The Krispy Kreme in Times Square cost at least $10 million

Was that a good deal? And what does that say about a doughnut company's once-Southern street cred?

My wife and I took the kids to New York City for the first time last weekend. Basically, everything the kids know about New York they learned from “Home Alone 2.” My 8-year-old daughter asked me if the people from the movie still worked at The Plaza hotel, and I had to inform her that no, Tim Curry never in fact held a concierge position there.

But it was great! We walked around Central Park, got giant chocolate drinks at Serendipity 3, hit up The Met and the American Museum of Natural History, and traipsed around 30 Rock, where there was SNL50 stuff all over the place. Did we see anyone famous? Nope! Did the kids have any idea what Saturday Night Live is? Not one bit!

Also, I wore my Wake Forest stocking cap/toque/beanie around and got chatted up by two well-off older guys who shouted “Go Deacs” at me. LinkedIn states that there are approximately 6,000 Wake Forest alumni in the New York metro area, and all of them are walking out of large glass buildings in midtown at all times.

I digress. We stayed near Times Square, and we did all of the Times Square-y things. We saw where they drop the big ball on New Year’s eve. We saw people dressed as Elmo and Voltron. And we spent way to much time inside the M&M Store. As my kids gazed upon all sorts of weird anthropomorphic candy merch, I looked across Broadway and saw… this:

Even when I leave North Carolina, North Carolina is following me.

This thing is a 4,500 square foot flagship Krispy Kreme “Hot Light Theater Shop,” which basically means it is an extremely big … Krispy Kreme. Inside they sell souvenirs, t-shirts, and, yes, doughnuts. It is the only place where you can get a special Big Apple doughnut with a “Red Delicious flavored Kreme filling and dipped in a sweet, shiny red shimmer mirror glaze.” It really does look like an apple.

As I gazed down upon this scene, I had questions. How much does something like this cost? Is it really possible to sell enough doughnuts to make a big store in an astonishingly expensive neighborhood worth it? Why go to all this trouble? Is it really worth it to put all of that work into one single location? And does this, at long last, end the debate over whether Krispy Kreme is a Southern company?

First thing: The cost. This store was in the works for three years before it opened in September 2020. At the time, Krispy Kreme was privately owned and didn’t have to tell anyone how much it paid to open this sucker. But the next year, the company went public (with the stock ticker DNUT, awww how cute). In its required filings with the SEC, the cost of the store was so significant that it got its own line under “net losses.” In 2019 and 2021, the company said it paid $10.3 million in pre-opening costs for that single location, “including shop design, rent, and additional consulting and training costs incurred and reflected in selling, general and administrative expenses.” It’s hard to say how much they’ve paid in rent since then, but my quick back-of-the-napkin calculation says it’s probably millions of dollars per year. For comparison, the company says it requires a total investment of $2 million to $5 million to get a regular Hot Light Theater store up and running. Those are the ones with the glowing neon light and the doughnut assembly lines.

So did that big investment pay off? Not initially! Remember that September 2020 was right in the thick of the global pandemic, an issue that the company did not anticipate when it started conceiving of a big store in Times Square. A day before it opened, CNN showed up and wondered if anyone else would show up. On opening day, there was a socially-distanced line around the block. The store got a so-so review from Rebecca Alter at Grub Street, who noted that a Krispy Kreme doughnut at this giant shrine is still … a Krispy Kreme doughnut. “If you’re ever in Times Square again, and there isn’t a line at the walk-up window, and the red light is on, I’d say treat yourself to an original glazed. But skip the interior. A T-shirt that says “DOUGHNUT DISTURB” is not worth the respiratory risk.”

At the time, foot traffic was down about 90%, but more recent numbers show that it’s bounced back to an average of 250,000 to 300,000 people PER DAY. For comparison, uptown Charlotte only gets those numbers whenever there’s, like, a Morgan Wallen concert happening at Bank of America Stadium.

The area around Krispy Kreme is at Broadway and W. 48th Street, on the north end of the square. It gets a fraction of the overall foot traffic, something like 25,000-30,000 people a day. That’s still pretty good! Almost any other city would kill to get that many people walking around downtown.

But even if a horde of people doesn’t duck in for a doughnut, there are other reasons for this store’s existence. One is that it’s literally a small factory, capable of making 4,560 doughnuts an hour. Those donuts can go out for delivery (my goodness, the John Mulaney SNL50 musical about delivery e-bikes being everywhere was spot on). They can also supply smaller Krispy Kremes around New York City. For a time, the only store open in the city was at Penn Station (ew). Now there are seven, and the Broadway store has the capability to send its donuts wherever they’re needed.

There’s another reason: The store doubles as a giant billboard. From a Yahoo! Finance report in 2018:

Times Square Alliance said visitors to the neighborhood spend on average eight minutes exclusively looking at billboards. And those billboards and flashy signs act as a backdrop for selfies and news cameras. The Times Square Alliance said close to 250,000 people post on social media about their experience in Times Square every day.

Put another way, a 15-by-18 foot tall, 8,000 pound spinning “Hot Now” sign that glows from 80 feet above Times Square is gonna end up in a lot of tourists’ Instagram stories. People are gonna talk about it! Look at me, giving them some earned media by merely writing this story.

All of this fits neatly into Krispy Kreme’s marketing strategy. In their very long and dry annual 10-K reports, they talk glowingly about how they love to pull stunts to get attention. Usually that comes in the form of giveaways, partnerships with famous people and brands, or one-off special donuts. In this case, it comes in the form of a seven-figure store in the busiest, most touristy part of New York City.

Krispy Kreme is going through some changes. They’re getting ready to sell their donuts at McDonald’s, but they just sold off their majority stake in Insomnia Cookies, and they’re going through some restructuring. They’ve been using this big store to try and establish a foothold in New York City, which is clearly Dunkin’ territory. They have a newish CEO who’s trying to figure out what makes his doughnut company different than any other doughnut company.

I know that Krispy Kreme was founded in 1937 in Winston-Salem. I know that it still makes almost all of its secret-recipe doughnut formula in a factory in that city. I know its headquarters have always been in North Carolina. And I know that it’s a source of pride for people in this state, in the same way that Cheerwine and Bojangles and NASCAR are. A few years ago, when Krispy Kreme held its IPO, I wondered aloud whether this company was a Southern company. I think, after seeing the Times Square Krispy Kreme, that the answer is: Not anymore. Things like barbecue and sweet tea feel like they have enough regional nuance to be “from” a place. Biscuits and bagels get their mojo from locally-sourced flour and water. A Southern biscuit and a New York bagel are very distinct.

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Is Krispy Kreme a Southern Company?

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Doughnuts are universal. And just because something was founded here doesn’t make it a thing we own. Pepsi isn’t a New Bern thing. Vick’s Vaporub isn’t a Greensboro thing. Putt-Putt isn’t a Fayetteville thing. They’re just … things. Once you go public, you cease to be regional. You just want to be everywhere. Opening a store in the busiest part of New York City is one way to show that you have global aspirations.

Later, as we made our way over to the Lego Store, I glanced inside the Krispy Kreme on Broadway. There were a few folks in line. A family looked at the t-shirts. We kept walking. I didn’t stop in for a doughnut. But that’s okay. I know there are plenty of places to find one if I want.