Krispy Kreme Shuts Down Young Entrepreneur: What Other Companies Can Learn from the Initial Response
Turns out, people are willing to pay a lot of money for their favorite brand of donut.
College student Jayson Gonzalez came to this realization while away coaching for a youth soccer tournament. While out of town, he asked friends on Facebook if they wanted him to bring back anything from the Krispy Kreme store, and he was astonished by the response.
“I kid you not, a couple days later, I had over 300 replies,” Gonzalez told the Twin Cities Pioneer Press in an interview.
That’s when he saw an opportunity to bring a high-demand good to a low-supply area.
Every week, driving over 4 hours to a Krispy Kreme store in Clive, Iowa, Gonzalez would load up his 2008 Ford Focus with 100 boxes of one dozen Krispy Kreme donuts—the maximum amount that his car could safely store. Gonzalez would then make eight stops on the way back (mostly in Target parking lots) to unload his supply. With a donut bag placed on the roof of his car as a signal to buyers, people came to know when “The doughnut guy” would be stopping by for his weekly visits.
While a box of one dozen Krispy Kreme donuts will set you back $7.99, eager buyers shelled out between $17 and $20 to get their donuts from Gonzalez, a fair price considering the cost of transport and Gonzalez’s own labor.
Now, you’d think that a story about a young, enterprising man using his love of the brand to make money to pay for his college tuition would be an instant home run for Krispy Kreme. They’d just need to publicize the story and share their support for Gonzalez. It’s great press delivered to them on a silver platter, right?
Gonzalez received a call from a corporate manager at the company and was told to immediately “cease and desist” reselling Krispy Kreme donuts.
In a video posted to Facebook, Gonzalez expressed his disappointment but also displayed remarkable maturity despite the situation:
“It was never my intent to make Krispy Kreme seem like the bad person, or the bad company, in this scenario. It is kind of upsetting that I had to stop, but it is what it is. One opportunity closes, another one will open, but we’ll kind of just see where we go and what happens and, who knows? Something amazing could happen from it…. But whatever happens, I’m always willing to embrace it. Always looking for the positive.”
Rather than lashing out at the company or venting on social media, he took it in stride. That’s the spirit of someone who knows that he has a long and successful life full of opportunity just waiting for him to seize it. And, that’s exactly what happened.
Public Response and Krispy Kreme’s Reversal
Gonzalez’s story and Krispy Kreme’s reaction went viral, and before long, the company realized that it had made a huge mistake.
According to a Facebook update from Gonzalez, representatives from Krispy Kreme reached out to the young entrepreneur, offering him an opportunity to become an official contractor for the company. They also donated 500 dozen donuts to help him restart his business.
Since this announcement, Gonzalez started a Go Fund Me page to raise the money he needed to buy a new, larger vehicle to transport more boxes of donuts. That, however, proved unnecessary. On an update to that page, he shared that after appearing on an interview show, the producers gifted him a van to use for his business. Between the donated van and the over $8,000 he raised through Go Fund Me, Gonzalez should have no problem getting his new ride outfitted and ready for his weekly trek to the Krispy Kreme in Clive, Iowa.
Why Companies Should Encourage, Not Punish, Entrepreneurship
Krispy Kreme’s initial response was wrong.
Enterprising people like Gonzalez add value to the product they sell by contributing their own labor, bringing the product to an area where it isn’t widely available. Resellers do not threaten the company’s own business because they are selling for a higher price to pay for the labor and resources that they contribute toward providing customers with convenience. Customers can then choose whether or not they’d rather pay extra for that convenience. Plus, as a result of increased availability, Gonzalez’s side business netted the store an additional 100 sales per week (which at $7.99 translates to $799 in revenue). Basically, it’s a win-win-win for the company, the customers, and the reseller.
Luckily, Krispy Kreme realized its mistake and made things right.
This whole debacle reminds me of my own high school side hustle. Every day before school I’d stop by the corner store and load up my backpack with soda cans. Then, when I got to school, I would sell the soda for a profit. The corner store made more soda sales, and by acting as the distributor, I made a nice little profit of around $500 per week.
And, this isn’t exactly a unique experience. For many people, our first “job” was flipping and/or reselling something—baseball cards, lemonade, donuts, whatever we had cheap and easy access to that could be sold for a profit. It’s a great way of encouraging young people to learn about selling, including the principles of supply and demand, pricing structure, and salesmanship. To quash that spirit is to take away a necessary opportunity from people who want to learn (not to mention make some money), especially in cases where those opportunities are limited by other circumstances.
So, take this as a lesson. When you see someone who is passionate about your product, who is performing a much-wanted service for your company, don’t crush that spirit of entrepreneurship. Encourage and nurture it, as Krispy Kreme eventually did, and you will not only have a lifetime supporter but, possibly, a powerful ally.