Short, but Sweet

This is an old story, but I just found out about it. I am not sure how I could have missed it. It may have lessened the sting my heart felt as I drove down Rt. 1 past the cows that look out from the Hill Top Steak House to find something nothing less then horrifying.

How could this have happened?

Where is the humanity?

Is God's way of saying, "Hey fatass, May I suggest a spinning class?"

Sweet, but short

After 16 months, the buzz is gone, and so is Saugus's Krispy Kreme

By Kathy McCabe, Globe Staff December 15, 2005

Krispy Kreme's neon red ''Hot Doughnuts Now" sign has gone dark on Route 1, creating a gaping hole in Saugus's commercial strip just 16 months after opening to great fanfare, with balloons, giveaways, and customers camping out overnight to be first in line.

With its name blacked out on its towering sign, its windows papered up, and its building for lease, Krispy Kreme's demise is easy to spot.

And locals say you only have to look next door -- where the pink-and-orange Dunkin' Donuts logo looms large -- to know why.

''They went up against a 10,000-pound giant next door, and it's not Kelly's," said Brian
McCarthy, owner of Kelly's Roast Beef, which is across Lynn Fells Parkway from the shuttered Krispy Kreme. ''They were fighting this New England phenomenon, which is Dunkin' Donuts, and they had no chance of winning that battle."

The Dunkin' Donuts store, which averages 12,000 customers per week, saw sales drop about 2 percent the first few weeks after Krispy Kreme opened, a store official said.

''I think people just wanted to try it," said Jennifer Furtado, a manager for the franchiser who owns six Dunkin' Donuts shops in Saugus. ''They probably were smart to open next door because we draw the crowds already."

Across town at Kane's Donuts, a 50-year-old independent shop, customers had another theory about why Krispy Kreme didn't cut it in Saugus.

''They weren't real doughnuts," said Janet Kierstead, 56, an art teacher in the Saugus public schools who stopped in Sunday for coffee and a chocolate-chip muffin. ''They were a novelty."

''They were too airy," said Kenny Poole, 60, a letter carrier sitting at the counter at Kane's. ''I went over there and stood in line when they opened in Medford. Their coffee I liked because it's strong. But the doughnuts -- forget it."

But Krispy Kreme's local franchiser said the Saugus store's closing last week, along with one in Medford, was driven by the high real estate costs in northeastern Massachusetts, which hindered long-term growth plans.

''Real estate costs up there are so exorbitant," said Janice M. Mathews, a vice president at Jan Cos., the company based in Cranston, R.I., that bought the Krispy Kreme franchise rights for southern New England. ''We realized we couldn't do the normal expansion we would need to make this [investment] work."

Mathews said several banks and restaurants have expressed interest in leasing the 4,600-square-foot structure, built on the former site of Russo's Candy House at the interchange of Route 1 and Lynn Fells Parkway. ''We'll weigh our options," she said.

Jan Cos., which also owns two Burger King restaurants and the site of the Famous Dave's barbecue on Route 1, waged a long and expensive battle to open Krispy Kreme on Route 1. The company bought out the former Russo's Candy House, tore down the white Colonial-style building, and replaced it with the doughnut shop. In all, Jan Cos. spent more time acquiring the site and obtaining local permits than selling doughnuts there.

The Saugus store, which debuted in August last year, never generated the same buzz that greeted the earlier openings in Dedham, Medford, and the Prudential Center in Boston. There were no lines snaking around the building. And local fears of traffic tie-ups never materialized.

''It lasted about two weeks," said McCarthy, who feared Krispy Kreme customers would park in his Kelly's lot. ''Then, all the ballyhoo was over. . . . I never really saw it busy there."

Still, Krispy Kreme's abrupt closing eight days ago was a surprise.

''They didn't give me any hint that they were closing," said Jon Paddock, 52, of Revere, who applied for a manager's job two days before. ''At first, I thought [the paper] was a Christmas decoration, but then I saw the 'for lease' sign."

Paddock, laid off recently from a job at a fitness club, said he often took his 7-year-old daughter, Nicole, to Krispy Kreme.

''She loved them," he said. ''They're really sweet."

Krispy Kreme, which has a cultlike following in the South, is renowned for serving ''Hot Doughnuts Now." When lighted, the sign indicates that Krispy Kreme's so-called ''doughnut theater" is in action. Doughnuts made from a yeast mix roll along a conveyor, in full view of customers who watch from behind glass. Original hot-glazed doughnuts are showered with a sweet, sticky coating.

''They're really a little doughnut factory," said John Glass, an analyst who follows Krispy Kreme for CIBC World Markets Inc., a Canada-based investment bank with offices in Boston.

Krispy Kreme Doughnuts Inc., based in Winston-Salem, N.C., is publicly traded on the New York Stock Exchange under the symbol KKD. The company produces 7.5 million doughnuts a day at 350 stores around the world, according to company information.

Mathews declined to disclose sales figures, saying only that both Saugus and Medford did ''OK." She also dismissed critics who said Krispy Kreme is no match for Dunkin' Donuts, which has nine outlets in Saugus.

''We never expected to be busy from 7 a.m. to 9 a.m.," she said. ''Krispy Kreme's busiest time is 3 p.m., when soccer moms come in to buy dozens of doughnuts, usually for a team or school event."

As part of its agreement with Krispy Kreme Doughnuts Inc., Jan Cos. hoped to open 16 Krispy Kreme stores in New England. It had opened seven, but last week closed three and sold its interest in all but one location, at the Mohegan Sun casino complex in Connecticut, to Krispy Kreme.

In August, the company closed its shop at the Prudential Center, its only Boston location.

Krispy Kreme will continue to operate a store in Dedham. The store supplies boxed Krispy Kremes for sale in Shaw's supermarkets, Shop Rite, and Tedeschi convenience stores, and for kiosks at ExxonMobil and Hess gasoline stations. ''People will still be able to buy our product there," said James Golden, a Krispy Kreme spokesman.

Golden declined further comment on Krispy Kreme's future plans for New England.
Krispy Kreme Doughnuts is struggling nationally, after rapid expansion across the country. The federal Securities and Exchange Commission is investigating the company's accounting practices. The company, which has not filed financial statements since last year, also has been sued by unhappy shareholders.

After going public in 2000, Krispy Kreme's stock traded as high as $37 per share. But the company's stock price has fallen since, dropping to about $6 a share amid financial struggles and the federal accounting inquiry.

Glass said the local store closings are symptomatic of the company's financial problems. ''They're essentially going through a huge restructuring," he said. ''What's happening in New England is happening all over the country."

But he said the Krispy Kreme brand is far from dead.

''Krispy Kreme has been around since 1937," Glass said, referring to the chain's origins as a single factory in North Carolina. ''It still is a very good brand."

Kathy McCabe can be reached at kmccabe@globe.com.
© Copyright 2005 Globe Newspaper Company.