Krispy Kreme confirmed Friday that it will close its Fort Union store, but also is looking at opportunities to open a location in downtown Salt Lake City.
"Utah's a great state for us, and it's just now getting to be good doughnut-eating weather: cloudy and gray," said Lincoln Spoor, Krispy Kreme's area developer, by phone from Nevada.
Spoor said the company's Fort Union store, 7535 S. Union Park Ave., will be closing "by the end of the month, if not sooner."
An offer by a bank for the site, together with a change in Krispy Kreme's business model, resulted in the decision to close, Spoor said. The company's business model is changing from one reliant on larger "factory stores" to smaller "tunnel oven" stores, in which doughnuts are not rolled and baked on site but are delivered, reheated in an oven and glazed on site.
"It's a smaller concept, so you can build more of them," Spoor said.
The Sandy closure will be accompanied by a notice to customers that Krispy Kreme isn't going anywhere but rather will be expanding in the state, Spoor said.
"We are looking at some sites downtown, and some sites on the west side" of the Salt Lake Valley, he said. "We're looking closely at the Salt Lake-to-Orem market."
The company is "very close" to obtaining a site in downtown Salt Lake City, Spoor said, but declined further comment. In the next year, Krispy Kreme hopes to open two of the "tunnel oven" stores in Utah and expects to have an announcement regarding those stores by the end of the first fiscal quarter of 2007.
"We want to be more convenient to people," Spoor said. "The way we've done it before is through wholesale. But you can only do that so much until you begin to be less special, and ubiquitous."
The new stores will be about 1,200 square feet to 1,500 square feet. In addition to the company's trademark doughnuts, Spoor said he's also working on cookies and snack cakes.
"They'll equally be able to cause that 'Oh, my gosh,' reaction that people have about the doughnuts," Spoor said.
In addition to the Fort Union location, Krispy Kreme's Utah operations include stores in Layton and Orem.
Founded in 1937 in North Carolina, Krispy Kreme appeared to be a company in transition in its financial report for fiscal 2006, which was due July 31 but filed Tuesday night.
According to the 2006 annual report, average weekly sales per store — a number that includes sales at stores where the doughnuts are made and at locations where prepackaged doughnuts are sold — decreased 21.9 percent from fiscal 2005 to fiscal 2006, after declining 18.6 percent in the previous year.
While sales were slipping, Krispy Kreme's corporate executives were preoccupied with sorting out an accounting mess. A stock that once traded above $50 bottomed out last year around $4, and the company's board ousted two former executives it concluded were trying to "manage earnings" to meet Wall Street expectations.
The company has reached a tentative $75 million settlement of a securities class action lawsuit, but investigations by the federal Securities and Exchange Commission and federal prosecutors in New York remain unresolved. The company has yet to file six quarterly earnings reports, dating as far back as fiscal 2005.
For fiscal 2006, the company reported revenues of $543 million and a net loss of $136 million. A year earlier, Krispy Kreme lost $198.3 million on revenue of $707.8 million.
The company's annual report cautioned investors that the new executives need time to become familiar with each other and the business, and their efforts "have been hindered at times by a lack of institutional knowledge." Still, Darren Tristano, executive vice president of Technomic Inc., a Chicago-based food service industry research and consulting firm, said that there are some obvious things the company should try to boost sales — things it seems to be trying in Utah.
"They have to broaden their offering," Tristano said, by selling a wider array of beverages, for example.
"We've seen a lot more competition on the breakfast front, and right now they are not a major player."
E-mail: jnii@desnews.com