Krispy Kreme Raises Guidance as Free Cash Flow Jumps $82 Million

Krispy Kreme improved free cash flow by $82 million year-over-year, posting a third-quarter loss of just $10 million as its turnaround plan — refranchising, capital discipline, margin expansion and profitable growth — gains traction. The doughnut chain raised its full-year guidance on the strength of those results and now expects more than $15 million in positive free cash flow in 2026.

The recovery is a sharp reversal from the failed McDonald's partnership, which demanded heavy investments and dragged cash flow deeply negative. CEO Josh Charlesworth told analysts Thursday morning: "Our results demonstrate the success of the actions we are taking to drive sustainable, profitable growth and improve profitability." He called the company "a compelling growth story supported by sustained consumer demand."

The headline numbers cut in different directions, and the divergence is the story. Systemwide sales rose 1% in the quarter. Net revenue fell 12.4% year-over-year — but that's a planned decline, driven by refranchising deals rather than lost demand. Adjusted EBITDA grew 12.7% to $35.3 million. Krispy Kreme is deliberately trading revenue for profitability.

What does refranchising actually change?

Under the first pillar of the plan, franchisees now generate roughly 42% of systemwide sales after two transactions closed earlier this year. Charlesworth expects that share to keep climbing as the company pursues more refranchising deals domestically and internationally. Capital expenditure is down 65% this year, the second pillar, which directly explains most of the cash-flow swing.

The company also opened a "reimagined" shop prototype in Las Vegas, a smaller-format store built around the brand's signature Hot Light experience. "While we're in the initial phase of testing the new hotline express concept, we are encouraged by the interest we've already seen from franchisees as we focus on ways of improving capital returns within our hub-and-spoke model," Charlesworth said.

Margin work and door-level economics

On margins, executives pointed to enhanced production planning, labor optimization, streamlined hub operations, better delivery-route management and improved demand planning. The fourth pillar — profitable growth — leans on an expanded core menu, rotating seasonal collections and limited-time offers, plus digital. The loyalty program now counts more than 18 million U.S. members.

The most concrete operator-level move: Krispy Kreme exited about 1,500 underperforming doors within its U.S. fresh delivery network, then added 715 net new doors year-over-year that generate higher average weekly sales than the ones cut. "Since announcing our turnaround plan just over a year ago, we have taken action to improve profitability and position our U.S. fresh delivery business for sustainable growth," Charlesworth said. Fresh delivery returned to growth in the third quarter. The network now spans roughly 7,700 doors across the U.S.

Placement matters as much as count. "Sustainable profitable growth in fresh delivery depends on having the right conditions in place, namely high traffic locations and prominent in-store visibility," the CEO said. In grocery, prominent front-of-store placement bolsters sales. In mass retail, planogram placement drives growth.

Big-box is the growth engine. "Those big-box retailers are an important part of our turnaround. We've been adding distribution with them because they have higher traffic and because the partners understand the importance of merchandising and prominence in stores," Charlesworth said. Krispy Kreme still sits in less than half of Walmart and Target stores, and continues negotiating expanded access with both.

Where the chain is pulling back

Not every channel survives the culling. Krispy Kreme is reviewing its convenience store footprint to optimize door counts, because c-stores mostly sell loose doughnuts and higher fuel prices have cut traffic to those locations.

On the menu side, the company is growing its Minis category — smaller doughnuts — to serve two demand shifts at once: increased sharing occasions and rising use of GLP-1 weight-loss medications, which have pushed consumers toward smaller portions.

"We are pleased with our momentum," Charlesworth said. "The actions we have taken are positioning Krispy Kreme for sustainable, profitable, long-term growth." With guidance raised, capex cut by nearly two-thirds and the delivery network rebuilt around higher-volume doors, the test for 2026 is whether that $15 million free-cash-flow target holds once the easy pruning is done.