The 2025 Doughnut Day, which promised to be a sweet celebration for Krispy Kreme, is shaping up to be one of the most bitter in the company’s recent history. Alongside its stalled expansion with McDonald’s, it now faces a legal tsunami: multiple class action lawsuits for allegedly misleading investors.
What happened to Krispy Kreme’s presence at McDonald’s?
Krispy Kreme had generated high expectations with its venture into McDonald’s, initially announced in 2024. The plan was to bring its iconic glazed doughnuts to more than half of the fast-food chain’s locations in the United States by the end of 2025, aiming for nationwide coverage by 2026.
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The strategy seemed to be progressing successfully: by March 30, 2025, Krispy Kreme doughnuts were already available in over 2,400 McDonald’s restaurants, mainly in Indiana and Kentucky. However, in its latest financial report dated May 8, the company announced that it would reassess the deployment schedule together with McDonald’s and would not expand to more locations during the second quarter.
“We are seeking a balanced operational framework that supports healthy long-term financial growth,” the company stated in an official release, emphasizing that the pause does not signify the end of the partnership but a strategic reassessment.
What impact did this have on Krispy Kreme’s finances?
The decision to halt the expansion was not isolated. Krispy Kreme reported a 20.1% drop in net income, bringing it down to $59.4 million. This decline is attributed to several factors, including divestment in its subsidiary Insomnia Cookies and the steady rise in operating costs, from basic supplies to increased wages.
The combination of these issues sparked a strong reaction in the stock market. Krispy Kreme’s shares fell by up to 10% after the announcement. Additionally, the company withdrew its previous annual financial outlook and refrained from updating it, citing “macroeconomic uncertainty” and the lack of clarity regarding its future with McDonald’s.
For the second quarter of 2025, Krispy Kreme expects to achieve net revenues between $370 million and $385 million and an adjusted EBITDA between $30 million and $35 million, figures that reflect much more modest growth than initially anticipated.
How does McDonald’s sales decline influence this crisis?
McDonald’s is also not having its best moment. According to its first-quarter 2025 earnings report, U.S. sales fell by 3.6% and global sales by 1%. The company attributed the drop to persistent inflation and economic uncertainty.
Although the partnership with Krispy Kreme seemed like an opportunity to revitalize sales, demand for doughnuts at McDonald’s restaurants declined after the initial enthusiasm. This, in turn, affected the average sales per location, one of the key performance indicators.
While McDonald’s is striving to introduce new products, such as the McCrispy Strips and the much-anticipated return of the Snack Wraps, the weakness of the collaboration with Krispy Kreme has been exposed, adding pressure on both giants.
Why are Krispy Kreme and its executives facing class action lawsuits?
The latest blow to Krispy Kreme comes not only from the markets but also from the legal front. Law firms like Rosen Law Firm, Gross Law Firm, and Levi & Korsinsky, LLP have initiated class action lawsuits representing investors who purchased Krispy Kreme shares between February 25 and May 7, 2025.
According to the lawsuits, the company allegedly committed several irregularities:
- False statements: Executives are accused of making optimistic public statements about the partnership with McDonald’s while concealing the decline in demand after the initial launch.
- Financial deception: Investors claim that critical information was withheld that would have impacted their investment decisions, such as the fact that the partnership was not profitable and that there was a considerable risk of pausing the expansion.
- Economic damages: As a result of these revelations, investors suffered significant financial losses.
The law firms encourage those who purchased Krispy Kreme shares during the specified period to join the lawsuits. Rosen Law Firm, for example, highlights that no upfront payment is required to participate in the class action and emphasizes its successful track record in securities litigation.
“The firm has recovered hundreds of millions of dollars for investors,” the statement notes, highlighting its leadership in class actions against companies that fail to meet transparency obligations.
If the class action lawsuits are successful, Krispy Kreme could face multimillion-dollar compensations for its shareholders. Additionally, its reputation would be affected, further complicating its national expansion.
Origin of Doughnut Day
Doughnut Day originated in the United States during World War I. In 1917, a group of Salvation Army volunteers, known as the “Doughnut Dollies,” began preparing and serving doughnuts to soldiers on the front lines to boost their morale and remind them of the taste of home.
To commemorate this effort, the Salvation Army established National Doughnut Day in 1938, celebrated on the first Friday of June each year.
This date has since spread worldwide and has become an occasion to enjoy this delicious treat and remember the history behind its creation.
