Krispy Kreme is facing a class action lawsuit from investors who allege they were misled regarding the company's halted expansion into McDonald's restaurants.

The doughnut giant had announced plans to supply fresh doughnuts to 12,000 McDonald's locations by the end of 2026, but paused the rollout due to low demand and profitability concerns.

The lawsuit claims that Krispy Kreme failed to disclose the decline in demand following the initial marketing campaign, the lack of profitability from the partnership and the subsequent halt in expansion.

The company's stock fell by 24.71% after this announcement.

McDonald's is part of Krispy Kreme's Delivered Fresh Daily (DFD) model, which delivers fresh products to outlets such as convenience stores, gas stations and grocery stores.

The company also partners with Target, Walmart and Kroger.

But despite these partnerships, Krispy Kreme has reported a slight decrease in net and organic revenue, citing consumer softness and a drop in doughnut shop transactions, particularly in the US.

Krispy Kreme CEO Josh Charlesworth told investor analysts during the company's first quarter (Q1) earnings call: “We’re pleased with many aspects of the McDonald’s partnership. The execution across all the cities has been very good. Our teams have worked well together, making sure we have awesome fresh doughnuts readily available. I think it’s also important to understand that we need it to be profitable on a sustainable basis over the long term.

“So what we’re doing working with them is to make sure that the availability and the visibility of the doughnuts is consistently prominent and that our operations are as simplified and streamlined as they can be. So really, our focus through 2,400 restaurants we’re in today is making sure we’re positioned for profitable growth before we expand further.”

Krispy Kreme reported a net revenue of $375.2m for Q1, which ended on 30 March 2025. Organic revenue declined 1% to $374.7m.

To improve efficiency and reduce costs, Krispy Kreme is moving towards outsourcing its delivery network. It is expected to be fully outsourced by mid-2026.

The company is also retrofitting production hubs in strategic locations to decrease capital and real estate expenses significantly.

The class action lawsuit is open to investors who acquired Krispy Kreme securities between 25 February and 7 May 2025.

"Krispy Kreme faces investor lawsuit over halted McDonald’s expansion" was originally created and published by Verdict Food Service, a GlobalData owned brand.

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