Krispy Kreme can't find enough drivers to deliver doughnuts to stores, and it's a problem for the chain's much-praised strategy

krispy kreme doughnuts — Krispy Kreme doughnuts go into production at the opening of the store at Harrods in London, October, 3, 2003.
REUTERS

Krispy Kreme's CEO said the chain is having trouble hiring drivers.
The chain makes doughnuts at central locations that have to be delivered to stores.
Other chains, like Domino's, are having the same problem.

Krispy Kreme is having trouble finding enough drivers, the company said in a Tuesday earnings call.

The doughnut chain operates in what it calls a hub and spoke model, where doughnuts are made fresh at large hubs, and then delivered to spokes like convenience and grocery stores. The model has been quite successful for the chain and is praised by analysts for its efficiency, but it only works when there are workers to transport the doughnuts from the hub to spokes each day.

Krispy Kreme is seeing "a lack of available drivers to run routes as we continue to build out our hub and spokes," CEO Mike Tatters field said in the call, even as the chain hired a record 2,100 new employees in the quarter.

A recent note from analysts at Truist Securities noted the same issue. While analysts believe in the potential of Krispy Kreme's hub and spoke system, "we believe it has become increasingly difficult to execute at the pace management originally hoped," they said. "The labor appears to be especially acute for short and long-haul
drivers."

Krispy Kreme's lack of drivers is exacerbated by the labor shortage across retail, forcing the chain to compete against larger, more established companies, Truist wrote, pointing out the Krispy Kreme has 1,800 thousand job openings on Glassdoor, compared to 41,000 from Starbucks.

Needing drivers specifically has been an issue for food and restaurant chains recently. Domino's saw a decline in sales last quarter after the pizza boom of the pandemic. Shrinking sales might not reflect lower demand, but Domino's doesn't have enough workers to keep up the earlier pace. CEO Richard Allison acknowledged the labor shortage as an issue for the chain in an earnings call, saying "staffing has been a challenge." While there are labor shortages across the business, the chain is most lacking drivers, he said.

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