Illinois Mfg./Dist. Facility Krispy Kreme's First Outside Carolina

Week of March 26, 2001
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'Hot Doughnuts Now'

Illinois Mfg./Dist. Facility
Krispy Kreme's First Outside Carolina

By JACK LYNE • Site Selection Executive Editor of Interactive Publishing

WINSTON SALEM, N.C. -- The "Hot Doughnuts Now" red light is flashing fast on Krispy Kreme's expansion engine. Responding to surging market demand, Krispy Kreme Doughnuts (www.krispykreme.com) has announced that it will build its first plant outside of North Carolina, where the company was founded 63 years ago.
The sultan of sweet has tapped Effingham, Ill., (www.effinghamil.com) as the location of choice for a new 187,000-sq.-ft. (16,830-sq.-m.) manufacturing and distribution facility. The new operation, which will triple the company's capacity, is a key element in cost-effectively handling Krispy Kreme's rapid expansion.

From its modest beginnings in Winston-Salem, Krispy Kreme
has expanded to become a 177-store chain that spans 28 U.S. states and Canada.

"We are very excited about this new plant. Not only will we be positioned closer to most of our franchise customers, but this new facility will allow us to maintain or improve our unit cost as soon as we begin operations," said John Tate, Krispy Kreme CFO and president of manufacturing and distribution.
The new facility is scheduled to be completed and operational during the first half of 2002, Tate added.
"Our continued sales momentum, penetration of new markets and accelerated pace of new store openings will outstrip our capacity to provide mix to our system by next year," commented Chairman, President and CEO Scott Livengood. "The combination of this new mix plant and new equipment manufacturing facility in Winston-Salem will provide the infrastructure to support our growth for the next several years."

Pluses Include 'Crossroads of America' Location

Krispy Kreme has submitted an option to purchase a 34-acre (13.6-hectare) site in the Effingham Business Park (www.efrr.com/bizpark.htm). Some 47,000 sq. ft. (4,230 sq. m.) of the new operation's space will be dedicated to blending and packaging the prepared doughnut mixes that are sent to Krispy Kreme stores. The Illinois facility's remaining 116,000 sq. ft. (10,440 sq. m.) will be dedicated to distribution center use. The operation will serve Krispy Kreme stores in the U.S. Midwest and in the Western half of North America, areas in which the company has been rapidly expanding.

Dedicated in 1999 (pictured), the Effingham Railroad Co. provides
Effingham Business Park tenants with direct interchanges with both CSX and Canadian National.

Logistics and location, said company officials, were major factors in Krispy Kreme's selection of the site in Effingham, which is located 210 miles (357 km.) southwest of Chicago. Billing itself as "the Crossroads of America," Effingham lies at the intersection of I-57, which runs directly from Chicago to New Orleans, and I-70, which runs directly from Washington D.C., to Los Angeles.
Effingham is also positioned at another major infrastructure intersection: the juncture of Conrail and Canadian National. In addition, Effingham Business Park's perks include the Effingham Railroad Co. A Class III line haul common carrier, Effingham Railroad operates two miles (3.4 km.) of tracks within the park, which provide tenants with direct interchanges with both CSX and Canadian National.

Incentives Sweeten Deal

The Illinois site also supplied incentives that sweetened the pot for Krispy Kreme. All of the 1,000-acre (400-hecatre) Effingham Business Park is designated as an Enterprise Zone. That qualifies Krispy Kreme's operation for benefits that include a seven-year, 100-percent property tax abatement, state income tax and job tax credits, and sales tax exemptions on building materials that are purchased locally. The Illinois Dept. of Commerce and Community Affairs (www.commerce.state.il.us) and the Illinois Dept. of Transportation (www.dot.state.il.us), which worked with Krispy Kreme on the project, are providing job training and infrastructure assistance.
Krispy Kreme will also qualify for EDGE tax credits (www.commerce.state.il.us/communities/edge/factsheet2.htm), state officials said. An acronym for "Economic Development through a Growing Economy," the EDGE program allows eligible businesses that create new jobs in Illinois to claim a state income tax credit equal to a proportion of incremental income tax generated by the new positions. As of press time, the state had not disclosed the total estimated value of the project's incentives.

The new Illinois facility comes during bullish bottom-line days for Krispy Kreme. Krispy Kreme's 2000 sales marked a 14 percent upswing, and the company's April 2000 IPO was one of the year's rare successes. Since that IPO, Krispy Kreme's share price has increased by as much as 400 percent.

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