Krispy Kreme ended its McDonald's deal after $28.9M of lease and exit costs

Krispy Kreme and McDonald's agreed to end their partnership, effective 2 July 2025, after Krispy Kreme had tried to distribute its doughnuts to about 2,400 U.S. McDonald's restaurants. The deal had been hailed as a major growth opportunity and was projected as a coast-to-coast rollout by the end of 2026. In the Q2 2025 earnings, Krispy Kreme CEO Josh Charlesworth said 'efforts to bring our costs in line with unit demand were unsuccessful, making the partnership unsustainable for us'.

Krispy Kreme booked $28.9 million of lease impairment and termination costs directly tied to the McDonald's tie-up, on top of $22.1 million in asset charges, Fortune reported. Second-quarter revenue was $379.8 million, down 13.5% year over year and short of analysts' estimates, with adjusted earnings per share of -$0.15 against an estimated -$0.03. Noncash charges totalled $406.9 million, most of a $441 million net loss. Charlesworth said the poor results primarily reflected the McDonald's deal.

McDonald's said Krispy Kreme was a small, nonmaterial part of its breakfast business, and its own Q2 results were strong. Krispy Kreme said it would remove the costs tied to the partnership, expected to recoup profitability in the third quarter, and shifted focus to supermarket and convenience channels, selling its remaining stake in Insomnia Cookies and refranchising markets. Fortune noted the stock had fallen nearly 70% since January.

$28.9M in lease impairment and termination costs, plus $22.1M in asset charges; Q2 2025 revenue fell 13.5% to $379.8M with a $441M net loss.

Doughnut sales per McDonald's door were too low to cover the extra costs of delivering and supporting them.

Krispy Kreme leased and invested ahead of the rollout, leaving lease impairments and termination costs when it ended.

Costs could not be brought in line with unit demand, in Krispy Kreme's own words.

The partner's benefit was small, so McDonald's had little reason to absorb any of the cost.

Distribution through a giant partner only pays when per-door volume covers the added labour, delivery and fixed costs; scale without unit demand multiplies losses.

Krispy Kreme began removing costs tied to the deal, suspended its dividend, renegotiated credit agreements and raised capital, according to Fortune, and said it expected a return to profitability in Q3 2025. McDonald's said the end of the partnership did not affect its results.