Krispy Kreme Cuts CapEx 65%, Lifts Guidance as Turnaround Bites

Krispy Kreme's free cash flow improved by $82 million year-over-year to -$10 million in the third quarter, and the doughnut chain now expects positive free cash flow of more than $15 million in 2026 as its four-part turnaround plan gains traction.

The company reported systemwide sales up 1% in the third quarter and raised its full-year guidance. Net revenue fell 12.4% year-over-year — a deliberate consequence of refranchising deals (selling company-operated units to franchisees) rather than demand erosion. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) grew 12.7% to $35.3 million.

"Our results demonstrate the success of the actions we are taking to drive sustainable, profitable growth and improve profitability," CEO Josh Charlesworth said during Thursday's earnings call. He called Krispy Kreme a "compelling growth story supported by sustained consumer demand."

The takeaway: the company is trading revenue scale for margin quality, and the cash line is the clearest proof it's working.

What are the four pillars delivering?

The turnaround plan, introduced just over a year ago, has measurable results in each pillar:

• Refranchising. Franchisees now generate roughly 42% of systemwide sales after two transactions closed earlier this year. Charlesworth expects that share to keep climbing as the company pursues more deals domestically and internationally.
• Returns on capital. Capital expenditure is down 65% this year.
• Margin expansion. Executives cited enhanced production planning, labor optimization, streamlined hub operations, better delivery route management and demand planning.
• Profitable growth. A broadened core menu, rotating seasonal collections and limited-time offers are giving customers new reasons to visit, while digital channels and a loyalty program with more than 18 million U.S. members add demand.

The company also opened a "reimagined" shop prototype in Las Vegas, a smaller-format store built around the brand's signature Hot Light experience. "While we're in the initial phase of testing the new hotline express concept, we are encouraged by the interest we've already seen from franchisees as we focus on ways of improving capital returns within our hub-and-spoke model," Charlesworth said.

In short, every pillar is now backed by a disclosed number rather than an assertion.

How is the door network being reshaped?

The cash recovery follows a failed McDonald's partnership that required heavy investments, and Krispy Kreme has since rebuilt its distribution footprint door by door. The company exited about 1,500 underperforming doors within its fresh delivery network, then added higher-quality ones.

"Since then, we have been adding more profitable, high-volume doors, and fresh delivery returned to growth in the third quarter," Charlesworth said. Net new doors totaled 715 year-over-year, and they generate higher average weekly sales than the locations the company left behind. The U.S. fresh delivery network now counts approximately 7,700 doors.

The company is also reviewing its convenience store footprint, where locations mostly sell loose doughnuts and higher fuel prices have cut traffic. "Sustainable profitable growth in fresh delivery depends on having the right conditions in place, namely high traffic locations and prominent in-store visibility," Charlesworth said.

The lesson: Krispy Kreme is optimizing for door economics, not door count.

Where does grocery and mass retail growth sit?

Placement is doing much of the work in wholesale channels. In grocery, more prominent front-of-store positioning bolsters sales; in mass retail, planogram placement (the retail shelf-layout plan that dictates where products appear) drives growth.

"Those big-box retailers are an important part of our turnaround. We've been adding distribution with them because they have higher traffic and because the partners understand the importance of merchandising and prominence in stores," Charlesworth said. He added that Krispy Kreme still sits in less than half of Walmart and Target stores and is working with both retailers to expand access.

The company is also scaling its Minis category — smaller doughnuts — to meet rising demand for sharing formats and increased use of GLP-1 weight loss medications, which have shifted consumers toward smaller portions.

"We are pleased with our momentum," Charlesworth said. "The actions we have taken are positioning Krispy Kreme for sustainable, profitable, long-term growth."

With fresh delivery back in growth, franchisees carrying 42% of systemwide sales and capEx down 65%, the 2026 free cash flow target of $15 million-plus is the next number to watch.