Editing Krispy Kreme (section)

===IPO and accounting scandals===
On April 5, 2000, the corporation went [[Initial public offering|public]] on the [[NASDAQ]] at $21 using the [[ticker symbol]] KREM.<ref>[http://www.allbusiness.com/retail/retailers-food-beverage-stores-specialty/6519563-1.html] {{webarchive|url=https://web.archive.org/web/20100915232937/http://www.allbusiness.com/retail/retailers-food-beverage-stores-specialty/6519563-1.html|date=September 15, 2010}}</ref> On May 17, 2001, Krispy Kreme switched to the [[New York Stock Exchange]], with the ticker symbol KKD, which it carried until its private acquisition. The stock reached what would be its all-time high of $50 on the New York Stock Exchange in August 2003, a gain of 135 percent from its IPO price. For the fiscal year ending in February 2004, the company reported sales of $665.6 million and operating profits of $94.7 million from almost 400 stores (including international locations). The market initially considered the company as having "solid fundamentals, adding stores at a rapid clip and showing steadily increasing sales and earnings."<ref name="cfo" />

In May 2004, the company missed quarterly estimates for the first time and suffered its first loss as a public company. Chairman and CEO [[Scott Livengood]] attributed the poor results to the [[low-carbohydrate diet]] craze. This explanation was viewed with skepticism by analysts, as "blaming the [[Atkins diet]] for disappointing earnings carried a whiff of desperation",<ref name="cfo">{{cite journal |author=O'Sullivan, Kate |url=http://www.cfo.com/printable/article.cfm/4007436?f=options |title=Kremed! |via=CFO.com |date=2005-06-01 |access-date=2012-08-09 |journal=[[CFO Mag.]] |archive-url=https://web.archive.org/web/20130115234101/http://www.cfo.com/printable/article.cfm/4007436?f=options |archive-date=January 15, 2013 |url-status=dead }}</ref> and as rival doughnut chain, [[Dunkin' Donuts]], has not suffered from the low-carb trend over the same compared period.<ref name="businessweek">{{cite magazine |url=http://www.businessweek.com/magazine/content/05_02/b3915649.htm |archive-url=https://web.archive.org/web/20050104053548/http://www.businessweek.com/magazine/content/05_02/b3915649.htm |url-status=dead |archive-date=January 4, 2005 |title=Scott Livengood |magazine=Businessweek |date=2005-01-09 |access-date=2012-08-09}}</ref>

By 2005, the company's stock had lost 75-80 percent of its value, amid earnings declines, as well as an [[U.S. Securities and Exchange Commission|SEC]] investigation over the company's alleged improper accounting practices.<ref>{{cite magazine |url=http://www.businessweek.com/investor/content/jan2005/pi20050119_0925_pi015.htm |archive-url=https://web.archive.org/web/20050409092414/http://www.businessweek.com/investor/content/jan2005/pi20050119_0925_pi015.htm |url-status=dead |archive-date=April 9, 2005 |title=The Holes in a Krispy Kreme Rally |magazine=Businessweek |access-date=2012-08-09}}</ref> A turnaround plan in December 2005 aimed to close unprofitable stores in order to avoid bankruptcy.<ref name="cfo" /><ref>{{cite news |url=http://www.bizjournals.com/triad/stories/2006/01/02/story1.html?page=all |first=Mark |last=Tosczak |title=Slim down or melt down? Issues loom at Krispy Kreme |date=2006-01-02 |access-date=March 16, 2012 |archive-date=January 17, 2013 |archive-url=https://web.archive.org/web/20130117054510/http://www.bizjournals.com/triad/stories/2006/01/02/story1.html?page=all |url-status=live }}</ref>

Analysts suggested that Livengood had expanded the chain too rapidly after the [[Initial public offering|IPO]], which concentrated certain markets with too many stores.<ref name="businessweek" /> While this approach initially grew revenues and profits at the parent-company level, due to [[royalty payment]]s from new franchisees, this reduced the profitability of individual franchisees in the long run as they were forced to compete with one another. For the 2003-04 fiscal year, while the parent enjoyed a 15 percent increase in second-quarter revenues, same-store sales increased only a tenth of a percent. Krispy Kreme also had [[supermarket]]s and gas stations carry their doughnuts, which soon contributed up to half of the chain's sales, creating further market saturation as well as increasing competition to its franchisees. All this expansion devalued Krispy Kreme brand's novelty, by making the once-specialty doughnuts ubiquitous, particularly as the newer sales outlets required pre-made doughnuts as opposed to the ones made fresh in factory stores, which alienated brand devotees.<ref name="cfo" />

Besides royalty payments from new stores, the parent company also enjoyed significant profits by requiring franchisees to purchase mix and doughnut-making equipment from the parent's Krispy Kreme Manufacturing and Distribution (KKM&D) division. KKM&D earned $152.7 million in 2003, which made up 31 percent of sales, with a reported operating margin of 20 percent or higher, but these mark-ups were largely at the expense of its franchisees. By comparison, rival chain [[Dunkin' Donuts]] generally avoids selling equipment or materials to its franchisees which "keeps company and franchisee interests aligned", as well as having a royalty stream based on same-store sales.<ref name="cfo" />

Krispy Kreme has been accused of [[channel stuffing]] by franchisees, whose stores reportedly "received twice their regular shipments in the final weeks of a quarter so that headquarters could make its numbers".<ref name="cfo" /> The company was also dogged by questionable transactions and self-dealing accusations over the buybacks of franchisees, including those operated by company insiders.<ref name="businessweek" /> A report released in August 2005 singled out then-CEO Livengood and then-COO John W. Tate to blame for the accounting scandals, although it did not find that the executives committed intentional fraud.<ref>{{cite news |url=https://www.nytimes.com/2005/08/11/business/11place.html |work=The New York Times |first=Melanie |last=Warner |title=Report Details Some Failures That Hurt Krispy Kreme |date=2005-08-11 |access-date=February 19, 2017 |archive-date=September 6, 2013 |archive-url=https://web.archive.org/web/20130906071834/http://www.nytimes.com/2005/08/11/business/11place.html |url-status=live }}</ref>

On March 4, 2009, the SEC issued a cease and desist order against Krispy Kreme for its actions inflating their revenues and engaging in illicit activities regarding the purchasing of its own stores to prop up revenues and setting up mechanisms to guarantee that it beat earnings estimates by $0.01, which eventually resulted in Krispy Kreme reducing net income over two years by over $10.5 million. In it, the SEC proposed remedial actions for Krispy Kreme to take.<ref>{{Cite web|url=https://www.sec.gov/litigation/admin/2009/34-59499.pdf|title=SEC Accounting and Auditing Enforcement|access-date=September 2, 2017|archive-date=August 25, 2017|archive-url=https://web.archive.org/web/20170825195719/https://www.sec.gov/litigation/admin/2009/34-59499.pdf|url-status=live}}</ref>