Sugarcoating the News at Krispy Kreme
According to Krispy Kremes Code of Ethics for Chief Executive and Senior Financial Officers, the companys
top executives are expected to practice and promote honest, ethical conduct. Theyre also responsible for the
health and overall performance of the company. Recently, however, things have gone wrong in the top echelons
of the doughnut-shop chain.
First, a little background. Founded as one small doughnut shop in Winston-Salem, North Carolina, in 1937, the
brand became increasingly popular over the next six decades, taking off in the 1980s and 1990s. By 2003,
Krispy Kreme (which went public in 2000) was selling more than a billion doughnuts a year. Thats when
things started to go stale. (For more details on the companys ups and downs, go to http://jacksonville.com/
tu-online/apnews/stories/012205/D87OTSIG0.shtml, and read the article Krispy Kreme: The Rise, Fall, Rise and
Fall of a Southern Icon.)
When sales first started to decline in the fall of 2003, CEO Scott Livengood offered a variety of creative explanations,
mostly for the benefit of anxious investors: high gas prices discouraged people from driving to doughnut
shops, supermarket sales were down because grocery stores were losing business to Wal-Mart, and
people were cutting back on carbohydrates because of the popular Atkins diet. Unfortunately, other (more
plausible) explanations were beginning to surface. To complete this exercise, youll need to find out what they
were. Go to both http://www.marketwatch.com/story/worst-ceo-krispy-kremes-scott-livengood and
http://usatoday30.usatoday.com/money/industries/food/2005-08-10-krispy-kreme_x.htm?csp=34 to read
these articles: Worst CEO: Krispy Kremes Scott Livengood and Krispy Kreme Must Restate Earnings by
$25.6M. Once you have a good grasp of the companys problems and youve read about the people who are
responsible, answer the following questions, being sure to provide explanations for your responses:
1. What factors contributed to the problems at Krispy Kreme? What happened to the company? Who was
hurt?
2. Should the firms problems be attributed to poor management, unethical behavior on the part of the
executive team, or both?
3. Judging from the lessons of the Krispy Kreme case, how important do you think it is for a firm to have
strong top-down leadership?
4. If youd been the CEO of Krispy Kreme, what things would you have done differently? The purpose of case studies is to bring real world concepts/situations into your course work. Read the assigned case study and complete a case study analysis. It will focus you on the issues covered in the assigned readings. Adhere to the following guidelines: Guidelines: The end result should be four sections: 1. Summary of the existing facts 2. Issues/Problem Identification 3. Analysis/Evaluation 4. Recommendations.
In addition to the case analysis, be sure to answer all of the questions given for the case. Your responses must be complete, using terminology and concepts presented in the primary textbook as well as supplementary resources. Each paragraph should be written in complete sentences with attention paid to good grammar and spelling. Please double-space, use 12 point font, with one inch margins. You may use California Southern University’s online library or the internet to complete your case study. Be sure to cite your resources and provide the references using the APA format. APA Guidelines can be found in the resources section of this syllabus.
