Krispy Kreme is shrinking on purpose, and Thursday’s results showed what that buys. The doughnut chain reported second-quarter revenue down 12.8% as it handed stores to franchisees and closed underperforming locations, while narrowing its net loss to $20.3 million from $435.3 million a year earlier. Systemwide sales came in at $497.3 million, up 1.1% in constant currency and 2.6% excluding the now-ended McDonald’s partnership. Adjusted earnings before interest, taxes, depreciation and amortization rose more than 43% to $28.8 million, and capital spending is down 70% for the first half of the year.
The strategy in plain terms: Krispy Kreme is selling company-owned operations to franchise partners and collecting royalties instead of running the shops itself. That immediately cuts reported revenue, because a franchisee’s sales no longer flow through Krispy Kreme’s books — only the fee does. What it adds is margin and cash, and cash is what pays down debt. A shrinking top line here is the plan working, not failing.
Chief Executive Josh Charlesworth said the quarter showed continued progress on strengthening the balance sheet, reducing leverage and building profitable growth, and the company kept its previously issued guidance for systemwide sales growth of 2% to 4%. Krispy Kreme also maintained its full-year outlook of $1.25 billion to $1.35 billion in net revenue and adjusted EBITDA of $140 million to $150 million.
The year-ago comparison needs context. The $435 million loss in the second quarter of 2025 was almost entirely non-cash, driven by roughly $407 million in goodwill and asset impairment charges booked when the company wrote down the value of its own business. Strip that out and the improvement is real but less dramatic than the headline numbers suggest — the operating story is the margin gain and the capital spending cut, not the loss line.
The turnaround plan itself was announced in August 2025 and rests on four pieces: refranchising international markets and restructuring the Western U.S. joint venture, cutting capital intensity by leaning on franchisee development, expanding margins through operational changes including outsourced U.S. logistics, and pursuing only revenue streams that actually make money.
During the quarter the company refranchised its Japan business and signed a joint venture with franchisee WKS Restaurant Group, taking its stake to 80%. Fifty-nine shops have opened worldwide since January 1, nearly all of them franchised, and Krispy Kreme has signed agreements to enter the Netherlands, Estonia and Mauritius.
That shift has moved fast. Krispy Kreme entered 2026 with roughly 25% of systemwide sales coming from franchisees; after the Japan and Western U.S. deals, the figure reached about 42%, against a 50% target.
The retreat that started all this was the McDonald’s rollout. Krispy Kreme had been placing doughnuts in McDonald’s restaurants nationwide, a deal that promised enormous volume and delivered thin profits. Charlesworth has described pulling operating expenses tied to that expansion out of the business quickly, along with halting delivery to 1,400 locations that were not profitable, and has said the company’s posture for this year is deliberately unexciting — steady earnings improvement and positive cash flow to reassure lenders while debt comes down.
Demand for the product has held up better than the financial engineering might suggest. Digital accounted for 23% of U.S. retail sales in the first quarter, backed by a loyalty program with more than 17 million members, and management has said the spread of weight-loss medications has had limited effect so far, attributing that to the doughnut’s role as an occasional shared treat rather than a daily habit.
For franchise operators and suppliers, the practical read is that Charlotte-based Krispy Kreme is prioritizing balance-sheet repair over expansion for now, with franchise partners carrying the growth. The company has signaled that 2027 is when it expects to move past the turnaround framing and back to a growth plan.
JBizNews Desk | Charlotte, North Carolina
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