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Krispy Kreme signs franchise agreement in South America

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WINSTON-SALEM, N.C. — Krispy Kreme Doughnuts Inc. is headed south, as in Colombia, South America. The company has landed its first franchise agreement on the continent.

The company said it has signed a deal with IRCC Ltda., a subsidiary of the VA! Group, to develop 25 shops over five years. Many of the shops will be in Bogota, Medellin and Barranquilla.

For years Krispy Kreme officials have been pointing to South America as a promising frontier for its delicacies and as a key part of its plans to have at least 900 international shops by the end of its fiscal year 2017. It also is pursuing a franchisee in Brazil.

“This is a very exciting and important announcement for Krispy Kreme as we enter the market in South America with IRCC, the leader and a true innovator in the Colombian food-service industry,” said Jeff Welch, Krispy Kreme’s president for its international unit.

IRCC has 30 years of experience of distributing and selling international brands in Colombia and Latin America.

“Colombia offers Krispy Kreme an attractive opportunity with its growing economy and long customer experience with international brands,” Welch said.

Felipe Baptiste, chief executive of VA! Group, said he is confident Krispy Kreme will find success in Colombia as “Colombians are seeking out new and different flavors.”

“In a market where the consumption per capita has a lot of space to grow, we are very grateful to Krispy Kreme for choosing us as its partner.”

Counting the United States, Krispy Kreme has franchisee shops in 22 international markets: Australia, Bahrain, Canada, China, Colombia, Dominican Republic, Indonesia, Japan, Kuwait, Lebanon, Malaysia, Mexico, the Philippines, Qatar, Saudi Arabia, South Korea, Taiwan, Thailand, Turkey, United Arab Emirates and the United Kingdom. The company also has a franchisee in Puerto Rico, a U.S. commonwealth.

Its largest planned international market is in South Korea, where it already has 73 shops and a franchisee is adding 60 new locations over five years. Krispy Kreme’s franchisee in Mexico has committed to operating 128 shops in the country.

In the past two years, Krispy Kreme also has announced major expansions for the United Kingdom (35 planned new shops, for a total of 80) and Japan (from 73 to 94), as well as entering India (115 shops), Russia (40), Singapore (15) and Taiwan (10).

Krispy Kreme also has a goal of more than 400 domestic shops by the end of fiscal 2017. It had 240 shops as of August.

The main concern expressed by analysts since Krispy Kreme’s return to profitability in 2011 has been whether current management can avoid previous management’s mistake of expanding beyond its ability to handle growth.

Jim Morgan, the company’s chairman and chief executive, has said he is convinced the company will post consistent growth through increasing international sales, including at sites with lots of pedestrians, such as train stations and airports.

Credit: Richard Craver / Winston-Salem Journalrcraver@wsjournal.com