McDonald's Rollout Costs
Q: How will McDonald's rollout impact 2025 profitability?
A: Management expects margins to be pressured in the first half of 2025 due to start-up costs associated with the McDonald's rollout, such as increased training, overstaffing drivers, and upgrading production lines. They anticipate U.S. margins will improve in the back half of the year as efficiencies from the hub-and-spoke model and scale production are realized.

EBITDA Guidance Adjustment
Q: Why is EBITDA guidance lowered despite maintaining top-line growth?
A: The EBITDA guidance was updated to reflect higher logistics costs, the intentional acceleration of start-up costs for the McDonald's expansion, and the carve-out of Insomnia. The company is investing ahead of revenue to ensure a smooth rollout, impacting short-term profitability but expected to drive growth.

Insurance Claims Impact
Q: What was the impact of higher insurance costs this quarter?
A: Late in the third quarter, the company experienced adverse developments in certain insurance claims, resulting in nearly $3 million of incremental expense. They assume claims will return to normalized levels but have included these costs in their guidance.

Third-Party Logistics Strategy
Q: Will third-party delivery offset logistics costs?
A: The company is evaluating leveraging external partners for logistics. Pilots in D.C. and L.A. have proven effective, and they've launched an RFP with national carriers. While it's too early to discuss financial impacts, they aim to transition in a way that benefits net income, not just EBITDA.

Existing DFD Locations
Q: Will existing less efficient DFD locations close?
A: As they expand with high-quality partners like McDonald's, Target, Costco, and Walmart, the company aims to optimize route efficiency. While weekly sales are a factor, decisions will consider route density and operational parameters, potentially leading to adjustments in their DFD network.

International Segment Strategy
Q: Do you plan to own all international markets going forward?
A: The company is focusing capital on U.S. growth and thoughtfully transitioning international markets toward more capital-light franchise models. They remain pleased with their international portfolio but are addressing underperformance in the U.K. with a new team focusing on challenges like lower Original Glazed sales and value perception.

U.S. Expansion Progress
Q: What's the update on U.S. hub expansion?
A: Progress continues with 3 hubs under construction and 10 signed contracts. The new hubs are efficient distribution points, often leveraging existing buildings, and will support the expanded distribution network, as demonstrated in Chicago.

Visibility into McDonald's Sales Data
Q: Can you see attach rates or sales data from McDonald's?
A: While they can track deliveries and unsold inventory, McDonald's does not share detailed consumer data. However, the company observes good consumer response and remains confident in their projections.

Marketing Support from McDonald's
Q: Will McDonald's provide national marketing support?
A: McDonald's is committed to the partnership and has actively marketed Krispy Kreme in launch areas like Chicago. As they reach about 85% of McDonald's locations by the end of 2026, they expect McDonald's to support the brand at a national level.

Digital Marketing Initiatives
Q: Are there digital marketing efforts with McDonald's?
A: McDonald's is activating across their digital media, including their app and online platforms. The company is impressed with McDonald's comprehensive marketing approach, aligning with making Krispy Kreme products more accessible to consumers.