Acquisitions

9 Months Ended

Oct. 02, 2022

Business Combination and Asset Acquisition [Abstract]

2022 Acquisitions

In the third quarter of fiscal 2022, the Company acquired the business and operating assets of one franchisee, consisting of seven Krispy Kreme shops in the U.S. (with one shop under construction). The Company paid total consideration of $19.4 million, consisting of $17.3 million of cash, $1.2 million of consideration payable to the sellers, and $0.9 million settlement of amounts related to pre-existing relationships, to acquire substantially all of the shops’ assets. Consideration payable of $1.2 million was withheld primarily to cover indemnification claims that could arise after closing. Absent any claims, these amounts are payable within 12 months of the acquisition date.

The settlement of pre-existing relationships included in the purchase consideration includes the write-off of accounts and notes receivable, net of deferred revenue, of $0.3 million. It also includes the disposal of the franchise intangible asset related to the franchisee recorded at time of the acquisition of Krispy Kreme by JAB Holding Company (“JAB”). The cumulative net book value of the franchise intangible asset was $0.6 million at the acquisition date. The Company accounted for the transaction as a business combination.

The following table summarizes the preliminary fair values of assets acquired and liabilities assumed as of the date of acquisition for the acquisition above.


	KK U.S. Shops
Assets acquired:
Cash and cash equivalents	$	7
Prepaid expense and other current assets	138
Property and equipment, net	895
Other intangible assets, net	11,652
Operating lease right of use asset, net	4,702
Other assets	20
Total identified assets acquired	17,414
Liabilities assumed:
Accrued liabilities	(106)
Current operating lease liabilities	(221)
Noncurrent operating lease liabilities	(4,481)
Total liabilities assumed	(4,808)
Goodwill	6,842
Purchase consideration, net	$	19,448
Transaction costs in 2022	$	589
Transaction costs in 2021	6
Reportable segment	U.S. and Canada

During the measurement period, the Company will continue to obtain information to assist in determining the fair value of net assets acquired, which may differ materially from these preliminary estimates. Measurement period adjustments, if applicable, will be applied in the reporting period in which the adjustment amounts are determined.

Equity Method Investment in KK France

In the third quarter of fiscal 2022, the Company acquired a 33% noncontrolling ownership interest in the newly formed entity Krispy Kreme Doughnuts France SAS (“KK France”), for approximately $1.0 million in cash. As the Company has the ability to exercise significant influence over KK France, but it does not exercise control, the investment will be accounted for using the equity method, and equity method earnings will be recognized within Other expenses/(income), net on the Condensed Consolidated Statements of Operations.

2021 Acquisitions

In the first quarter of fiscal 2021, the Company acquired the business and operating assets of two franchisees, collectively consisting of 17 Krispy Kreme shops in the U.S. On October 4, 2021, the Company acquired a 60% controlling ownership interest in ten franchise shops in Canada (KK Canada). The valuation for the acquisitions requires significant estimates and assumptions. The estimates are inherently uncertain and subject to revision as additional information is obtained during the measurement period for the acquisitions. Measurement period adjustments for the 2021 acquisitions did not have a material impact to the Condensed Consolidated Financial Statements for the three quarters ended October 2, 2022.