Krispy Kreme – Forecast Gross Profits Per Store
Forecast Gross Profits per Store
These vary greatly by business. For company stores they have increased to 18%. Royalty income has a 65% margin, and KKM&D is 17%. The CIBC analysts have forecasted that margins increase to 19% for company stores, 70% for franchise operations, and 18-19% for KKM&D. Using these values we get the following costs:
FEB. 3,
FEB. 3,
Gross Profit
Company stores (18%)
$ 54,405
$ 59,789
Franchise operations (65%)
13,912
20,784
KKM&D (17%)
29,108
43,486
$ 97,425
$ 124,059
Forecast Other Costs
G&A and Depreciation costs have averaged 9% of sales for the last three years. The CIBC analysts show this 9% declining marginally in 2004 to 8.74%. In addition, minority interest (presumably in franchisees) has been around 0.3% of the franchise revenues for the last two years.
FEB. 3,
FEB. 3,
Other expenses (9% of sales)
$ 44,539
$ 55,794
Minority Interest (0.3% of franchise sales)
1,605
2,398
Note that there are other items that tend to cancel each other out (joint venture income, minority interest). The analysts forecast a lower MI item.
Forecast Interest Expense
This requires assumptions to be made about the firm’s capital structure. The beginning capital structure is given, and shows that the company has negative net debt of $20 million. This arises from the prior year’s decision to raise new equity to meet