Fast-food giant McDonald’s and popular donut chain Krispy Kreme are set to terminate their partnership in the United States by July. The ambitious plan to sell Krispy Kreme donuts at potentially over 14,000 McDonald’s locations across the country is ending early, primarily due to challenges in managing the associated costs.
The collaboration, which began in March 2024, had only managed to roll out Krispy Kreme donuts to approximately 2,400 McDonald’s restaurants before the decision to end the agreement was made.
Why the Partnership Proved Unsustainable
According to Krispy Kreme CEO Josh Charlesworth, efforts to bring costs in line with the demand observed at the individual restaurant level were ultimately unsuccessful. This made the partnership economically “unsustainable” for the donut maker. The difficulty in aligning operational costs with the scale and pace of the rollout appears to be a significant factor in the early termination.
Impact on Both Companies
For Krispy Kreme, the end of the partnership comes after signs of strain. The company withdrew its annual financial forecast in May, indicating it was reassessing the program’s deployment schedule with McDonald’s. The donut chain’s shares have reportedly seen a significant decline this year. The original agreement also included an exclusivity clause preventing Krispy Kreme from supplying other U.S. quick service restaurants through the end of 2026, a commitment that is likely now released with the partnership’s termination.
From McDonald’s perspective, the Krispy Kreme donut offering was described as a “small, non-material part” of its overall breakfast business. McDonald’s views its breakfast segment as a “core pillar” of its strategy and has been actively working to enhance it through various other initiatives, including adding new items and increasing marketing efforts. Therefore, the end of this specific collaboration is not expected to fundamentally alter McDonald’s broader focus on its morning menu.
In essence, while the partnership held significant promise, particularly for Krispy Kreme’s reach, operational hurdles and cost challenges prevented it from scaling effectively, leading to its premature conclusion.
