Krispy Kreme May Put Insomnia Cookies to Bed as Restaurants Cut Costs

As restaurants grapple with cost challenges, Krispy Kreme is putting its Insomnia Cookies subsidiary up for sale.

On Tuesday (Oct. 3), the donut chain announced that it is “exploring strategic alternatives” for the cookie brand, which has more than 250 locations globally, including the possibility of selling the brand.

According to the donut company’s CEO Mike Tattersfield, Krispy Kreme has accomplished everything it was looking to do with the Insomnia brand, leveraging learnings from the cookie chain’s success on digital platforms to boost the donut store’s omnichannel performance, among other goals.

“We acquired a majority stake in Insomnia Cookies to build our e-commerce and digital capability as well as assist Insomnia’s U.S. and International expansion. Both efforts have been successful and it’s time for the next strategic step for both companies,” Tattersfield said in a statement. “…Krispy Kreme has expanded rapidly through our capital light omni-channel model, and the brand is now in 37 countries selling fresh doughnuts through nearly 13,000 points of access daily.”

The donut brand has tapped Evercore and Morgan Stanley as financial advisors in this process.  

The move comes as restaurants look to cut costs amid rising prices, especially as the slowing of grocery inflation forces restaurants to work harder to maintain their customers. Consumer Price Index (CPI) data from the U.S. Bureau of Labor Statistics (BLS) reveals that menu prices have crept up every month this year so far, amounting to a 6.5% increase year-over-year in August, while grocery inflation is only 3%. 

Indeed, research cited in last month’s “Inflation Puts Technology on the Menu for Restaurants,” a collaboration with American Express, revealed that 92% of restaurant operators view food costs as a significant challenge, and 87% of restaurant owners increased menu prices last year. 

As such, many restaurants are turning their focus to the most profitable parts of their business, while cutting away more costly parts of their operations. For instance, fast-casual brand Panera Bread has reportedly been testing out a significantly reduced menu. Similarly, in June, it was reported that quick-service restaurant (QSR) chain Bojangles was trying out a streamlined menu.

Some, meanwhile, have been looking to offload the restaurants they own, and the high costs associated with them, altogether. In August, QSR giant Subway was sold off to Roark Capital, owner of Inspire Brands.

Consumers, for their part, have noticed restaurants cutting costs where possible. A PYMNTS Intelligence survey of more than 2,300 U.S. consumers noted that about half have seen restaurants operating with reduced hours or shuttered dining rooms, and 27% have noted lower quality service.

For Krispy Kreme’s part, if it has gained eCommerce insights from its time owning Insomnia Cookies, that could go a long way towards the donut chain’s future success, as more consumers turn to the internet to place orders.

PYMNTS Intelligence from the study “Consumer Interest in an Everyday App,” created in collaboration with PayPal, which drew on insights from a survey of more than 3,300 consumers in the United States and Australia, found that of the 73% of U.S. respondents who place orders from restaurants each month, 60% do so using internet-connected devices at least some of the time.