Business

PAUL GARBER

Scripps Howard News Service

Must credit Winston-Salem Journal

Winston-Salem Journal

Let the doughnut wars begin.

Franchisees for Dunkin' Donuts, the nation's largest coffee-and-doughnut franchise, are in the midst of a fried-dough offensive, bringing at least 13 stores to the home of Krispy Kreme, around Winston Salem in North Carolina's Forsyth and Davie counties.

''We are going to saturate the market, because we are looking for customer convenience,'' franchisee Sunny Patel said. ''Wherever they go, they can find Dunkin' Donuts.''

Patel is planning five stores.

Sundeep Makhani, who plans to bring eight Dunkin' Donuts to the region in the next four years, said he, too, looks at Krispy Kreme's hometown and sees a hole in the doughnut market.

That's a minimum figure, Makhani said. If the market is there, he may try to add more stores.

Brian Little, a spokesman for Krispy Kreme, said that the company doesn't comment on the activities of other companies. He said that the local market could accommodate more doughnut stores. ''We believe that there is room out there for everyone,'' Little said.

Some may look at the Dunkin' expansion into Krispy Kreme territory as a turf war that would have Homer Simpson drooling -- the heavier, cakelike confection going up against the airy, sugar-glazed treat. But Makhani downplays the competition.

He said that coffee drinkers, not doughnut eaters, drive the early-morning market. Dunkin' Donuts has a strong reputation for its coffee. Makhani said he sees McDonald's and Bojangles' as bigger competitors than Krispy Kreme.

Makhani said he doesn't view Winston-Salem as a Krispy Kreme-dominated town despite the presence of its corporate headquarters here.

''If this is a Krispy Kreme hometown, why would they only have one retail store?'' he said.

Dunkin's expansion may wound Krispy Kreme's corporate pride, said Michael Lord, an associate professor of management at Wake Forest University.

''If anything, it might be a blow to the pride of Krispy to have so many Dunkin's locally,'' he said. ''Maybe it will spur them to action.''

''Dunkin's strategy is a better business model,'' Lord said. ''Krispy Kreme's problem continues to be in large part that it doesn't have enough outlets convenient enough to buy doughnuts and coffee. Coffee is an extremely convenience-based business.''

The company's stock, which had gone public in 2000, reached a peak in August 2003, when it closed at $49.37, adjusted for two splits. In May 2004, the stock began to tumble on reports of a downturn in profits that the company based on a trend toward low-carbohydrate foods.

Some analysts also said that overexpansion was partly the cause of Krispy Kreme's woes. In May 2004, there were 373 Krispy Kreme stores in the United States. As of this month, the company was down to about 234 stores nationwide, Little said.

Meanwhile, Dunkin's expansion is part of a national plan launched in 2006, said Lynette McKee, vice president of franchising for Dunkin' Brands, which is based in Massachusetts. The plan includes expansion into new markets -- particularly out west -- as well as places that already have a store.

At the end of last year, Dunkin' Donuts had 5,769 stores nationwide.

(E-mail Paul Garber at pgarber(at)wsjournal.com.)

(Distributed by Scripps Howard News Service, www.scrippsnews.com.)

AP-NY-08-18-08 1319EDT