KKD Krispy Kreme Doughnuts, Inc.

Item 1. BUSINESS.

Company Overview

Krispy Kreme Doughnuts, Inc. is a leading branded retailer and wholesaler of high-quality doughnuts, complementary beverages, and treats and packaged sweets. Our principal business, which began in 1937, is owning and franchising Krispy Kreme stores. Our stores offer a wide variety of high-quality doughnuts, including the Company’s Original Glazed ^® doughnut, together with complementary products, including a broad array of coffees and other beverages.

The Company and its franchisees sell products through two channels:

We generate revenues from four business segments: Company Stores, Domestic Franchise, International Franchise and KK Supply Chain. The revenues and operating income of each of these segments for each of the three most recent fiscal years is set forth in Note 2 to our consolidated financial statements appearing elsewhere herein.

Company Stores. The Company Stores segment is comprised of the doughnut shops operated by the Company. These shops sell doughnuts and complementary products through the on-premises and CPG channels and come in two formats: factory stores and satellite shops. Factory stores have a doughnut-making production line, and many of them sell products to on-premises consumers and through CPG channels to approved retailers of Krispy Kreme products to more fully utilize production capacity. Factory stores also include commissaries which serve only CPG customers. Satellite shops, which serve only on-premises customers, are smaller than most factory stores, do not have production lines, and include the hot shop and fresh shop formats.

Domestic Franchise. The Domestic Franchise segment consists of our domestic store franchise operations and the licensing of Krispy Kreme products domestically. Domestic franchise stores sell doughnuts and complementary products through the on-premises and CPG channels in the same way and using the same store formats as do Company stores.

We began licensing complementary products in the beverage category when we signed an agreement for the test of Krispy Kreme branded bagged coffee at approximately 100 wholesale club locations in the southeastern United States. In calendar 2014, we signed agreements for the introduction of Krispy Kreme branded ready-to-drink coffee beverages in bottles for distribution at approximately 900 mass merchant locations throughout the United States, and also signed an agreement with Keurig Green Mountain to bring Krispy Kreme branded coffee to the Keurig ^® brewing system. Krispy Kreme coffee is available in K-Cup ^® packs at grocery stores, convenience stores and big box outlets throughout the U.S., as well as at Krispy Kreme shops and online. Manufacturing and distribution of all three products is done by the licensees. In March 2015, we announced a multi-year licensing agreement with a major beverage firm to roast and distribute twelve-ounce bags of Krispy Kreme ground coffee in Rich, Smooth and Decaf blends through grocers, mass merchants, club stores and online. We have also begun licensing our brand into other product categories.

International Franchise. The International Franchise segment consists of our international store franchise operations. International franchise stores sell doughnuts and complementary products almost exclusively through the on-premises sales channel using shop formats similar to those used in the United States, and also using a kiosk format.

KK Supply Chain. The KK Supply Chain segment produces doughnut mixes and manufactures doughnut-making equipment, which all factory stores, both Company and franchise, are required to purchase. In addition, KK Supply Chain sells other ingredients, packaging and supplies, principally to Company-owned and domestic franchise stores.

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As of January 31, 2016, there were 297 Krispy Kreme stores operated domestically in 41 states and in the District of Columbia, and there were 824 shops in 25 other countries around the world. Of the 1,121 total stores, 370 were factory stores and 751 were satellites. The ownership and location of those stores is as follows:

Company History

During the summer of 1937, our founder, Vernon Carver Rudolph opened his first doughnut shop in the historic Old Salem area of Winston-Salem, North Carolina with just a few pieces of doughnut equipment, a secret yeast-raised doughnut recipe and the Krispy Kreme Doughnuts name. On July 13, 1937, the first Krispy Kreme doughnuts were made at the Winston-Salem shop and were primarily sold to grocery stores. The demand was so great that Mr. Rudolph opened the shop for retail business by cutting a hole in the wall and selling doughnuts directly to customers, marking the beginning of our restaurant business.

Since Mr. Rudolph’s humble beginnings the Company has celebrated numerous milestones:

Today, our Hot Krispy Kreme Original Glazed Now ^® sign is an integral contributor to the brand’s mystique. In addition, the Doughnut Theater in factory stores provides a multi-sensory introduction to the brand and reinforces the unique Krispy Kreme experience in 26 countries around the world.

Industry Overview

We operate within the quick service restaurant, or QSR, segment of the restaurant industry, although our consumer research indicated domestic customers think of our shops more like bakeries than restaurants. In our Company shops, approximately 55% of retail transactions include one or more dozens of doughnuts and the vast majority of products we sell in our shops are consumed elsewhere. In the United States, the QSR segment is the largest segment of the restaurant industry and has demonstrated steady growth over a long period of time.

We believe that the QSR segment is generally less vulnerable to economic downturns than the casual dining segment, due to the value that QSRs deliver to consumers, as well as some “trading to value” by consumers from other restaurant industry segments during adverse economic conditions, as they seek to preserve the “away from home” dining experience on tighter budgets. We believe increases in the prices of agricultural products and energy are more likely to significantly affect our business than are economic conditions generally, because we believe our products are affordable indulgences that appeal to consumers in all economic environments.

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In both domestic and international markets, we compete against a broad array of national, regional and local retailers of doughnuts and treats, some of which have substantially greater financial resources than we do and are expanding to other geographic regions, including areas where we have a significant store presence. We also compete against other retailers who sell sweet treats such as cookie, cupcake and ice cream stores. We compete on elements such as food quality, convenience, location, customer service and value.

In addition to retail doughnut outlets, the domestic doughnut market is comprised of several other sales channels, including grocery store packaged products, in-store bakeries within grocery stores, convenience stores, and foodservice and institutional accounts. Our CPG competitors include makers of doughnuts and snacks sold through all of these CPG channels. Customer service, including frequency of deliveries and maintenance of fully stocked shelves, is an important factor in successfully competing for convenience store and grocery/mass merchant business. In the packaged doughnut market, we compete for sales with many well-known national brands, such as Dolly Madison, Entenmann’s, Little Debbie, Hostess and Sara Lee, as well as regional brands.

We use industry data purchased from third-party vendors to track doughnut category sales by distribution channel. Industry data indicate that during fiscal 2016, doughnut industry sales rose approximately 2.1% year-over-year in grocery stores and approximately 7.0% in convenience stores. During that same time Krispy Kreme’s market share declined 0.2% and 1.2% in those channels, respectively.

Krispy Kreme Brand Elements

Our iconic brand has several important elements that we believe have created a bond between the brand and our team members, guests, consumers and their communities. The key elements include:

One-of-a-kind taste . The taste experience of our doughnuts is the foundation of our concept and the common thread that binds generations of our loyal customers. Our doughnuts are made based on a secret recipe that has been in our Company since 1937. We use premium ingredients, which are blended by our proprietary processing equipment in accordance with our standard operating procedures, to create this unique and very special product. Our research indicates this one-of-a-kind taste drives guests’ cravings for our products.

Doughnut Theater . Our factory stores typically showcase our Doughnut Theater, which is designed to produce a multi-sensory customer experience and establish a brand identity. Our goal is to provide our customers with an entertainment experience and to reinforce our commitment to quality and freshness by allowing them to see the doughnuts being made.

Hot Krispy Kreme Original Glazed Now sign . The Hot Krispy Kreme Original Glazed Now sign, when illuminated, is a signal that our hot Original Glazed doughnuts are being served. Our Original Glazed doughnuts are made for several hours every morning and evening, and at other times during the day at our factory stores. The Hot Krispy Kreme Original Glazed Now sign is an impulse purchase generator and an integral contributor to our brand. We also have the Krispy Kreme Hot Light® app for smartphones and desktops that automatically notifies guests when the Hot Krispy Kreme Original Glazed Now sign is illuminated at either their favorite or the nearest Krispy Kreme shop. The app allows users to get directions to Krispy Kreme locations and find out important information regarding current promotions.

Sharing and Connection . Krispy Kreme doughnuts are a popular choice for sharing with friends, family, co-workers and fellow students. Consumer research shows the majority of purchases at our domestic shops are for sharing occasions and in Company shops, approximately 55% of retail transactions are for sales of one or more dozen doughnuts. The strength of our brand in shared-use occasions transcends international borders. Sales of dozens comprise a significant portion of shop sales transactions around the world, and the sharing concept is an integral part of our global marketing approach.

Community relationships . We were built upon generations of word-of-mouth marketing. We are committed to building relationships with our team members, guests and in our communities. Our shop operators support their local communities through fundraising programs and sponsorship of charitable events. Many of our loyal customers have memories of selling Krispy Kreme doughnuts to raise money for their schools, clubs and community organizations. We refer to these activities as “local relationship marketing;” it is the core building block of our marketing and directly connects our marketing efforts to our brand’s mission of “touching and enhancing lives through the joy that is Krispy Kreme.”

Heritage . For over 78 years, we have been known for producing one-of-a-kind doughnuts. Our consumer research indicates this heritage and consistency are important parts of the brand’s imagery with our guests. Icons of our heritage include paper hats, historical road signs and our “bowtie” logo.

Shop Formats

The following description of shop formats is generally applicable to all segments, although international markets generally do not use the large traditional factory shop format because most international markets serve only the on-premises distribution channel and therefore do not require the additional space required to support CPG distribution. All our international shops are operated by franchisees.

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The ability to accommodate a drive-thru window is an important characteristic in most domestic shop locations, because our shops most often are situated in suburban locations that are accessed by consumers using vehicles. Of our 108 Company shops which serve on-premises customers, 105 have drive-thrus, and drive-thru sales comprise approximately 49% of these shops’ retail sales. At some of the shops which produce doughnuts 24 hours per day, we also have continuous drive-thru operations.

Over time, as we begin to develop shops in more urban, pedestrian-rich environments in the United States, smaller satellite locations may become more common because the lower size requirements may be attractive in urban markets in which the per square foot cost of real estate is greater than suburban locations. Our international franchisees tend to operate in those urban environments and, accordingly, international franchise shops tend to be smaller than their domestic counterparts, and satellite locations are more common than factory shops.

Factory Shops

Traditional Factory Shops . Historically, our business was centered around large facilities which operated both as quick service restaurants and as CPG distributors, with doughnut-making production lines and related doughnut finishing and storage space to support production for both distribution channels. The allocation between such channels is dependent on the store’s capacity and the characteristics of each market. Traditional factory shops generally are located in freestanding suburban locations ranging in size from approximately 2,800 to 5,500 square feet, and typically have equipment which can produce from 110 to 440 dozen doughnuts per hour.

The factory store category also includes eight commissaries, six of which have multiple production lines. These production lines often have equipment capable of producing 440 or 660 dozen doughnuts per hour. The commissaries typically serve CPG customers and support satellite stores, special events and fundraising. Additionally, some commissaries produce certain longer shelf-life products that are shipped to other factory stores where they are distributed to CPG customers together with products manufactured at the receiving shop.

Historically, the relatively large size and high cost of traditional factory stores limited the density of our stores in many markets, causing many of our consumers to utilize them as “destination” locations, which limited their frequency of use. Our consumer research indicates that our typical on-premises customer visits our stores an average of once a month, and a significant obstacle to more frequent customer visits is our relative lack of convenience. In addition, each factory store has significant fixed or semi-fixed costs, and margins and profitability are significantly affected by doughnut production and sales volume.

Small Retail Factory Shops. We have been developing smaller retail factory shops to serve on-premises customers exclusively, with the goal of permitting us to operate a larger number of stores, reducing the initial shop investment, reducing our per store fixed costs, lowering breakeven points and, most importantly, enabling us to focus exclusively on the consumer experience for our retail customers. These shops typically range from 2,700 to 3,000 square feet in size.

Each of these small retail factory shops contains a full doughnut production line, but on a smaller scale than the production equipment in a traditional factory store. Due to their lower cost, we believe these small format factory shops will enable us to deliver the Krispy Kreme Doughnut Theater experience to consumers in relatively smaller geographic markets than we currently serve. Our small retail factory shops generally have the capacity to produce 110 dozen doughnuts per hour, although some shops have greater capacity in order to meet consumer demand in their markets.

Satellite Shops

In addition to small retail factory shops, we have developed three varieties of satellite stores that serve fresh doughnuts delivered at least twice daily from a nearby factory store or, principally in international markets, from a central commissary production facility. Like small retail factory shops, satellite shops serve only on-premises customers and are smaller than traditional factory stores, but do not contain a doughnut-making production line.

Domestic satellite stores consist of the hot shop and fresh shop formats and, internationally include the kiosk format. Hot shops and fresh shops typically range in size from approximately 1,800 to 2,400 square feet. In each of these formats, we sell doughnuts, beverages and complementary products.

Hot shops utilize convection oven doughnut heating and finishing equipment to offer customers our hot Original Glazed doughnuts throughout the day. This equipment heats fresh unglazed doughnuts and finishes them using a hot glaze waterfall that is the same as that used in a traditional factory store. Products other than our Original Glazed doughnut generally are delivered at least twice daily to the hot shop already finished, although in some locations we perform some finishing functions at the hot shop, including application of icings and fillings, to provide consumers with elements of our Doughnut Theater experience in hot shop locations.

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Fresh shops are similar to hot shops, but do not contain doughnut heating and finishing equipment. Doughnuts sold at fresh shops often are delivered fully finished from the factory hub, but in some locations fresh shops decorate and finish doughnuts in the shop in order to provide an element of consumer interest and to emphasize the freshness of our products. The fresh shop format is the predominant satellite format used by our international franchisees, comprising approximately 66% of all international satellite shops.

Hot shops and fresh shops typically are located in shopping centers, malls and other retail-oriented locations. Domestically, end cap spaces that can accommodate drive-thru windows are particularly desirable. Kiosks typically are located in high pedestrian traffic venues, such as airports, train stations and transportation malls. We view the satellite formats as ways to achieve market penetration and greater consumer convenience in a variety of market sizes and settings.

Strategic Initiatives

We have developed a number of strategic initiatives designed to foster our growth and improve our profitability. Our business strategy has four principal components:

Accelerating global growth

Geographic Expansion

We believe that there is a significant opportunity to expand our business globally. We plan to infill in markets in which we are already represented by expanding with existing franchise partners and growing out existing Company-owned markets. We believe this approach will permit us to leverage supply chain efficiencies and capitalize on our strong brand awareness. We also plan to evaluate new markets, regions and areas where we have limited or no existing market presence. Our goal is to achieve annual double-digit percentage growth in our systemwide unit count over the next several years.

Growth in Same Store Sales

In addition to growth from an expected increase in the number of Krispy Kreme shops, we believe we have opportunities to increase same store sales and shop average unit volumes. To achieve this goal, we are focused on increasing traffic by offering additional doughnut and beverage varieties, using strategic promotions, and encouraging special and “everyday” reasons for consumers to visit Krispy Kreme. We plan to further develop and leverage a new mobile guest engagement platform described below to build visit frequency and promote social media sharing of the Krispy Kreme consumer experience.

Leveraging Technology

We are leveraging our Hot Light smartphone app, by introducing our new mobile guest engagement platform, including the My Krispy Kreme Treats ™ loyalty and rewards program. With the introduction of My Krispy Kreme Treats, we can reward guests for their purchases with a simple framework that has an easy-to-read dashboard and current product and marketing news. The app shows current points accumulated, earned rewards and points needed for the next reward. The app also offers e-gifting, which allows consumers to transfer digital reward points to family and friends.

In March 2015, we implemented the first phase of a state-of-the-art enterprise resource planning (“ERP”) system. This initial phase included core accounting system functionality, including general ledger, accounts receivable and payable, fixed assets, purchasing, warehouse management, equipment and doughnut mix manufacturing cost accounting, and database management. The first phase implementation also provided the platform for anticipated deployment of additional ERP functionality including business analytics, demand and production planning, shop cost accounting and more robust promotional analysis. We are also working to enhance our business intelligence capabilities to gather more precise and timely data including information about consumer needs and desires.

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Enhancing the Core Menu

We believe our unique Krispy Kreme Original Glazed and other doughnut offerings are a core strength of our brand and a major factor differentiating us from other sweet-goods manufacturers and retailers. While we expect that doughnuts will remain at the center of our menu offerings, we expect to continue increasing doughnut variety to keep offerings both exciting and inviting. We also believe that increasing the percentage of retail consumers who purchase a beverage when visiting our shops has great potential for growing both revenues and profitability.

Maximizing Brand Awareness

We believe that CPG distribution of doughnuts, snacks and beverages, which represents approximately half of the revenues of our Company Stores segment, offers an opportunity to maximize the value of the Krispy Kreme brand. We have been adding new, longer shelf-life snacks to our product offering, and believe the CPG channel has continued opportunity for sales and profit growth.

In fiscal 2014, we announced our licensing program, with an emphasis on coffee. The primary focus of the licensing program is to create top of mind consumer awareness of the Krispy Kreme brand in the beverage category and to encourage trial usage of Krispy Kreme coffee. In addition to improving the in-store beverage attachment rate, we believe licensing can increase brand equity and offer long-term revenue opportunities.

We believe our fundraising program has potential for future revenue growth. For over sixty years, this program has assisted local charities and organizations and we believe we can enhance our fundraising program with the use of technology and increased awareness.

Company Stores Business Segment

Our Company Stores segment is comprised of the operations of our Company-owned stores. Of our 116 Company shops in operation as of January 31, 2016, 76 sell doughnuts and complementary products exclusively through the on-premises distribution channel. An additional 32 shops sell products through both on-premises and CPG channels, and eight commissaries serve CPG customers and support satellite stores, special events and fundraising. We expect substantially all our new shop development to primarily be on-premises retail-only shops because they are less costly to build and simpler to operate.

Expenses for this business segment include cost of goods sold; store level operating expenses; segment general, administrative and management expenses; certain marketing costs; and an allocation of shared corporate costs estimated to be directly attributable to the segment’s operations, including accounting, internal audit, human resources, risk management, information technology, and training expenses.

Products

Doughnuts and Related Products. We currently make and sell a wide variety of high-quality doughnuts, including our signature Original Glazed doughnut. Our shops typically offer 16 or more doughnut varieties, including six varieties that are offered at all our Krispy Kreme shops and up to four limited time doughnut offerings, with the balance of the assortment selected by the shop manager from our more than 30 other standard doughnut varieties. Most of our doughnuts, including our Original Glazed doughnut, are yeast-raised doughnuts, although we also offer several varieties of cake doughnuts and crullers. We have become known for seasonal doughnuts that come in a variety of non-traditional shapes, including hearts, pumpkins, footballs, eggs and snowmen, and which often feature icings and fillings. We also offer other doughnut varieties on a limited time basis to provide a changing variety of new and innovative doughnut menu offerings to consumers, and to promote continuous excitement about our products among our team members. Sales of doughnuts comprise approximately 89% of total retail sales, with the balance comprised principally of beverage sales.

Many of the doughnut varieties we offer in our doughnut shops are also distributed through CPG channels. In addition, we offer a number of products exclusively through CPG channels, including Danish pastries, honeybuns, fruit pies, mini-crullers and chocolate products, generally packaged as individually wrapped snacks or packaged in snack bags. Sales of yeast-raised doughnuts comprise approximately 75% of total CPG sales, with cake doughnuts and all other product offerings comprising approximately 25% of total CPG sales. The cost of doughnut mixes, shortening, sugar and packaging are the four most significant component costs of our doughnut products, comprising approximately 12%, 4%, 5% and 7%, respectively, of Company Stores’ sales in fiscal 2016.

Complementary products. We continue to develop and leverage complementary products to meet consumer needs for convenience, regional taste preference and variety. Beverages play a large role in providing convenience and satisfaction for our guests, including coffee, which has been part of the brand for many decades. We have a complete beverage program which includes drip coffees, iced coffees, both coffee-based and non-coffee-based frozen drinks, juices, milks, water, frozen/blended beverages and packaged and fountain beverages. We continue to refine our beverage offerings which include specialty espresso, cappuccino and hot chocolate drinks. Our promotional activities often include beverage and doughnut combinations.

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Consumer demand for our products at our retail shops is relatively even throughout the day. The breakdown of our retail sales transactions by daypart is approximately as follows (hours between 11:00 p.m. and 6:00 a.m. have been omitted because very few of our shops are open to the public during these hours):

The following table sets forth the type and locations of Company stores as of January 31, 2016.

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Changes in the number of Company stores during the past three fiscal years are summarized in the following table.

CPG Distribution

Sales to CPG customers accounted for 45.5% of fiscal 2016 revenues in the Company Stores segment. Of the 116 stores operated by the Company as of January 31, 2016, 40 serve the CPG distribution channel, including eight commissaries. We sell our traditional yeast-raised and cake doughnuts in a variety of packages, generally containing from two to fifteen doughnuts. In addition, we offer in the CPG distribution channel a number of doughnuts and complementary products that we do not offer in our shops, including honeybuns, mini-crullers, fruit pies, Danish pastries and a variety of snack doughnuts. These products typically have longer shelf lives than our traditional doughnuts and are packaged in snack bags or as individually wrapped snacks. Packaged products generally are marketed from Krispy Kreme branded displays. In addition to packaged products, we sell individual loose doughnuts through our in-store bakery (“ISB”) program, using branded self-service display cases and branded packaging. We intend to introduce additional new products to expand the breadth of product offerings to consumers who purchase our products from grocers and mass merchants and convenience stores.

The CPG distribution channel is composed of two principal customer groups: grocers and mass merchants and convenience stores. Substantially all sales to grocers and mass merchants consist of packaged products, while a significant majority of sales to convenience stores consists of loose doughnuts sold through the ISB program.

We deliver doughnuts to CPG customers using a fleet of delivery trucks operated by an hourly and commissioned employee sales force. We deliver products to packaged doughnut customers three or more times per week while ISB customers generally are serviced daily. In addition to delivering product, our salespeople are responsible for merchandising our products in the displays and picking up unsold products for return to the Company shop. Our principal products are yeast-raised doughnuts having a short shelf-life, which results in unsold product costs in the CPG distribution channel, most of which are absorbed by the Company. Whenever possible, we seek to eliminate relatively lower sales volume distribution points and consolidate routes in order to reduce delivery costs and increase the average revenue per distribution point and the average revenue per mile driven.

Shop Operations

General store operations. We outline standard specifications and designs for each shop format and require compliance with our standards regarding the operation of each store, including, but not limited to, varieties of products, product specifications, sales channels, packaging, sanitation and cleaning, signage, furniture and fixtures, image and use of logos and trademarks, training, marketing and advertising. Our shops generally operate seven days a week, excluding Christmas.

Quality standards and customer service. We emphasize the importance of performance by linking a portion of both a Company shop manager’s and assistant manager’s incentive compensation to profitability and customer service. We also encourage high levels of customer service and the maintenance of our quality standards by frequently monitoring our stores through a variety of methods, including periodic quality audits, regular mystery shop visits and a toll-free consumer telephone number.

Management and staffing. Our Vice President of Company Stores Operations focuses on operations at retail-only shops and on both the doughnut production and QSR elements of our stores that serve both on-premises and CPG customers. This vice president is supported by two regional directors, as well as market managers in each geographic region to whom shop general managers report. Our CPG operations team is responsible for CPG distribution at all retail locations that also serve CPG customers, and for operation of our eight commissaries. The CPG operations management structure consists principally of a director of commissary operations who supervises the operations of our commissaries through managers at these locations, and a sales organization led by a vice president and consisting of national and regional CPG sales managers who deal with larger customers and in-store sales personnel responsible for managing sales and deliveries to individual customer locations. Store operations and CPG operations closely coordinate their activities because a substantial portion of CPG production takes place in shops which also have significant retail and fundraising distribution.

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We offer a comprehensive manager training program covering the critical skills required to operate a store and a training program for all positions in the shop. The manager training program includes classroom instruction, computer-based training modules and in-shop training. Our staffing varies depending on a store’s size, volume of business and number of sales channels. Hourly employees, along with route sales personnel, are trained by local store management through hands-on experience and training manuals.

Shop Acquisitions and Refranchisings

During the past three fiscal years, we have acquired franchisee shops in Alabama, Arkansas and Illinois. We expect to consider additional franchise acquisitions from time to time when a potential acquisition involves territory that is a good geographic fit with our existing shops operations or acquisition of the shops otherwise satisfies important strategic goals.

In February 2013, we refranchised three locations in Kansas and Missouri. In July 2013, we refranchised our three stores in Dallas, Texas and entered into a development agreement with the new franchisee for 15 additional stores in the Dallas market. In September 2014, we refranchised a shop in Rockville, Maryland and entered into a development agreement with the new franchisee for 20 additional stores in southern Maryland, northern Virginia and the District of Columbia. Over time, we may consider refranchising other stores, most likely shops in markets outside our traditional base in the southeastern United States.

Domestic Franchise Business Segment

The Domestic Franchise segment consists of our domestic store franchise operations and derives revenue principally from initial development and franchise fees related to new stores and from royalties on sales by franchise stores. Domestic Franchise direct operating expenses include costs incurred to recruit new domestic franchisees, to assist with domestic store openings, to assist in the development of domestic marketing and promotional programs, and to monitor and aid in the performance of domestic franchise stores, as well as direct general and administrative expenses and certain allocated corporate costs. Revenues and costs related to licensing certain Company-owned trademarks to domestic third parties other than franchisees also are included in the Domestic Franchise segment.

We generally assist our franchisees with operating procedures, advertising and marketing programs, public relations, store design, training and technical matters. We also provide an opening team to provide on-site training and assistance both in the week prior to and during the first week of operation for each initial store opened by a new franchisee. The number of opening team members providing this assistance is reduced with each subsequent store opening for an existing franchisee.

All domestic franchisees sell products to on-premises customers, and some also sell products to CPG customers. Sales to CPG customers comprised approximately 20% of domestic franchisees’ total sales in fiscal 2016.

Our growth strategy will continue to rely on increasing store count through franchising. As of January 31, 2016, our approximately 40 domestic franchisees operated a total of 181 stores. Approximately 80% of these franchisees operate five or fewer shops, approximately 10% operate between six and ten shops, and approximately 10% operate more than ten shops.

Our domestic franchise development agreements provide for the development of a specified number of stores within a protected geography over a specified time period. Our franchisees currently pay a development fee ranging from $12,500 to $25,000 per location. Typically these fees are paid when the agreement is executed and are non-refundable. Following the execution of a development agreement, we enter into franchise agreements with our franchisees that convey the right to operate a specific Krispy Kreme shop. Our franchise agreements typically include payment of a franchise fee ranging from $12,500 to $25,000 per store and have a 15-year term which is renewable provided the franchisee meets specified criteria. Certain franchisees’ agreements provide that the franchisees may develop, with our consent, additional shops within the franchise territory without payment of initial franchise or development fees. Accordingly, some shop openings by domestic franchisees do not result in the recognition of such fees.

Our current franchise agreements generally provide for royalties of 4.5% of all on-premises and 1.5% of all CPG sales. This royalty fee may vary depending on when the agreements were entered into and range from 3.0% to the current 4.5%. We may, at our discretion, waive or reduce the royalty fee on a temporary or permanent basis. Domestic franchisees are also required to pay 1.0% of sales to the Brand Fund and many of the franchise agreements require franchisees to contribute to an Advertising Fund with a contribution rate of 0.50% of sales.

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The types and locations of domestic franchise stores as of January 31, 2016, along with future development commitments are summarized in the following table.

We have an equity interest in one domestic franchisee operating stores in Washington, Oregon and Hawaii at January 31, 2016, as more fully described in Note 7 to the consolidated financial statements appearing elsewhere herein. We conveyed our equity interest in the domestic franchisee operating stores in South Florida to the majority owner on January 14, 2016 as more fully described in Note 7.

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Changes in the number of domestic franchise stores during the past three fiscal years are summarized in the following table.

International Franchise Business Segment

The International Franchise segment consists of our international store franchise operations and derives revenue from initial development and franchise fees related to new stores and from royalties on sales by franchise stores. The franchise agreements with international area developers typically provide for the payment of royalties of 6.0% of all retail sales, 2.0% - 6.0% of all CPG sales, contributions to the Brand Fund of 0.5% of sales and one-time development and franchise fees generally ranging from $20,000 to $50,000 per store. We may, at our discretion, waive or reduce the royalty fee on a temporary or permanent basis. Additionally, certain franchisees’ agreements provide that the franchisees may develop, with our consent, additional shops within the franchise territory without payment of initial franchise or development fees. Accordingly, some shop openings by international franchisees do not result in the recognition of such fees. Recently, we entered into a master franchising agreement with an international franchisee that permits them to sub-franchise the right to develop and operate stores to third parties. The sub-franchisor is generally required to pay an initial franchise fee for each developed unit as well as ongoing royalties. These are generally single unit agreements to operate a non-producing fresh shop or kiosk. We plan to grow the sub-franchising model on a limited basis.

Direct operating expenses for this business segment include costs incurred to recruit new international franchisees, to assist with international store openings, to assist in the development of marketing and promotional programs, to assist in the development of operational tools and store designs, and to monitor and aid in the performance of international franchise stores, as well as direct general and administrative expenses and allocated corporate costs.

The operations of international stores are similar to those of domestic stores, except that the majority of the sales of international stores are made to on-premises customers. International franchisees pioneered the hub and spoke business model, in which centralized factory stores or commissaries provide fresh doughnuts to satellite locations. Internationally, the fresh shop satellite format predominates, and shops typically are located in pedestrian-rich environments, including transportation hubs and shopping malls. Some of our international franchisees have developed small kiosk formats, which also are typically located in transportation hubs and shopping malls. The satellite shops operated by international franchisees tend to be smaller than domestic satellite shops, and the international satellite shops have lower average unit volumes than do domestic satellite shops.

Product offerings at shops outside the United States include our signature Original Glazed doughnut, a core set of doughnut varieties offered in our domestic shops and a complementary set of localized doughnut varieties tailored to meet the unique taste preferences and dietary norms in the market. Often, our glazes, icings and filling flavors are also tailored to meet local taste preferences. We work closely with our franchisees outside the United States to conduct marketing research to understand local tastes and usage occasions, which drives development of new products and marketing approaches. Beverage offerings at shops outside the United States include a complete program consisting of hot and iced espresso based beverages, frozen drinks, teas, juices, sodas, water and bottled or canned beverages. Drip coffee is also offered in many international markets, but represents a much smaller component of the beverage program relative to the United States due to international consumer preferences.

Internationally, we believe that complementary products such as baked goods and other craveable treat products will play an increasingly important role for our franchisees as they penetrate their markets and further establish the Krispy Kreme brand. These items offer franchisees the opportunity to fill and/or strengthen day part offerings to meet a broader set of customer needs.

Markets outside the United States have been a significant source of growth, and we plan to continue that growth exclusively by franchising. In the past three years, we have focused our international development efforts primarily on opportunities in markets in Asia, the Middle East and Central and South America. In fiscal 2016, we signed new development agreements for shops in Bolivia, Cambodia, Guatemala, Myanmar, Panama, Peru and South Africa.

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With the exception of Canada, India and Australia, there is a single franchisee in each of the countries outside the United States where the Krispy Kreme brand is represented. All of the shops in the Middle East are operated by a single franchisee. We have an equity interest in the franchisee operating a store in Western Canada.

We have development agreements with certain of our international franchisees pursuant to which the franchisees are contractually obligated to open additional stores in their territories. Territories are typically country or region-wide, but for large countries, the development territory may encompass only a portion of a country. The international franchise agreements have a renewable 10 to 15-year term. These agreements generally do not contemplate distribution through CPG channels, although our franchisees in Canada, Australia, Mexico and the United Kingdom make such sales.

The following table sets forth the types and locations of international franchise stores and future commitments as of January 31, 2016:

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Changes in the number of international franchise stores during the past three fiscal years are summarized in the following table.

KK Supply Chain Business Segment

We operate an integrated supply chain to help maintain the consistency and quality of products throughout the Krispy Kreme system. The KK Supply Chain segment buys and processes ingredients it uses to produce doughnut mixes and manufactures doughnut-making equipment that all factory stores are required to purchase. The KK Supply Chain business unit is volume-driven, and our economics are enhanced by the opening of new stores and the growth of sales by existing stores. Substantially all domestic stores purchase all of their ingredients and supplies from KK Supply Chain, while KK Supply Chain sales to international franchise stores are comprised principally of doughnut mix.

We manufacture doughnut mixes at our facility in Winston-Salem, North Carolina. Additionally, we also manufacture doughnut mix concentrates, which are blended with flour and other ingredients by contract mix manufacturers to produce finished doughnut mix while maintaining our intellectual property. We have an agreement with an independent food company to manufacture certain doughnut mixes using concentrate for domestic regions outside the southeastern United States and to provide backup mix production capability in the event of a business disruption at the Winston-Salem facility.

We utilize contract mix manufacturers in multiple countries to produce doughnut mixes from one or more concentrate varieties manufactured by us, but with local sourcing of other mix ingredients. Providing concentrate to be used to make mix locally helps to reduce the substantial international transportation costs associated with shipping finished mixes, to minimize foreign import taxes, and to maintain our intellectual property.

The KK Supply Chain segment also purchases and sells key supplies, including icings and fillings, other food ingredients, juices, signage, display cases, uniforms and other items to both Company and franchisee-owned stores. In fiscal 2012, we entered into an agreement with an independent distributor to distribute products to Company and franchise stores in the eastern portion of the United States, as well as to handle the export of products to the 25 foreign countries in which our international franchisees operate. We have contracted with another independent distributor since 2008 to distribute products to domestic stores in the western portion of the United States. Implementation of the eastern U.S. outsourcing resulted in all of KK Supply Chain’s distribution operations being handled by contract distributors. We believe that moving to a substantially outsourced model has enabled us and our franchisees to benefit from the operating scale of the independent distributors and, in the case of outsourcing all export functions, to minimize the compliance and other risks associated with exporting to a large number of countries with diverse import regulations and procedures.

Flour, shortening, sugar and packaging represent the four most significant cost components of products sold by KK Supply Chain. While the flours used in the production of doughnut mixes are generic, the food properties of flour are different by type of flour and change from crop year to crop year. Accordingly, we periodically must reformulate our doughnut mixes to account for changes in the characteristics of the flour used in their production in order to maintain uniform, high quality doughnut products. We leverage our size and scale to improve the quality of our ingredients, improve purchasing efficiency, and negotiate purchase agreements, which includes purchasing commodities under agreements with terms generally ranging from one month to one year, usually at a fixed price, with most of our suppliers to achieve cost reductions for both us and our franchisees.

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Marketing

Our approach to marketing is a natural extension of our brand equity, brand attributes, relationship with our customers and our values. Our marketing team has extensive food and beverage experience, and we manage our marketing efforts on a global basis.

Domestic

To build our brand and drive our sales in a manner aligned with our brand values, we focus our domestic marketing activities in the following areas:

Shop Experience. Our factory stores (or “shops”) are where most guests first experience a hot Original Glazed® doughnut. Customers know that when our Hot Krispy Kreme Original Glazed® Now sign in the shop window is illuminated, they can enjoy a hot, fresh Original Glazed® doughnut straight off the factory line. Upon entering the shop, guests are captivated by our proprietary “Doughnut Theater” window that allows them to view the entire doughnut-making process from start to finish. Our iconic paper hats are available free to guests and hearken back to the uniforms worn by doughnut makers since our earliest days. We believe this experience begins an enduring relationship with each guest and forms the foundation of the unique Krispy Kreme experience.

Relationship Marketing. Building a “relationship” between our brand and our team members, guests, consumers and their communities is essential to the success of our marketing efforts. To that end, many of our brand-building activities are grassroots-based and focused on building relevancy with these groups. These activities include:

Public Relations. We utilize public relations and media relations, product placement, event marketing and community involvement to generate and maintain brand awareness, brand relevancy and trial of our products. Our public relations activities create opportunities for traditional and digital media as well as current and prospective consumers to interact with the Krispy Kreme brand. Our key messages are as follows:

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Marketing, Advertising and Sales Promotion. Local relationship marketing has been central to building our brand, awareness and relevancy. In addition to these grassroots activation efforts, we will use other media as appropriate to create and maintain brand awareness, communicate promotions and generate interest, trial and store traffic. These media may include traditional tactics ( e.g. , free-standing newspaper inserts, direct mail, shared mail, tactical radio, television and out-of-home, etc.) and digital media ( e.g. , Facebook, Twitter, promoted posts, paid media support, blogs, krispykreme.com, Friends of Krispy Kreme email club, etc.).

These activities may include announcements of limited time offerings and shaped doughnut varieties, such as Valentine’s Day hearts, footballs, Halloween pumpkins and holiday snowmen. We also engage in activities and call attention to and leverage the Krispy Kreme experience and engage the public in non-traditional ways.

International

Krispy Kreme's approach to international marketing utilizes many of the same elements as the domestic marketing approach to build integrated marketing initiatives through shop experience, relationship marketing, public relations and marketing/advertising/sales promotion. One of the key foundations to developing integrated marketing programs that leverage each of these marketing elements is our efforts and focus on driving category-leading new product innovation. New product innovation is a critical focus internationally as it allows us to engage consumers more often through our marketing efforts and, at the same time, evolve our product range to more effectively meet local taste demands.

Our international marketing team works closely with the domestic marketing team to develop global programs that leverage key global occasions and celebrations, including programs for Valentine’s Day, Halloween and the holiday season. In addition, we develop international-specific programs that address the diverse needs of our international markets, regional programs that address trends and occasions unique to Asia/Pacific, Latin America and the Middle East/Europe, and assist in the development of local country-specific programs that leverage unique aspects of our broad set of markets.

To build our brand and drive sales across our international markets, our international team provides strategic leadership, marketing expertise and consulting on local market issues through dedicated regional resources. In partnership with our franchisees, we assist in local marketing planning, product offering innovation, promotional and store activation, and consumer messaging.

Brand Fund

We administer domestic and international public relations and advertising funds, which we refer to as the Brand Funds. Franchise agreements with domestic area developers and international area developers require these franchisees to contribute 1.0% and 0.5% of their sales, respectively, to the Brand Funds. Company stores contribute to the Brand Funds on the same basis as domestic area developers, as do some associate franchisees. Proceeds from the Brand Funds are utilized to develop programs that both increase sales and brand awareness while building brand affinity and are also utilized to measure consumer feedback and the performance of our products and stores. In fiscal 2016, we and our domestic and international franchisees contributed approximately $8.3 million to the Brand Funds.

In fiscal 2016, we instituted a domestic advertising fund to which many domestic franchisees, and all Company shops, contributed at a rate of 0.50% of sales. In fiscal 2016, we and our domestic franchisees contributed approximately $3.1 million to the domestic advertising fund.

Competition

Our domestic and international competitors include a wide range of retailers of doughnuts and other treats, coffee shops, other café and bakery concepts. We also compete with snacks sold through convenience stores, supermarkets, restaurants and retail stores domestically, but to a much lesser extent internationally. Some of our competitors have substantially greater financial resources than we do and are expanding to other geographic regions, including areas where we have a significant store presence. We also compete against other retailers who sell sweet treats such as cookie, cupcake and ice cream shops. We compete on elements such as food quality, convenience, location, customer service and value. We view the uniqueness of our Original Glazed doughnut as an important factor that distinguishes our brand from competitors, both in the doughnut category and in sweet goods generally.

Customer service, including frequency of deliveries and maintenance of fully stocked shelves, is an important factor in successfully competing for convenience store and grocery/mass merchant business. There is an industry trend towards expanded fresh product offerings at convenience stores during morning and evening drive times, and products are either sourced from a central commissary or brought in by local bakeries. In the packaged doughnut market, an array of doughnuts is typically merchandised on a free-standing branded display. We compete for sales with many sweet treats, including national brands, such as Dolly Madison, Entenmann’s, Little Debbie, Sara Lee and Hostess, and also regional brands.

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Trademarks and Trade Names

Our doughnut shops are operated under the Krispy Kreme ^® trademark, and we use many federally and internationally registered trademarks and service marks, including Original Glazed ^® and Hot Krispy Kreme Original Glazed Now ^® and the logos associated with these marks. We have registered various trademarks in over 65 other countries and we generally license the use of these trademarks to our franchisees for the operation of their doughnut shops. We have also licensed our marks for other consumer goods. We believe that out trademarks and service marks have significant value and are important to our brand. When necessary, we aggressively pursue persons who use our trademarks without our consent. To better protect our brand, we have registered and maintain numerous Internet domain names.

Government Regulation

Environmental regulation. We are subject to a variety of federal, state and local environmental laws and regulations. Such laws and regulations have not had a significant impact on our capital expenditures, earnings or competitive position.

Local regulation. Our shops, both those in the United States and those in international markets, are subject to licensing and regulation by a number of government authorities, which may include health, sanitation, safety, fire, building and other agencies in the countries, states or municipalities in which the shops are located. Developing new doughnut shops in particular areas could be delayed by problems in obtaining the required licenses and approvals or by more stringent requirements of local government bodies with respect to zoning, land use and environmental factors. Our agreements with our franchisees require them to comply with all applicable federal, state and local laws and regulations, and indemnify us for costs we may incur attributable to their failure to comply.

Food product regulation. Our doughnut mixes are primarily produced at our manufacturing facility in Winston-Salem, North Carolina and by third parties with which we have contracted for the production of mix. Production at and shipments from our Winston-Salem facility and those other production facilities are subject to applicable federal and state governmental rules and regulations. Similar state regulations may apply to products shipped from our doughnut shops to convenience stores or grocers and mass merchants.

As is the case for other food producers, numerous other government regulations apply to our products. For example, the ingredient list, product weight and other aspects of our product labels are subject to state, federal and international regulation for accuracy and content. Most states periodically check products for compliance. The use of various product ingredients and packaging materials is regulated by the United States Department of Agriculture and the Federal Food and Drug Administration. Conceivably, one or more ingredients in our products could be banned, and substitute ingredients would then need to be identified.

International trade. We conduct business outside the United States in compliance with all foreign and domestic laws and regulations governing international business and trade. In connection with our international operations, we typically export our products, principally our doughnut mixes (or concentrates which are combined with other ingredients sourced locally to manufacture mixes) to our franchisees in markets outside the United States. Numerous government regulations apply to both the export of food products from the United States as well as the import of food products into other countries. If one or more of the ingredients in our products are banned, alternative ingredients would need to be identified. Although we intend to be proactive in addressing any product ingredient issues, such requirements may delay our ability to open shops in other countries in accordance with our desired schedule.

Franchise regulation. We must comply with regulations adopted by the Federal Trade Commission (the “FTC”) and with several state and foreign laws that regulate the offer and sale of franchises. The FTC’s Trade Regulation Rule on Franchising (“FTC Rule”) and certain state and foreign laws require that we furnish prospective franchisees with a franchise disclosure document containing information prescribed by the FTC Rule and applicable state and foreign laws and regulations. We register in domestic and foreign jurisdictions that require registration for the sale of franchises. Our domestic franchise disclosure document complies with FTC disclosure requirements, and our international disclosure documents comply with applicable requirements.

We also must comply with a number of state and foreign laws that regulate some substantive aspects of the franchisor-franchisee relationship. These laws may limit a franchisor’s ability to: terminate or not renew a franchise without good cause; interfere with the right of free association among franchisees; disapprove the transfer of a franchise; discriminate among franchisees with regard to charges, royalties and other fees; and place new shops near existing franchises. Bills intended to regulate certain aspects of franchise relationships have been introduced into the United States Congress on several occasions during the last decade, but none have been enacted.

Employment regulations. We are subject to state and federal labor laws that govern our relationship with team members, such as minimum wage requirements, overtime and working conditions and citizenship requirements. Many of our team members are paid at rates which are influenced by changes in the federal wage regulations. Accordingly, changes in the wage regulations could increase our labor costs. The work conditions at our facilities are regulated by the Occupational Safety and Health Administration and are subject to periodic inspections by this agency. In addition, the enactment of recent legislation and resulting new government regulation relating to healthcare benefits may result in additional cost increases and other effects in the future.

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Other regulations. We are subject to a variety of consumer protection and similar laws and regulations at the federal, state and local level. Failure to comply with these laws and regulations could subject us to financial and other penalties. We have several contracts to serve United States military bases, which require compliance with certain applicable regulations. The stores which serve these military bases are subject to health and cleanliness inspections by military authorities.

Seasonality

Our sales peak at various times throughout the year due to certain promotional events and holiday celebrations. Additionally, our hot beverage sales generally increase during the fall and winter months while our iced beverage sales generally increase during the spring and summer months. Quarterly results also may be affected by the timing of the opening of new stores and the closing of existing stores. For these reasons, results for any quarter are not necessarily indicative of the results that may be achieved for the full fiscal year.

Research and Development

New product innovation is important to the success of our business. We believe that the development of new Krispy Kreme doughnuts, beverages and other products attracts new customers to our brand, increases same store sales, and allows our shops to strengthen day part offerings. One of our properties in Winston-Salem, North Carolina includes research and development facilities including test kitchens and doughnut producing equipment used in developing new products and processes.

Team Members

We employ approximately 5,200 people. Of these, approximately 200 are employed in our headquarters and administrative offices and approximately 100 are employed in our manufacturing and distribution center. We employ approximately 600 employees in our commissaries which serve CPG customers almost exclusively, most of whom are employed full-time. In our other stores, we employ approximately 4,300 team members, of which approximately 2,300 are full-time (including approximately 700 managers, assistant managers and supervisors) with the balance employed part-time.

We are not a party to any collective bargaining agreement, although we have experienced occasional unionization initiatives. We believe our relationships with our team members generally are good.

Executive Officers

Our executive officers as of the date of this report are listed below.

Cathleen D. Allred, 43, has served as Senior Vice President – Human Resources and Organizational Development since May 2014. She served as Vice President – Corporate Human Resources and Training from March 2008 to May 2014. Prior to that, Ms. Allred served as Human Resources Director from November 2006 to March 2008. Ms. Allred joined Krispy Kreme in March 2002 as Human Resources Manager, and served in that capacity until March 2005 when she briefly left Krispy Kreme and was Human Resources Manager at Polo Ralph Lauren. She rejoined Krispy Kreme as Director of Training in October 2005. Prior to joining Krispy Kreme, she served in recruitment and human resources management positions at LifeStyle Furnishings International and American Technical Resources. Through these different company assignments, Ms. Allred developed expertise in recruitment, training, and organizational development.

Cynthia A. Bay, 58, has served as Senior Vice President of U.S. Franchises and Company Stores since August 2011. Ms. Bay joined Krispy Kreme in July 2008 as Senior Vice President of Company Store Operations. From 2006 to 2008, Ms. Bay was an independent consultant focused on operations, training, and development. Formerly, she held various management positions within McDonald’s Corporation from 1981 to 2006, where she gained extensive leadership experience in multi-unit operations, training, and franchising. Most recently, Ms. Bay was Vice President of Operations, Training, and Franchising at McDonald’s Corporation from 2003 to 2006. Ms. Bay has announced her retirement effective March 31, 2016.

Dan L. Beem, 47, has served as Senior Vice President and President of International since February 2014. Prior to joining Krispy Kreme, Mr. Beem served as President of Cold Stone Creamery and Kahala Corp. International, where he directed all international and franchise development for Kahala's 14 brands and more than 3,000 stores worldwide, including over 1,500 Cold Stone Creamery locations in 25 countries. Prior to joining Cold Stone in 2003, he held executive and management positions with Planet Hollywood, T.G.I. Fridays, Gordon Biersch Brewing Company, and NASCAR.

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Price Cooper, 44, has served as Executive Vice President since January 2015 and as Chief Financial Officer since April 3, 2015. Mr. Cooper has over 15 years of restaurant industry experience. Prior to joining Krispy Kreme, Mr. Cooper was employed by Texas Roadhouse, Inc. from 2006 to 2015, serving as Chief Financial Officer from August 2011 to January 2015 and as Vice President of Finance from August 2006 until August 2011. For approximately eight years before joining Texas Roadhouse, Mr. Cooper held various financial and accounting positions at Ruby Tuesday, Inc. Before working in the restaurant industry, Mr. Cooper worked in public accounting for over five years, serving a variety of clients in the financial, construction, retail, and other industries.

Tom Kuharcik, 45, has served as Senior Vice President of Supply Chain Operations since August 2015. He joined Krispy Kreme from The Scotts Miracle-Gro Company, where he most recently served as Vice President, Global Supply Chain, with responsibility for over 45 manufacturing plants and 12 distributions centers globally. At the Scotts Company, he previously held the positions of Vice President, Global Operations and Engineering; Vice President, North American Manufacturing; Director of Lawns, Controls, and Pro Operations; Plant Manager, Marysville Operations; and Plant Manager, Milpitas Professional Operations. Before joining the Scotts Company in 2001, Mr. Kuharcik spent seven years in the specialty chemical industry at National Starch and Chemical Company and Rohm and Haas. Mr. Kuharcik has a degree in chemical engineering and an extensive operations background, which includes more than 20 years of experience in supply chain.

Tony Thompson, 49, has more than 25 years of food service, grocery products and beverage experience. Mr. Thompson has served as President and Chief Executive Officer of Krispy Kreme since June 2014. Prior to joining Krispy Kreme in June 2014, Mr. Thompson worked for Papa John’s International, Inc., where he most recently served as President and Chief Operating Officer. At Papa John’s, he previously held the positions of Executive Vice President, Global Operations; Executive Vice President, North American Operations; Senior Vice President, PJ Food Service; and Vice President, QCC Operations. Prior to joining Papa John’s in 2006, Mr. Thompson worked for The Scotts Miracle-Gro Company for six years as Plant Manager, Director of Marysville Operations and Director of Lawn and Controls Operations. Before joining the Scotts Company, he spent four years with Conagra Grocery Products Company and seven years in various roles with Gulf Coast Coca Cola. In addition, Mr. Thompson currently sits on The Salvation Army’s National Advisory Board.

Available Information

We maintain a website at www.krispykreme.com . The information on our website is available for information purposes only and is not incorporated by reference in this Annual Report on Form 10-K.

We make available on or through our website certain reports and amendments to those reports, if applicable, that we file with or furnish to the SEC in accordance with the Exchange Act. These include our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and amendments to those reports. We make this information available on our website free of charge as soon as reasonably practicable after we electronically file the information with, or furnish it to, the SEC. In addition, you may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE., Washington, DC 20549. You may obtain information about the operation of the SEC’s Public Reference Room by calling the SEC at 1 (800) SEC-0330. The SEC also maintains an Internet site ( http://www.sec.gov ) that contains reports, proxy and information statements, and other information regarding the Company that we file electronically with the SEC.