spain was more than offset by timing of shipments of equipment to franchisees.
Product and distribution costs (exclusive of depreciation and amortization): Product and distribution costs decreased $36.6 million, or 8.9%, from fiscal 2024 to fiscal 2025, driven mainly by a $31.0 million impact from the divestiture of a controlling interest in Insomnia Cookies. Product and distribution costs as a percentage of revenue remained largely consistent at 24.6% in fiscal 2024 and 24.5% in fiscal 2025.
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Operating expenses: Operating expenses decreased $10.9 million, or 1.3%, from fiscal 2024 to fiscal 2025, driven mainly by a $66.4 million decrease resulting from the divestiture of a controlling interest in Insomnia Cookies that was partially offset by an increase of $55.5 million in operating expenses for the global Krispy Kreme brand primarily due to higher shop and delivery labor expenses, including logistics costs. Operating expenses as a percentage of revenue increased 390 basis points, from 48.6% in fiscal 2024 to 52.5% in fiscal 2025, primarily due to the impact of lower transaction volumes on operating leverage, operating costs associated with our now-ended McDonald’s USA partnership, and an estimated $5 million related to the 2024 Cybersecurity Incident, primarily related to operational inefficiencies.
Selling, general and administrative expense: Selling, general and administrative (“SG&A”) expenses decreased $48.0 million, or 17.5%, from fiscal 2024 to fiscal 2025, driven mainly by a $23.8 million impact from the divestiture of a controlling interest in Insomnia Cookies. As a percentage of revenue, SG&A decreased by 160 basis points, from 16.5% in fiscal 2024 to 14.9% in fiscal 2025, primarily driven by lower employee costs and share-based compensation expenses related to restructuring initiatives.
Goodwill and other asset impairments: For discussion of the $432.4 million non-cash goodwill and other asset impairments in fiscal 2025, refer to Note 1 , Description of Business and Summary of Significant Accounting Policies, to the audited Consolidated Financial Statements.
Other income, net: Other income, net of $24.1 million in fiscal 2025 was primarily related to $16.5 million of cyber insurance proceeds related to the 2024 Cybersecurity Incident, which includes $14.1 million of business interruption insurance recoveries. Additionally, there were $6.7 million of gains on sale-leaseback transactions described in Note 10 , Leases, to the audited Consolidated Financial Statements. Other income, net of $8.4 million in fiscal 2024 was primarily driven by a gain of $5.6 million related to the remeasurement of equity method investments to fair value immediately prior to the acquisition of Krispy Kreme shops referenced in Note 3 , Acquisitions and Divestitures, to the audited Consolidated Financial Statements.
Depreciation and amortization expense: Depreciation and amortization expense increased $3.5 million, or 2.6%, from fiscal 2024 to fiscal 2025. As a percentage of revenue, depreciation and amortization expense increased 100 basis points, from 8.0% in fiscal 2024 to 9.0% in fiscal 2025, primarily driven by higher finance lease amortization expense and increased depreciation associated with capital assets placed into service to support our U.S. national expansion, including the McDonald’s USA rollout. We recorded long-lived asset and lease impairment charges during the second quarter of fiscal 2025, a portion of which related to assets supporting the U.S. national expansion, including the McDonald’s USA rollout, which we expect to impact the future rate of depreciation expense for these assets.
Interest expense, net: Interest expense, net increased $5.7 million, or 9.5%, from fiscal 2024 to fiscal 2025, primarily driven by higher finance lease interest expense and a higher average debt balance.
Loss/(gain) on divestiture of Insomnia Cookies: In the third quarter of fiscal 2024, we sold our controlling interest in Insomnia Cookies in exchange for cash proceeds. Following the transaction, we owned 34.7% of Insomnia Cookies and lost the ability to exercise control. Accordingly, we deconsolidated Insomnia Cookies and recorded a gain on divestiture of $90.5 million (gross of income taxes). In the second quarter of fiscal 2025, we sold the remainder of our ownership interest in Insomnia Cookies for cash proceeds and recognized a loss on divestiture of $11.5 million (gross of income taxes). Refer to Note 3 , Acquisitions and Divestitures, to the audited Consolidated Financial Statements for further information.
Income tax (benefit)/expense: Income tax benefit was $20.8 million in fiscal 2025, while income tax expense was $16.0 million in fiscal 2024. The variance of $36.8 million from fiscal 2024 to fiscal 2025 was primarily driven by lower pre-tax results in fiscal 2025, offset by the tax effect of nondeductible goodwill impairment charges.
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Results of Operations by Segment – Fiscal Year ended December 28, 2025 compared to the Fiscal Year ended December 29, 2024
The following table presents Adjusted EBIT and Adjusted EBITDA by segment for the periods indicated:
Fiscal Years Ended
Change
(in thousands, except percentages)
December 28, 2025 (52 weeks)
December 29, 2024 (52 weeks)
U.S. Adjusted EBIT
Depreciation expense and amortization of right of use assets
U.S. Adjusted EBITDA
International
International Adjusted EBIT
Depreciation expense and amortization of right of use assets
International Adjusted EBITDA
Market Development
Market Development Adjusted EBIT
Depreciation expense and amortization of right of use assets
Market Development Adjusted EBITDA
Total reportable segment Adjusted EBIT
Total reportable segment Adjusted EBITDA
Corporate
Corporate expenses within consolidated Adjusted EBIT
Depreciation expense and amortization of right of use assets
Corporate expenses within consolidated Adjusted EBITDA
Total consolidated Adjusted EBIT
Total consolidated Adjusted EBITDA
(1) Refer to “ Key Performance Indicators and Non-GAAP Measures ” above for a reconciliation of Adjusted EBIT and Adjusted EBITDA to net (loss)/income.
U.S. segment Adjusted EBIT decreased $36.2 million, or 69.2%, and Adjusted EBITDA decreased $33.1 million, or 29.4%. Of these decreases, $15.8 million of the reduction was associated with the divestiture of a controlling interest in Insomnia Cookies in the third quarter of fiscal 2024. The Adjusted EBITDA margin decline of 200 basis points to 8.7% in fiscal 2025 compared to fiscal 2024 was primarily driven by an estimated $13 million to $15 million adverse impact associated with our now-ended McDonald’s USA partnership, lower transaction volumes impacting operating leverage, and an estimated $5 million related to the 2024 Cybersecurity Incident, primarily related to operational inefficiencies. The U.S. Adjusted EBIT and Adjusted EBITDA decreases were partially offset by $14.1 million of business interruption insurance recoveries related to the 2024 Cybersecurity Incident.
International segment Adjusted EBIT decreased $9.3 million, or 15.6%, and Adjusted EBITDA decreased $7.6 million, or 8.4%. The Adjusted EBITDA margin declined 200 basis points to 15.5% in fiscal 2025 compared to fiscal 2024, as lower transaction volume continued to impact operating leverage for the International equity markets, particularly the U.K.
Market Development segment Adjusted EBIT and Adjusted EBITDA decreased $3.8 million, or 8.0%, with Adjusted EBITDA margin expansion of 450 basis points to 59.2% in fiscal 2025 compared to fiscal 2024, driven mainly by changes in the revenue mix, including fewer shipments of lower-margin equipment to franchisees, and growth in royalties.
Corporate expenses within Adjusted EBIT increased $6.5 million, or 9.3%, and corporate expenses within Adjusted EBITDA increased $8.7 million, or 15.0%, primarily reflecting a reduction in costs allocated to the business segments following the centralization of certain overhead functions.
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Capital Resources and Liquidity
Our principal sources of liquidity to date have included cash from operating activities, cash on hand, amounts available under our credit facility, commercial trade financing including our structured payables programs, and proceeds from strategic transactions such as the divestiture of Insomnia Cookies. Our primary use of liquidity is to fund the cash requirements of our business operations, including working capital needs, capital expenditures, acquisitions, and other commitments.
Our future obligations primarily consist of our debt and lease obligations, as well as commitments under ingredient and other forward purchase contracts. As of December 28, 2025, we had the following future obligations:
• An aggregate principal amount of $900.3 million outstanding under the 2023 Facility;
• An aggregate principal amount of $2.5 million outstanding under short-term, uncommitted lines of credit;
• Purchase commitments under ingredient and other forward purchase contracts of $74.0 million.
Refer to Note 9 , Long-Term Debt, Note 10 , Leases, and Note 16 , Commitments and Contingencies, to the audited Consolidated Financial Statements for further information.
We had cash and cash equivalents of $42.4 million and $29.0 million as of December 28, 2025 and December 29, 2024, respectively. We believe that our existing cash and cash equivalents and available borrowing capacity under our credit facilities will be sufficient to fund our operating and capital needs for at least the next twelve months. In fiscal 2026, we expect to use our available cash to reduce debt and to continue to position the business for sustainable growth, including investing in shop improvements, ways to better serve our consumers, and ways to increase our omni-channel presence. Total capital expenditures for fiscal 2026 are expected to be between $50.0 million and $60.0 million, as we continue to deploy the capital-efficient Hub and Spoke model globally.
Our assessment of the period of time through which our financial resources will be adequate to support our operations could vary because of, and our future capital requirements will depend on, many factors, including our growth rate, the timing and extent of spending on business acquisitions, the growth of our presence in new markets, and the expansion of our omni-channel model in existing markets. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, results of operations, and financial condition would be adversely affected.
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Cash Flows
We have historically generated significant cash from operations and have substantial credit availability and capacity to fund operating and discretionary spending such as capital expenditures and debt repayments. Our requirement for working capital is not significant because our consumers pay us in cash or on debit or credit cards at the time of the sale and we are able to sell many of our inventory items before payment is due to the vendors for the various inputs to such items. The following table and discussion present, for the periods indicated, a summary of our key cash flows from operating, investing and financing activities:
Fiscal Years Ended
(in thousands)
December 28, 2025 (52 weeks)
December 29, 2024 (52 weeks)
Net cash provided by operating activities
Net cash (used for)/provided by investing activities
Net cash used for financing activities
Operating Activities
Cash provided by operations totaled $33.9 million for fiscal 2025, a decrease of $11.9 million compared with fiscal 2024. Cash provided by operations declined primarily due to a larger operating loss in fiscal 2025 compared to fiscal 2024 and the impact of our receipt of $7.7 million in cash proceeds from the settlement of interest rate swap derivative contracts in fiscal 2024, partially offset by the intentional paydown of obligations due under our SCF programs (discussed in Note 8 , Vendor Finance Programs, to the audited Consolidated Financial Statements) in fiscal 2024.
Investing Activities
Cash used for investing activities totaled $12.1 million for fiscal 2025, a fluctuation of $31.4 million compared with fiscal 2024. The cash used for investing activities in fiscal 2025 was primarily due to cash for capital expenditures. As part of our turnaround plan, we expect to reduce capital investment by leveraging existing capacity where available and focusing on franchise development. These outflows were partially offset by the divestiture of our remaining ownership interest in Insomnia Cookies for $75.0 million in aggregate cash proceeds (discussed in Note 3 , Acquisitions and Divestitures, to the audited Consolidated Financial Statements) and proceeds from sale-leaseback transactions (discussed in Note 10 , Leases, to the audited Consolidated Financial Statements).
The cash provided by investing activities in fiscal 2024 was primarily due to the receipt of net proceeds of $124.1 million from the divestiture of Insomnia Cookies and an additional $45.0 million from the repayment of an intercompany loan due from Insomnia Cookies. These proceeds were partially offset by our use of $31.9 million cash for the acquisition of franchised shops in fiscal 2024, discussed in Note 3 , Acquisitions and Divestitures, to the audited Consolidated Financial Statements.
Financing Activities
Cash used for financing activities totaled $7.8 million for fiscal 2025, a fluctuation of $66.2 million compared with fiscal 2024, primarily driven by the pay down of long term debt balances with a portion of the net proceeds received from the divestiture of Insomnia Cookies.
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Debt
Our long-term debt obligations consist of the following:
(in thousands)
December 28,
December 29,
2023 Facility — term loan
2023 Facility — revolving credit facility
Short-term lines of credit
Less: Debt issuance costs
Financing obligations
Total long-term debt
Less: Current portion of long-term debt
Long-term debt, less current portion
2023 Secured Credit Facility
The Company is party to a credit agreement (the “2023 Facility”) consisting of a $300.0 million senior secured revolving credit facility and a term loan with an original principal amount of $700.0 million. During the second quarter of fiscal 2025, the Company amended the 2023 Facility to, among other things, establish additional, incremental term loan commitments in an aggregate principal amount of $125.0 million. Refer to Note 9 , Long-Term Debt, to the audited Consolidated Financial Statements for further information.
Under the terms of the 2023 Facility, we are subject to a requirement to maintain a leverage ratio of less than 5.00 to 1.00 as of the end of each quarterly Test Period (as defined in the 2023 Facility) through maturity in March 2028. The leverage ratio under the 2023 Facility is defined as the ratio of (a) Total Indebtedness (as defined in the 2023 Facility, which includes all debt and finance lease obligations) minus unrestricted cash and cash equivalents to (b) a defined calculation of Adjusted EBITDA (2023 Facility Adjusted EBITDA) for the most recently ended Test Period. Our leverage ratio was 4.4 to 1.00 as of the end of fiscal 2025 compared to 3.9 to 1.00 as of the end of fiscal 2024.
We were in compliance with the financial covenants related to the 2023 Facility as of December 28, 2025 and expect to remain in compliance over the next 12 months.
Short-Term Lines of Credit
We are party to two agreements with existing lenders providing for short-term, uncommitted lines of credit up to an aggregate of $25.0 million. Borrowings under these short-term lines of credit are payable to the lenders on a revolving basis for tenors up to three months and are subject to an interest rate of adjusted term SOFR plus a credit spread adjustment of 0.10% plus a margin of 1.75%. As of December 28, 2025, the Company had drawn $2.5 million under the agreements which is classified within the Current portion of long-term debt on the Consolidated Balance Sheets.
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Critical Accounting Estimates
The financial information discussed in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” is based upon or derived from the audited Consolidated Financial Statements, which have been prepared in conformity with GAAP. The preparation of the financial statements requires the use of judgments, estimates, and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses as well as related disclosures. We consider an accounting judgment, estimate, or assumption to be critical when (1) the estimate or assumption is complex in nature or requires a high degree of judgment and (2) the use of different judgments, estimates, and assumptions could have a material impact on the audited Consolidated Financial Statements.
On an ongoing basis, we evaluate our estimates and judgments based on historical experience and various other factors that are believed to be reasonable under the circumstances. We review our financial reporting and disclosure practices and accounting policies quarterly to confirm that they provide accurate and transparent information relative to the current economic and business environment. A summary of our significant accounting policies is included in Note 1 , Description of Business and Summary of Significant Accounting Policies, to the audited Consolidated Financial Statements. We believe that our critical accounting estimates are:
Self-Insurance Risks and Receivables from Insurers
We are subject to workers’ compensation, vehicle, and general liability claims and are self-insured for a significant portion of our workers’ compensation, vehicle, and general liability claims up to the amount of stop-loss insurance coverage purchased from commercial insurance carriers. We maintain accruals for the estimated cost of claims, without regard to the effects of stop-loss coverage, using actuarial methods which evaluate known open and incurred but not reported claims and consider historical loss development experience. In addition, we record receivables from the insurance carriers for claims amounts estimated to be recovered under the stop-loss insurance policies when these amounts are estimable and probable of collection. We estimate such stop-loss receivables using the same actuarial methods used to establish the related claims accruals and taking into account the amount of risk transferred to the carriers under the stop-loss policies. The stop-loss policies provide coverage for claims in excess of retained self-insurance risks, which are determined on a claim-by-claim basis. As of December 28, 2025 and December 29, 2024, we had $31.2 million and $34.8 million, respectively, reserved for such programs. Inclusive of the receivables from the stop-loss insurance policies, the Company’s limited liability balance was $22.6 million and $18.7 million as of December 28, 2025 and December 29, 2024, respectively.
Our estimated liability is not discounted and is based on a number of assumptions and factors. The critical assumptions used in determining these related expenses and obligations are future cost projections of claims, which include healthcare cost projections. These critical assumptions are calculated based on historical Company data and experience, as well as appropriate market indicators including inflation, societal attitudes toward legal action, and changes in law. The assumptions are evaluated at least semiannually by us in conjunction with outside actuaries and are closely monitored and adjusted when warranted by changing circumstances. If a greater amount of claims are reported, or if the nature of the claims, including medical costs, results in increased exposure beyond our expectations, our liabilities may not be sufficient, and we could recognize additional expense.
Income Taxes
Our provision for income taxes, deferred tax assets and liabilities including valuation allowances requires the use of estimates based on our management’s interpretation and application of complex tax laws and accounting guidance. We establish reserves for uncertain tax positions for material, known tax exposures in accordance with Accounting Standards Codification (“ASC”) 740, Income Taxes relating to deductions, transactions and other matters involving some uncertainty as to the measurement and recognition of the item. We may adjust these reserves when our judgment changes as a result of the evaluation of new information not previously available and will be reflected in the period in which the new information is available. While we believe that our reserves are adequate, issues raised by a tax authority may be resolved at an amount different than the related reserve and could materially increase or decrease our income tax provision in future periods.
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Realization of deferred tax assets involves estimates regarding (i) the timing and amount of the reversal of taxable temporary differences, (ii) expected future taxable income, (iii) the ability to carry back or carry forward net operating losses and tax credits, and (iv) the impact of tax planning strategies. We believe that it is more likely than not that we will not realize the benefit of certain deferred tax assets and, accordingly, have established a valuation allowance against them. In assessing the need for a valuation allowance, we consider all available positive and negative evidence, including past operating results, projections of future taxable income and the feasibility of and potential changes to ongoing tax planning strategies. The projections of future taxable income include a number of estimates and assumptions regarding our volume, pricing and costs. Although realization is not assured for the remaining deferred tax assets, we believe it is more likely than not that the remaining deferred tax assets will be realized through future taxable earnings or alternative tax strategies. However, deferred tax assets could be reduced in the near term if our estimates of taxable income are significantly reduced or tax strategies are no longer viable.
Goodwill and Indefinite Lived Intangible Assets
For each reporting unit, we assess goodwill for impairment annually at the beginning of the fourth fiscal quarter or more frequently when impairment indicators are present. If the carrying value of the reporting unit exceeds its fair value, we recognize an impairment charge for the difference up to the carrying value of the allocated goodwill. The fair value is estimated using a combination of a discounted cash flow approach and a market approach.
When assessing goodwill for impairment, our decision to perform a qualitative impairment assessment for an individual reporting unit is influenced by a number of factors, inclusive of the carrying value of the reporting unit’s goodwill, the significance of the excess of the reporting unit’s estimated fair value over carrying value at the last quantitative assessment date, the amount of time in between quantitative fair value assessments and the date of acquisition. If we perform a quantitative assessment of an individual reporting unit’s goodwill, our impairment calculations contain uncertainties because they require management to make assumptions and to apply judgment when estimating future cash flows and asset fair values, including projected revenue growth and operating expenses related to existing businesses, product innovation and new shop concepts, as well as utilizing valuation multiples of similar publicly traded companies and selecting an appropriate discount rate. Estimates of revenue growth and operating expenses are based on internal projections considering the reporting unit’s past performance and forecasted growth, strategic initiatives, local market economics, and the local business environment impacting the reporting unit’s performance. The discount rate is selected based on the estimated cost of capital for a market participant to operate the reporting unit in the region. These estimates, as well as the selection of comparable companies and valuation multiples used in the market approaches are highly subjective, and our ability to realize the future cash flows used in our fair value calculations is affected by factors such as the success of strategic initiatives, changes in economic conditions, changes in our operating performance, and changes in our business strategies, including retail initiatives and international expansion.
In the quarter ended June 29, 2025, management identified impairment indicators that required a quantitative assessment of goodwill outside of management’s routine annual assessment. These indicators included that during the two quarters ended June 29, 2025, the Company experienced a decline in its stock price and market capitalization, which became significant and sustained during the quarter ended June 29, 2025. In addition, the Company’s operating results for the quarter were below previous forecasts. Lastly, the Company updated its forecasts for the full year following termination of the Business Relationship Agreement with McDonald’s USA during the quarter, and the updated forecasts were below previous forecasts. After completing the quantitative impairment test, management concluded that the estimated fair values of the U.S., Krispy Kreme Holding U.K. Ltd. (“KK U.K.”), and Krispy Kreme Holdings Pty Ltd. (“KK Australia”) reporting units had declined below their carrying values, and management recognized a cumulative, non-cash, partial goodwill impairment charge of $356.0 million (gross of income taxes) in the second quarter of fiscal 2025. As of September 29, 2025, we performed a quantitative impairment assessment for all of our reporting units. The estimated fair value of each reporting unit exceeded its carrying value and, therefore, no additional impairment was recorded.
For the fiscal years 2024 and 2023, there were no goodwill impairment charges. We believe the fair value of each of our reporting units is in excess of its carrying value, and absent a sustained multi-year global decline in our business in key markets such as the U.S., we do not anticipate incurring significant goodwill impairment in the next 12 months.
Other intangible assets, net primarily represent the trade names for our brands, franchise agreements (domestic and international), reacquired franchise rights, and customer relationships. The trade names have been assigned an indefinite useful life and are reviewed annually for impairment. The fair value calculation for the trade names includes estimates of revenue growth, which are based on past performance and internal projections for the intangible asset group’s forecasted growth and royalty rates, which are adjusted for our particular facts and circumstances. The discount rate is selected based on the estimated cost of capital that reflects the risk profile of the related business. These estimates are highly subjective, and our ability to
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achieve the forecasted cash flows used in our fair value calculations is affected by factors such as the success of strategic initiatives, changes in economic conditions, changes in our operating performance, and changes in our business strategies, including retail initiatives and international expansion. All other intangible assets are amortized on a straight-line basis over their estimated useful lives. Definite-lived intangible assets are assessed for impairment whenever triggering events or indicators of potential impairment occur. We did not have any impairment charges of indefinite-lived intangible assets during any of the periods presented, and we do not anticipate incurring significant impairment charges in the next 12 months.
Impairment of Long-Lived Assets
We evaluate property and equipment, lease right of use assets, and other definite lived assets for impairment whenever events or changes in circumstances indicate that the carrying amounts of such assets may not be recoverable. Expected cash flows associated with an asset are the key factor in determining the recoverability of the asset. For the recoverability evaluation, long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. For Company-owned Hub and Spoke assets, the impairment test is performed at the individual Hub asset group level (which includes a Hub and its related Spokes), which is inclusive of property and equipment and lease right of use assets. If the carrying amount of the assets exceeds the sum of the undiscounted cash flows, the Company records an impairment charge in an amount equal to the excess of the carrying value of the assets over the estimated fair value. Significant judgment is involved in determining the assumptions used in estimating future cash flows, including projected revenue growth, operating margins, economic conditions, and changes in the operating environment. Changes in these assumptions could have a significant impact on the recoverability of the asset and may result in additional impairment charges. For those Hubs and any other asset groupings where the carrying amount of the assets exceeds the sum of the undiscounted cash flows, the Company must make additional assumptions to determine the related fair values of the assets, including selection of an appropriate discount rate when the income approach is used.
Impairment charges related to the Company’s long-lived fixed assets were $39.4 million, $4.6 million, and $18.1 million for the fiscal years ended December 28, 2025, December 29, 2024, and December 31, 2023, respectively. For the fiscal years ended December 28, 2025 and December 31, 2023 the Company recorded lease impairment and termination costs of $37.0 million and $6.6 million, respectively. For the fiscal year ended December 29, 2024 the Company recorded a net gain on lease termination of $0.1 million.
New Accounting Pronouncements
Refer to Note 1 , Description of Business and Summary of Significant Accounting Policies, to the audited Consolidated Financial Statements for a detailed description of recent accounting pronouncements.
