Good morning, everyone. I'm Rob Ballew, Head of Investor Relations for Krispy Kreme. I'd like to welcome you all to Charlotte, North Carolina, at our global headquarters and innovation center. A lot of you know us from the past. We were in Winston. We wanted to bring everyone here to really show kinda the new Krispy Kreme. Before we begin today, I'd like to remind you that today will contain forward-looking statements that are pursuant to the Safe Harbor Act.
Statements made today speak only as of today. There are inherent risks and uncertainties in our forward-looking statements that are outlined in our Form 10-K that I would recommend everybody review when you have time. We will also discuss non-GAAP measures today.
Reconciliations to these non-GAAP measures will be available in our presentation deck that we'll post around noon today on our Investor Relations website. Additionally, it's important to know that today, in order to do a deeper dive in some of our individual business units, we will show our U.S. fresh numbers standing alone that will exclude Insomnia and Branded Sweet Treats, as well as Canada. Our Canada section will be moved to our market development in 2023, it's important to note. Also, we will, in our international section, we will report international and market development together with, as well as with a breakout with pie charts. We have a very exciting agenda for you today.
Mike Tattersfield, our President and CEO, will provide a high level of the story for Krispy Kreme, focusing on what's new, including our global point of access opportunity. Dave Skena, our Chief Brand Officer, will bring our brand to life for you in a very powerful way. Josh Charlesworth, our Global President, COO, and CFO, will provide detail Hub and Spoke in more detail than ever before, focusing on the U.S., and share what's changed since our IPO 18 months ago. Matthew Spanjers, our Chief Growth Officer, will showcase the massive global opportunity we have for Krispy Kreme around the globe, including our pipeline for new market entries around the world. Seth Berkowitz, Insomnia Cookies Founder and CEO, is also here today, and he will be showcasing the compelling brand, economics, and total addressable market for the digital-first Insomnia Cookies.
Josh will finish the day for us, showing what all this terrific growth will mean for us in 2026. I'll turn the floor over to Mike.
Great. Buenos dias, everybody. Hope you're all doing well this morning or wherever you are in the world. If it's evening, good evening as well. Buenas noches. Thank you all for being here with us today. I appreciate the folks that made the trip in last night. You were able to see our doughnut shop and our cookie bakery. I'm in front of our support center. You've had a tour of the support center this morning, and what else way to start the day than a Hot Light doughnut that you're being given in the morning and all the collection of doughnuts that you can see where we're gonna go around the world. I'm pretty excited because I get to talk about 18 months ago, we did an IPO, right?
A lot has changed, and we're gonna keep you up to speed today. We're gonna talk about where we are in our transformation journey. It is a significant growth story in front of us, both on the Krispy Kreme side as well as on the Insomnia side. We're gonna show you the roadmap of actually how we're going to capture that value, and we believe that's gonna translate to enormous opportunity for both these brands going forward, as well as you get a little snapshot of the culture of the company, right? Here I am, the CEO. I'm in my ugly sweater.
I do this every month, every year in the month of December, where I just kind of go out to our shops and, you know, we don't take ourselves too seriously in terms of Krispy Kreme, just what we do, but it's one of our values, right? I know it's blinking, so it might be a little distracting for folks that are on the screen, so I'll turn it off in a moment. I'll get it back on. The Hot Light is on. Hold on a second.
Of course, I'm having technical difficulties. There we go.
You know, I've been with the business, and I know I've met you many times, even in my past prior lives, but I've been in retailing in some shape or form for almost 30 years. I've been with some amazing brands.
When the opportunity came to lead Krispy Kreme, I was like, "This is an incredible brand." I even helped lead the acquisition. What's really compelling is the story about what I saw and its potential. I was fortunate to be able to attract an amazing management team. These folks come from much larger systems, have a lot of experience, and especially with folks in the sweet treat space or not, but they actually have been around from running global companies. I loved it because they invested in the business in day one. They really wanted to be owners of this company, and that got them really excited about let's build this.
What even keeps me really proud of them is they came into the business, they mastered the craft of the function that they took on, you can see a lot of them have grown, right? You can see that's what they came here to do, and not just grow themselves, but also grow this brand. We're also guided by an incredible board of directors, right? They got 200 years of experience. They have clear expertise in managing multinational companies and functions around the world, and they've got to depth in today's consumer, as well as actual business practice in all the countries that we actually operate today. It's very helpful for us.
When I came into the business, which was a little over seven years ago, when I started probing in, I first came in as chair when I was leading the acquisition. I took on the role of CEO. A lot of things you do in the CEO is you try to find out where's the company's purpose, what it's trying to do. I kept on hearing this thing about touching and enhancing the lives of others through the joy that's Krispy Kreme. It was penned by a former CEO, and he followed basically what Jim Morgan was gonna do. Jim Morgan was the CEO, and Vernon Rudolph was our founder. It was about the fundraising and the care that the donut brand brings. As a CEO, you sometimes see purpose statements. You want to create one.
I was like, "That one's brilliant. How about we just leave it?" It's amazing. It's actually what the brand stands for every day. The direction, there was many, right? There was going in all kinds of different ways. I said, "Okay, again, the business is going to be in front of you. How about we start out by thinking about what we do every day, which is freaking awesome donuts. Get that right. Focus on donuts and a fresh approach to how to access customers. Drive innovation across the donuts, across everything else that we do. Reinvigorate how we want the brand to actually come to life. Think about it in dozens. Think about it in gifting. Think about it in holiday. Think about it in celebration.
About doughnuts. When you start looking at it that way, it's pretty simple to see, you know what? It's clear. We should start to think about how do we build the most loved sweet treat brand in the world. We have a lot of confidence that we can build that. If we can do that, I got a pretty good degree of confidence also we'll be one of the most loved brands in the world. Where are we today? We're a brand that's in, we're global. It's five continents. Soon to be six, as we open up South America. The seventh one is Antarctica. I think that might leave us a little space. We'll figure that one out. In the markets that we're in, we have 99% awareness. Think about that, 99% awareness.
Here's what's really interesting. It's just a little north of 400 producing doughnut shops and factories that drive that type of business. It's 20,000 Krispy Kremers. Again, culture of the company, that's what we call ourselves, in the equity markets and many more outside in our partner markets. We sell $1.6 billion this year. Son muchas donas. That's a lot of doughnuts. What's really unique and different today is that we almost get to 12,000 points of access through those hubs, get to points of access, tends to be grocer, convenience shops mostly, and we do it fresh every day. I talked about that direction that we were working on in the first six years that I got in here.
We're actually the loved sweet treat in a lot of our core markets now. It's not about just comparing ourselves to the category. It's comparing ourselves to the chocolate cake, ice cream, where a sweet treat occasion will happen.
What's different? The reality is we've evolved from a franchising doughnut company to a doughnut business to a doughnut company, right? We're truly a branded doughnut company today. It's about a fresh doughnut delivery system and leading doughnut in some innovation. It's about maximizing our channel opportunities through leveraging those 400 doughnut shops that we have and getting out to capacity and getting to the 12,000 points of access. It's a global business. That's 30 countries, you know, if you look at it different way from continents.
We can now see that we will build new businesses in those countries, but it's about 15-20+ hubs, which we call our theater producing shops, and that is just happened in six plus years. That's a lot of work. You can't make this type of change without actually going at the culture of the company, and what are you trying to do? Company that's 85 years old has got a culture, right? It's, you got to find the good and the bad, and it's pretty interesting when you come in as CEO, you've got to be able to touch and talk to Krispy Kremers all across the organization. If you can just get a simple way of how they can think about it, you can then build your values. Why did I think about this? Because the company had values.
They had them on a door. I'd ask everybody, "What are the values of the company?" Nobody really knew them. If you really wanna change the culture, you gotta live it. You gotta breathe it. You gotta think about it every single day. Simple one, if you think about this matrix you see in front of you, right? It's got love on the top line of a vertical axis. You wanna show empathy in a company. It's got tough love. You wanna have accountability, right? You wanna have own the outcomes. Talk about it. You wanna have dreaming. How do you come up with all this creativity from a doughnut shop to doughnuts or everything else you wanna see where the business can go? You gotta have a discipline of a process architecture. Get stuff done.
You use that matrix, we started to build a very unique leadership mix. With that's what really starts to change the culture and how we live every day. If you think about it, the most important things that makes this work is you wanna have happy Krispy Kremers. The folks that are in Krispy Kreme tend to make happy donuts, right? You have happy donuts, you tend to have happy customers. You have happy customers, you're gonna have happy partners and investors along that journey as well. I'm gonna bring up, I'm very privileged to bring on our Chief of Peeps, Terri Zandhuis, who's just done an incredible job kind of spearheading this, and let her tell us about where we are.
Thanks, Mike. Hi, everyone. I'm Terri Zandhuis. I joined Krispy Kreme about five years ago as the Chief People Officer or Chief of Peeps, as we refer to it often. I've spent 30 years working in financial services and banking, media, technology, and most recently retail, getting to do what I love the most, which is building teams, building capabilities, influencing, and transforming cultures.
I've been really fortunate to be part of some amazing brands. I have to admit, and I think if our banker friends here were honest, no one really lights up, with the exception of maybe our moms, when we say we work at a bank. When you say you work at Krispy Kreme, everybody lights up. Everyone wants to share their story about their favorite doughnut, their favorite memory, their favorite affiliation with this incredible brand.
I'm gonna talk a little bit about our cultural journey here. We've been really fortunate. When we showed up on the scene, we inherited, as Mike mentioned, a brand that had some incredible cultural and brand assets. One of the things that we really preach that resonates here, if we get culture right, it means we're firing on all cylinders.
It means we're doing right by our Krispy Kremers. It means that we're giving back to our communities, and it means that we're delighting our customers. We started from a position of strength. We knew there were things that we wanted to preserve that were still relevant and timeless. Mike mentioned the purpose statement. That still very much resonates internally and externally. We needed to listen a lot.
There was an opportunity to reinvent how we talked about culture, how we think about talent, how we talk about our ways of working in a way that contemplated a new organization, a global, growing, omnichannel organization. The words were really important. For the first time in the company's history, these words were gonna be the same no matter where you worked, no matter what role you were in, and no matter how long you'd been working with the company.
It was really important that they not only resonated, but that they quite literally translated. We deliberated and debated over every single word. Through no coincidence, we've come up with a dozen leadership mix ingredients, which you can see on the screen here. It was also very important that they felt like our brand. It sounded like our brand. It couldn't be heavy corporate speak.
It needed to be joyful. It needed to be simple. It needed to be consumable. Importantly, it needed to be shareable. When you look at this, you see words like appreciate our differences, grow our peeps, love our communities, respect all opinions. While we take the business of doughnut making very seriously, we also wanted to call out that we don't want to take ourselves too seriously. I think we can attest that no one embraces that more fulsomely than our fearless CEO.
The Krispy Kreme culture doesn't come to life by painting the leadership mix ingredients on the wall. It comes to life by the way we work together every day, the actions that we take, the stories that we tell. I might paint a picture about what it means to inspire customer wonder. That's probably gonna sound very different than how a doughnut maker in Australia might explain that. We're tethered to a common purpose and to common leadership ingredients.
We know it starts with our people, so I want to talk a little bit about the transformation and investment that we've made in our people. It starts with talent. When we joined the company five to seven years ago, depending who you talk to, we made a tremendous investment in bringing talent to the organization. We've upgraded all of the capabilities across the core functions. Think HR, think IT, think accounting, finance, legal. Nothing was untouched. Simultaneously, we were also making investment in new capabilities, things that were becoming increasingly relevant as we thought about where we were taking the company.
We invested in digital, e-commerce, a different level of culinary innovation, and you'll hear an awful lot about the investment that we've made in brand. The other thing that we wanted to do, empower our Krispy Kremers. This is a really powerful brand. We wanted to make sure they had the opportunity to leverage the impact of this brand in the places that mattered most to them.
We certainly give them opportunities. We deliver our brand. We delivered fresh doughnuts to first responders in times of crisis. That's not something that started with the pandemic. That's something that we've been doing for decades across the globe. We also wanted to empower our Krispy Kremers to come into new communities and create new networks. We have for the first time, our Krispy Kremers marched in the pride parades in their communities.
The brand was showing up in places that we hadn't previously been seen, and it was really exciting and engaging for many of our Krispy Kremers. In some of our markets, we've created scholarships for our Krispy Kremers that really enable them to unlock their goals and dreams, that it's bigger than just coming to work every day. We want to enable them to take their careers forward.
A lot of what you see on this screen is really organic. It starts with the passion of our Krispy Kremers and the power of this brand. We also recognize there's an importance in creating structure and process around this so that we can certainly enable our focus and continue to scale. We're committed to creating a company where Krispy Kremers know they belong. They know that they can grow here, they can develop here, they can become owners.
We also want to ensure that they feel heard, that their voices are part of the process. When we think about diversity and inclusion, within the U.S., we launched our first cross-functional D&I council, which is comprised of leaders and Krispy Kremers from across the different segments within the U.S. We also established our first set of employee resource groups. Not only has this made a big impact in the U.S., but importantly, it's created a blueprint that we're going to be able to replicate across all of our markets. We've put a stake in the ground around establishing our D&I metrics. We started with gender parity. We think of that as universal math that applies across all of our markets.
Part of what we'll do next year is engage in a demographic analysis to better understand our starting points in our respective markets and continue to build out additional D&I metrics that are really relevant and are gonna make an impact in the different markets. With regard to pay equity and access, we will continue to do analysis around what our current pay practices look like across the world. Part of what we did this year is rolled out a career architecture framework to ensure that we have a level of consistency in how we're rewarding and compensating our employees across the globe in very, very similar roles.
One of the things that we were very intentional about was to put a lot of deliberation around what we think about as the most important role in the company, and that's our shop general managers, our shop GMs. We created and rolled out what we call a GM ownership program. Part of what this does is it ties the complexity and the ability to influence the outcomes in their shop to their incentives, to their bonus, tying the metrics there so that they have more direct control around running their own businesses and acting like an owner.
Importantly, for the first time, we introduced a long-term incentive component. They now all have DNUT stock, so they are equity. They are owners within the company. That amount of equity, depending on the type of shop that they're running, ranges from $2,500 up to $10,000.
We're really creating a significant impact on their earnings opportunity. Part of how we know this is working, we're seeing the retention for the GMs increase. Why is that important? Why does that matter? If we hold on to our GMs, we're going to decrease shop turnover, which is incredibly important. We're also going to set up success for delivering much better customer experience. This is a really important investment and role for us.
Lastly, in the engagement survey this year, we asked our general managers about their intent to stay, and we saw a double-digit increase in their intent to stay from a survey that we conducted a year ago. While we can attribute that to a lot of things, we have to believe this is one of the levers that's really making an impact.
Lastly, we want to make sure we understand how Krispy Kremers are experiencing working at Krispy Kreme. We launched our first global engagement survey last year, so we're measuring engagement the same place everywhere. Might sound simple, but has a big impact. We asked two questions as it relates to engagement. Do you like what you're doing, and is this a place that you would recommend to work? We're starting at 75%. It's a good starting point. It's a position of strength. We have aspirations to grow that to get to 85% over the next three years.
Hopefully you can see this has been a starting point for how we continue to think about the structure and investment around transforming our talent and our culture. It sets us up for a great runway to go. I'm going to happily hand it over to Mike, who's going to talk more broadly about the bigger transformation story.
Gracias, Teresa. Much appreciated. Hopefully you get a little bit of sense of the culture, right? When you start thinking about the work that you need to do in a culture, and I always think culture and brand in our company are very much the same. If you look at the journey and what we were able to accomplish to set us up to where we are today, first things we started to say, now we know we want to focus on fresh and we want to completely change the business, let's take over the brand in a few key core equity markets. That would be the U.S., including the U.K. as well as Australia. Why those two international markets? They were already doing what we call this delivered fresh model, right?
Where they were leveraging their hubs, their doughnut shops, to get to the grocer or the convenience shop. What then happened from there is any new business that opened was thought through Hub and Spoke kind of model, right? You now link that to any time we invest into a shop, it's no longer about, hey, pick the right corner. It's about make sure we can deliver to the DFD customers is just as critical. We made the change to DFD.
We actually were in the convenience before, but the doughnuts that were in that business were sometimes five days old, right, at lower price points, which really was negative to the brand. We had to stop it, right? You can imagine changing that business at the same time. Make sure all of our franchise partners line up in the countries the exact same way.
That discipline about how doing that also attracted new franchise partners, because no longer it's about opening up doughnut shops everywhere. It's about actually opening up the hubs, the theater shops, and then building a network of spokes.
It's allowed us to actually sign eight deals. We opened up two new countries this year, and we'll open up a minimum of six next year. It allows us to see how the business will go forward, and it's very clear, the strategy of the brand. What does that mean? We've tripled in revenue. We've doubled in EBITDA when you're counting at the end of 2022. It's 100% fresh, right, which is really critical. You're seeing that around almost 12,000 locations around the world that are getting fresh doughnut delivery.
Pretty unique brand, we're the only ones that we know that kind of do that today. It's building from that, which is really critical. Now it's a very clear strategy. What is so unique about it? It is this omnichannel model. If you think about our product, the doughnuts carries well into other access points. The biggest challenge that we had, and even when I came into Krispy Kreme, if you have 400 points of you know, 400 producing doughnut shops, you don't have a lot of access to all those customers. The plan wasn't just to build 400 more, right? The plan is to how do you get to customers where they are? That is how you solve the lack of access problem.
If you can do it fresh, and you can do it at high quality, it really is the change maker which has been driving the revenue and the success of our business. It's tested. It's been happening through COVID. It's been happening this year. It's really the customers choosing where they want to engage with you. We can rapidly adjust that by markets and start to see here's how we do it, and then think about that brand activation of gifting occasions, how we can maximize that and get that around every single access point.
It is the key driver of growth. If you think about it, what did that do, right? In the last 18 months we went public. We talked about that we have this model which is going to do 20,000 points of access from an IPO perspective. Really, the channel's about grocer, and they're about the convenience shops, right, outside really leveraging the 400 hubs. Within the last eight months, we've said clearly we're going to do more than 20,000 just in the grocer or the convenience category, right? Instead of just doing 1,000 a year, we said we can actually start doing 10%-12% a year in this category.
We've also been testing the drug channel, we've been testing the club channel, and recently we started to test the QSR channel. Why is that so relevant? Same DFD process, right? The donuts are made, manufactured through the hubs, and we get them to the channels or the spokes and make sure we do that consistently. Timeframe-based, assortment-based, what the customer is looking at.
We're now pretty comfortable to say our next step with a point of access is going to be north of 75,000, right? Where we're going to be building 10%-15% of points of access on a yearly basis from 10 to up to 25 hubs, whether it's equity or partnership that's involved in that, and they will then start to build their points of access as well. This is a big opportunity in the United States. It's a big opportunity in the 30 countries outside of the United States. It's a big opportunity as well as the countries that we're starting to sign deals with and starting to move forward. When you still even think about the universe of the size of 75,000, what's that mean from all those channels or those unique customers that you're looking at?
It's still only about 3% of the opportunity. That's what 75,000 means from all the opportunities there. We're gonna be focusing on fresh, we're gonna be focusing on that scarcity of our brand, and it's a very disciplined approach to how we do this. You lead with the omnichannel model in every single one of our 31 countries.
Clear business strategy. How do you get to either drive availability or improve channels and continue to drive that forward? You then link with how do you drive frequency, right, to those channels? What's it going to be? How are you driving that business model? How do you beyou come more productive from your Hub and Spoke system as you get new points of access or a new spoke, or how are you driving the efficiency even within the hub?
Finally, how do you show the capital efficiency? You're really leveraging that existing production base and getting to the channels vis-à-vis the spoke strategy. That's what we do now. Very clear, really working for us. Along the way, we also found this incredible opportunity four years ago. I had the privilege of talking to this cookie brand founder, and what was really interesting is they were looking at how do they scale, what's their potential. I loved it for two main reasons. One, it's best in class, and absolutely has an e-commerce model that's very clear. The majority is very digital, and I knew we would need that in Krispy Kreme. Two, it was not about putting cookies in the doughnut shops or doughnuts in the cookie shops.
It's about really leveraging this powerful brand in the sweet treat space, and then it's got very similar attributes and a culture and a passion following of Insomniacs. That's why we made that decision. You'll hear a lot about this, now today, with Seth will tell you his story and how he wants to grow. When you think about it, why are we so bullish, or why does this team get excited about being here every day? It is an amazing business, but it is a truly loved brand, Krispy Kreme. With 99% awareness, very few brands can relate to that.
It has an omnichannel model which the product works exceptionally well, and there's a logistics and system that we can do that, and it allows you to actually explore channels and look at those things from any place that you'd like to have your doughnut become. That's why when we talk 75,000 points of access, it's real. The last six years, we've you know, done double-digit top line and double-digit bottom line. It's proven, right? When you think about that access. There's a growth story, not just in the United States, not just in the 30 countries, but even beyond the 30 countries. Getting to those six continents and doing this with the right partners.
Finally, when you have a partner like Insomnia Cookies that's within your business, where we have the controlling stake, but a partner that's still with us, that's been with us for four years. Remember, most time people buy companies, you don't normally get the founder to stick with you. It's working. The culture's right. It's in a tremendous growth story. That's where we are today. The team will now talk about that brand activation. What is that frequency piece? What's different? What do we do now?
Josh, you know, Dave will bring up that. Josh will talk about how do you maximize this U.S. opportunity Hub and Spoke where we are. Matt will give you a little lens of what does this mean from a global perspective. Seth will talk about here's where we're gonna take this Insomnia Cookies company. Let's get started, and I'll bring up Mr. Dave Skena, our Chief Brand Officer. Here you go, sir.
Thank you, Mike. Appreciate that. Good morning, everyone. First of all, for the folks here, thanks so much for making it down to the Global Innovation Center. These guys here got a literal taste, but of what I'm gonna talk about today. Thanks to all of you joining us online as well. My name's David Skena. I'm our Chief Brand Officer. Over the last two decades in food and beverage marketing, I've had the chance to work at great companies like PepsiCo and Kraft, what was then Kraft. I've gotten to work on some incredible, just incredible global iconic brands, which will go forward here in a sec. There we go. Everything from Philadelphia Cream Cheese to Lay's potato chips, and these are awesome brands.
I gotta tell you, I have never, ever worked on a brand as magnetic and as attractive as this one, and literally attractive. I mean, when the Hot Light goes on, people say their steering wheels turn automatically. We think that's sort of a psychosomatic thing, but they'll turn into the parking lot because it is so attractive. I hope to impress upon you today a few things.
One, I'd like you to understand not only that we're known and loved, but why we're known and loved. Two, I'd like you to understand how our innovation is so important to making us even more special than we already are with our core business, and that helps us create value at different price points along the way. Finally, that our biggest opportunity is really our biggest barrier.
We don't have a lot to fix on the brand or on the business. We just need to get more access to it. It's really amazing. I mean, you think about some of the things Mike just said, 99% brand awareness in a relatively small footprint in each of the countries that we're in. That's incredible. That's really incredible. We're very proud of that.
Not only that, we are already the number one most loved sweet treat brand in several of our major markets. I mean, I've listed the U.S., U.K., and Australia too. We're also number one in a lot of our small, smaller markets, not as large, Thailand, Turkey. Yes, it's an aspirational goal, but it's also one that we know is attainable. Once we do attain it, we wanna maintain it, which we will do.
Finally, we're very buzzy. We're a very buzz-worthy brand, and people are interested in what we have to say. For the last several years, we've gotten over 30 billion earned media impressions a year. That's free advertising. People wanna talk about us. People wanna learn about us. People wanna know what we're up to. Just to give you a little bit of a sense of what has happened just this past year, I prepared a short video to kind of capture a year in review, but this is something we focus on year in and year out. Let's have a look.
Krispy Kreme.
Krispy Kreme.
Krispy Kreme.
Krispy Kreme. Krispy Kreme.
Krispy Kreme partnering with Twix.
A limited time collaboration with Twix.
They just put a whole Twix bar in there. That's what I'm talking about.
Krispy Kreme has the perfect gift for Valentine's Day.
The Sprinkle a Little Love collection comes in a custom dozen box that features Valentine Day cards built right into the box.
Krispy Kreme has an all new collection of spring themed mini donuts.
Oh.
Krispy Kreme is running a promotion offering a dozen donuts for $4.11, which is the average price for a gallon of gas.
Every Wednesday, the company will be selling a dozen Glazed Doughnuts for the same amount as Monday's national gas price average.
Sometimes you just wanna cut people a break. Doughnuts are a great way to do it because you can share them with other people and brighten a lot of other people's days.
Here to meet Lando Norris at Krispy Kreme in Bluewater for the Forza Horizon 5 event.
Krispy Kreme's is coming to Tasmania. Good news, though, for me, my doctor's told me I need to eat more whole foods.
Krispy Kreme is releasing its pumpkin spice treats a month early. You heard me.
If you are not aware, today is National Dog Day. What better way to celebrate than with Krispy Kreme's doggy donuts?
They're six all natural doughnut shaped biscuits inspired by classic Krispy Kreme varieties. Yeah.
Krispy Kreme is celebrating NASA's upcoming launch of the unmanned Artemis I rocket.
The donut maker is selling moon shaped donuts.
I'm so excited. This is the glazed donut of Krispy Kreme. It's my favorite.
It was such a crazy morning. I woke up and I remembered it, the name Krispy Kreme Donuts.
It's fall, y'all, and our friends at Krispy Kreme rolling out their new flavors in their Autumn's Orchard collection.
If a doughnut and a churro had a baby, it would be, what else? A ChurrDough. It looks quite tasty.
Churros and donuts. I tell you, I ran out of my house at the speed of light to get these churros and donuts combined, times three.
Krispy Kreme is, of course, getting into the Halloween spirit, too. Their Haunted House Collection
Which features a spooky family of Halloween inspired doughnuts.
Krispy Kreme is giving you four more reasons to feel thankful this giving season.
Chain introduced four doughnuts inspired by some Thanksgiving desserts.
All right. Trust me, we had to edit that down. All right. That's not the first edit. Whether it's morning talk shows to late night comedies, whether it's people with 1,000 followers all the way up to one of the individuals you saw there with 345 million followers, and these are all happening organically, especially in the social sphere. A lot of that coverage isn't by accident. I mean, we work very hard to keep this brand relevant. I want to tell you a little bit about why I think this brand is so buzz-worthy, is so known and also loved and anticipated. It starts with the product, of course. We call this on the left our brand doughnut, and you probably see different ways brands capture their attributes and benefits.
This is the way we capture it. It also concludes our personality and so on. But the product, the product, the product. You know, when we do quantitative, qualitative studies all across the world, it's always the same. It's fresh, it's light and airy. It's like biting into a cloud. It's a sugary dream. These are the way consumers describe this product independently, open-ended.
That product is so delicious, so special, so one of a kind, and a lot of you, the folks in front of me, have gotten to the opportunity to try that just this morning, that it does make it special. It's unique. It's so special that people really do want to share it. They want to share that with people they know, people they love. They use it for special occasions. That actually gets into something more profound.
The doughnut itself is so special, and because we sell it in dozens, it's so shareable, it tends to naturally attract people who are wired maybe a little bit differently than the general population. In fact, when we ask consumers about what personality traits are important to them and what they value in other humans, so this is what they say about the product in that brand doughnut, what they value about other people, how they view the world, is that generosity is very important to them as a human value.
When they bring in a box, we ask people, you know, "Well, what do you think about folks when you see them with a Krispy Kreme box?" They'll say they're generous, they're friendly, you know. They're clearly trying to be taking care of somebody, do something special. They use our brand as a means through which they express generosity towards others. When we're generous ourselves as a brand, we're reinforcing that very critical human value, and it makes them love us all the more. That's some of, I think, some of the consumer psychology behind why we're so loved, why we're so known.
During the Acts of Joy pandemic, we started this program called Acts of Joy. Everything from giving free doughnuts away to medical workers, to graduating seniors, to people who got vaccines. These were all things that attracted a lot of attention because it was so conspicuously generous. It was also great for business. It worked because the people who value our generosity and who value generosity are willing to reward us with their business, and they know we're doing something special.
Every time they come in and buy a dozen and share it's trial all over the place. This didn't start with our Acts of Joy in 2020. I mean, we've been an extremely generous brand for a very long time. Our fundraising program goes back to 1965, and this is a very conservative estimate because the bookkeeping doesn't go all the way back to 1965.
Well over $500 million have been raised for organizations in the U.S. and across the world, simply through our fundraising efforts, where we basically sell folks a dozen at half price. We get half, they sell it at full price, they get half, and they raise all that money for organizations. It's one way that we have a lot of community outreach, and it's one way that we become loved and known everywhere we are.
It's a very special brand, and we make it more special through the way we do innovation and the way we lean into special occasions. On our holiday, and you see some of these right here, our Christmas collection. Whether it's Valentine's Day, Halloween, so many of our special holidays where people want to, maybe they're taking in something to school for a party, maybe they have their kids after party, maybe they're doing something at night.
Whatever that special occasion is, we tend to be a part of it. We're a great thing to be a part of it. In fact, over the last, you know, five years, we've really leaned into this. We've seen our revenue that comes from innovations around those holidays, these holiday collections you see up there, more than double. I mean, it's been a spectacular reception.
We're giving folks what they want, what they've always wanted, which is, yes, we use you for special occasions. Give us something great to share. It's not limited to those innovations. This middle picture here is a program we have going on right now in Australia and New Zealand, where we ask folks, "Would you like to be married at Krispy Kreme on Valentine's Day next year?" Honestly, we thought we'd get a few people. You know, there's got to be a few, right?
Over 340 couples have asked, "Please, yes, I would like to be married at Krispy Kreme on Valentine's Day," which is really cool, it just shows you how special this brand is and how deeply people feel this association with this brand and how much they want to share this brand with others, share special occasions with others.
86% of what we sell is consumed by someone who didn't buy it. How many products can you think of that you buy and give away almost all of it to someone else? That's really special. That's really special. There's so many things we can do with this. You see personalization examples on the right here, and this is from the U.K., where we're getting more and more into this personalization of happy birthday or whatever, and consumers feel good about that. In fact, the percent of doughnuts used for special occasions, self-identified for consumers, is up so much, up 16 points, 37%. People use us as a tool to say, "I love you. I care. You're special." That's a wonderful place to be for a brand.
It's a wonderful place to be for a brand because it allows us to express value, to deliver value. Value where when I say value, I mean benefits divided by price, right? People see value in Krispy Kreme at multiple price tiers, and we've introduced a couple of these price tiers lately. We're able to deliver value in all different kinds of ways. Our Original Glazed classic assorted, those go back to 1937. In 2019, we introduced this premium LTOs, and we've used power partners to really bring those to life. Whether it's great American or global brands, be it Oreo, be it Twix, you see in front of you, Hershey's and so on, it's such a mutually reinforcing mechanism when you take two power brands and push them together and turn it into something truly unique.
When people pay more for those, yes, but they feel they get more for those. In this last year, in 2021, we introduced some more handmade and specialty items. I can't even say doughnuts. Cinnamon rolls, apple fritters, you saw some churros earlier this morning, some of you. These, these things are handmade, they're special, and again, they're a great value, even at higher prices. We have something for everyone at Krispy Kreme, and at every level, every price tier is very special and a good value. People use all these products in ways to satisfy a craving, yes, which is typical of indulgent products, but in our case also to satisfy a need to share with others and to show interest and appreciation for them.
That's why for a lot of brands, you know, I've been doing this for decades, and for a lot of brands, you talk about barriers to purchase. You're always talking about barriers to purchase, right? You want more people to purchase. On a lot of brands I've been on, it's usually price. "Oh, well, we can't convince them to pay more," and this and that. For us, it's not price. Our biggest barrier is access. I mean, we're a relatively scarce brand.
We know this from all of our research that we've done. The location's not convenient is one of our biggest hurdles. Our whole omnichannel strategy is designed to overcome this barrier, and it's doing it. I mean, it's absolutely doing it. Just think about it. Our shop footprint in the U.S., maybe we reach a third of the country, right? Rough numbers, max.
$130 million or so. You add on e-com, maybe some dark shops there, you extend that radius around that shop five, 10, 15, even 20 miles, now you've got another $20 million or so folks you can reach. Add on DFD, now it's convenient. I can go to my local grocery store. I don't have to drive 11 miles to a Krispy Kreme. That expands even more. Ultimately, you'll never reach everyone in the whole country until you have something like a CPG line, which we have just started. It's in its infancy, our brand is Sweet Treat line. Everything about our strategy is designed to give access to the brand. We're not having to do a lot of work on the brand.
We just need to give it to people and give them the opportunity to purchase it all across the world and all across the country. It's working. If you look at our e-com sales, I mean, we really didn't have much of an e-com. 2019 is not on there because it wouldn't have been very, very high, as we basically had nothing in the U.S. other than some third-party aggregation. We did launch our e-com just before the pandemic, which was pretty good timing, and it's taken off. You know, when you look at how we've done across the world, it's grown every year. This year it's 18%, which is fantastic, we think it's gonna keep on growing. There's different ways to continue to extend the access through e-com.
Not only do we have a good own channel, right, through our own web and app, but we use all the major third-party aggregators in the U.S. across the world. We're also extending that further with dark shops. dark shops allow us to sort of plant a flag about five, 10 miles out from one of our shops and extend that delivery radius 10 miles beyond that. there's a lot of ways we can still grow e-com. It's gonna be great. You know, DFD, of course, which we've had great success with, Mike mentioned the U.K. and Australia is having an established DFD channel, but it's still relatively new in the U.S. Not surprisingly, I mean, it's not complicated, it's more convenient.
I go to my local Walmart, I go to my local Publix, whatever, and I have our fresh, high-quality doughnuts delivered every day, made fresh daily, right there. You just take away a hurdle to purchase. It's that simple. We did ask ourselves, though, "Well, what if that scarcity is reduced? Will it be less special if it's in a store, you know, not just our shop, if it's in a grocery store?" No, it makes them love us more. In fact, multi-channel shoppers love us more than folks who buy from just one channel. When you see in the U.K., this is U.K. data from Tesco, people who buy us across the shops in Tesco love the brand more than if they buy just in our shops alone.
We think it's not only great business, but it makes sense if you think about it, right? People love the brand, they just want to access it. When you make it easier for them to access something they love, that makes them happy. I want to touch a minute on Branded Sweet Treats as well. Branded Sweet Treats is our entry into CPG writ large, and it's in its infancy. We have a great consumer proposition there, and there's a lot of work to be done foundationally. We've been doing the fresh donuts since 1937. We've been doing Branded Sweet Treats for just a couple years. Consumers love the product. Consumers love the brand.
In fact, it's the most loved brand in the sweet treat aisle already because it entered with all the equity that it had from the Fresh Shops. We'll continue to get better, work on that, working on our distribution, working on our product, making sure it's all high quality, making sure we manufacture well, take a lot of that internally, have a fresh innovation pipeline coming, and it's just gonna grow over time. It's still in its early stages, but we feel good about ultimately this adding a lot of potential for the access to the brand. You wrap it all together, and you can kind of see how the omnichannel play comes together. This is pumpkin spice from this past year, and you're gonna be seeing more and more of this kind of thing.
We had it in DFD. We had, and this is all, you know, in the U.S. We had it in DFD, we had it across our doughnuts and also our beverages in the shops. We even had it in Branded Sweet Treats line. When you do that, you see a nice spread across all of these channels. You know, the green there, the $5 million, that's through our drive-thru. We do most of our business through the drive-thru in the U.S. $2 million more in the shop, $2 million more in DFD. Tack on another $1 million with e-commerce. Tack on another $1 million with Branded Sweet Treats. In the space of six to eight weeks, you're adding $11 million to your brand that you didn't have before, and a lot of it from channels that weren't people walking in through the lobby.
It's a really powerful model, something we feel absolutely great about, and there's a lot of room to grow. We're always focused on growing and learning more. The brand, the nice thing about this brand is we're not coaxing a brand along to be as big as we want the business. We're just allowing the business to grow into the size of this brand, and that's a special place to be, and it's a really fun brand to be on. At the end of the day, we have an incredible product. We have one of the most special products on planet Earth. It's really great, and it's eminently shareable. That specialness allows us to be unique. That specialness allows us to premiumize the brand, offer all kinds of options at different price points and for different occasions, special occasions.
We're gonna take that thinking and try to do more to meet consumers where they are, be where they are, so they can access all the stuff that they already know and love. That's why we can have so much confidence about having one of the most, not one of the most, the most loved sweet treat brands in the world, and really take advantage of all that to ultimately touch and enhance lives. When people ask you to be part of their wedding, part of their kids', play party, part of a gathering that they have, part of their holidays, you are touching and enhancing lives. We're really proud of this brand, and we're really proud of the potential.
I wanna turn it over to Josh Charlesworth to give you a bit more about how this comes to life in the U.S. business.
Thank you, Dave. Good morning, everyone. Yes, my name is Josh Charlesworth. I joined Krispy Kreme, beginning of 2017, as CFO. Actually, I get the privilege of handing over the reins of CFO to a chap called Jeremiah Ashukian. He joins in just a few weeks. He's joining from Mars Incorporated as our new CFO. I know he's gonna do a great job, and he's gonna find a great team here. I'm actually gonna on this section gonna talk to you within the context of my role as Global President and COO. I get to oversee the major equity-owned markets around the world, and run our operating teams around the world. I'm gonna talk to you about our biggest and oldest business, the U.S. fresh doughnut business.
One that has obviously gone through significant change over the last few years, seeking to address that convenience challenge and bring our wonderful fresh doughnuts to more people across America. What I'm gonna discuss here is about how although we've got great momentum, there's still more to do to maximize the benefits of that fresh Hub and Spoke model.
Now, I joined Krispy Kreme, like most of the team here, because of the beloved brand that Dave just talked about. In America, it is the most loved sweet treat brand, period. When surveyed, Americans who give it a 10 out of 10 on a scale of absolute love, 26% of those do that. That's higher than Hershey Reese's M&M's. When surveyed, people identify the most important attributes as taste and freshness. Guess who excels at that? Who's the best at that?
It's Krispy Kreme. Mike and Dave talked a lot about brand awareness. Of course, here in the South, our brand awareness is very, very high, 99%. This is our homeland. You go to the West of the country, guess what? It's 99% brand awareness. You go to Midwest, talking 98% brand awareness. Even in the Northeast, where we're less present, where our presence is lighter, it's 96% brand awareness. No wonder we have more than 10 million social media followers.
That's with a presence of less than 400 shops across the country. It's just incredible. Why? Well, there's something we all love, and nearly everybody here today was able to try, the hot Original Glazed doughnut. That Hot Light is a really unique differentiator. It encourages people to try the doughnuts when they're turning left across the highway.
It also, perhaps more importantly, ensures that they come back again and again, and the love of the brand is so strong that when they see it on their daily shopping trip or on their commute, as long as it's fresh, as long as the product lives up to the brand, the repeat purchase is there. How have we been addressing this issue of not being as available to people over the last few years? The first thing to do was to take control of the network, to buy out the franchisees in all the major urban centers across America so that we could launch Delivered Fresh Daily in the local markets there from our local Hot Light Theater Shops. We've also, over the last few years, added e-commerce to really boost that availability.
Really made a big hit in New York, opening up during the pandemic after a very limited presence for years. As we come back, came to be a public company again, we were able to suddenly show the world that more than 30% of our sales are off-premise, not in-store at just the doughnut shop, but around the local communities, hence explaining why we've been able to generate nearly $800 million of revenue in the U.S. fresh business for 2022. This transformation is clearly working. We have seen very strong growth already. In particular, the Delivered Fresh Daily launch has been a real hit. We can see here the fresh points of access that enables increased 40% since 2022.
We are selling more donuts around the country than ever before. The fresh revenue is growing double-digit from an organic revenue point of view. Why is that? Well, we've talked a lot about why the consumer wants to be able to get hold of our donuts. Another aspect is really interesting. Our trading partners love this model. Our grocery and convenience partners, they look at a model that is super easy operationally. We make the donuts. We deliver the donuts. We even take them away at the end of the night. It's a fresh proposition. This is ideal for most of their strategies. It is incremental to their bakery category. Perhaps, for some anyway, most important of all, the economics are awesome for them. You're talking a premium proposition with a high rate of sale at a high velocity.
When you start working out the dollar per square feet, that puts us right at the top of what they see in their estate. The grocers love us, our trading partners love us, consumers love us. We it's about maintaining that momentum, making sure we bring that convenience, and driving that growth. What has enabled all of that behind the scenes has been Hub and Spoke model. It's critical for us to be able to economically execute a locally produced fresh proposition every day. For those of you unfamiliar with it, as we add the fresh points of access around our donut theaters or our production hubs, we are increasing the productivity of those hubs. The sales are going up, but the costs are hardly changing.
The ran, the energy bills, even the labor is hardly changing, but we're adding sales off-premise. E-commerce just takes that even further. The sales per hub increases. We talk a lot about the sales per hub here because it means that we're making those hubs more productive, both from a profitability point of view, but of course from an asset utilization point of view as well.
Those hubs are a significant investment, but adding the spokes is much lower investment. You see an example here from Tampa. It's an interesting Photoshop, because as you look at it, the front of the photo shows our retail store. There's a drive-through there's a Hot Light, everything you're familiar with. You see a very big processing area at the back.
In that, we're producing, staging, preparing donuts to go out to our DFD partners, to our spoke Fresh Shops. Actually, as a result, this is one of our biggest producing shops in the U.S. It is producing $11 million in revenue a year. It is able to support those four Fresh Shops and 120 DFD doors. If we were to build something like this from fresh, again, cost over just about $6 million to build, but you can see that the paybacks would be less than three years. This is what we want across the country. We don't have this everywhere yet. Of course, I'm calling out one of our best shops, but this is what we're striving to achieve.
Going forward, I'm gonna spend the next few minutes with you really bringing to life a couple of elements of our strategy is how we're working towards having more Tampas across the country, which not only drive the top-line growth, but deliver that bottom-line margin and return on capital that we know is inherent in the business model, because we can see it in several examples across the country.
I'm gonna start by, of course, talking about how we're gonna keep the growth going. Gotta expand that availability continuously. How are we gonna make sure the quality of the execution is always top-notch? This brand demands a lot. In every channel, we need to be delivering to the brand promise. I'm gonna share with you how we're gonna Hub and Spoke system work, deliver on that P&L flow through. This business is decades old.
How are we going to address some parts of the network that just aren't really set up for this model? Let me start with the top line. The big driver of our points of access growth has been the DFD business. Right now already, it's over $165 million in annual sales, largely coming through grocery and convenience store access, 505,700 DFD doors.
The news is out. Our customers are being added all the time to this model. We've just recently launched in the last few months at Albertsons and Giant, to give you a couple of examples. As Mike said, we've also started moving to different channels as well. We have a great distribution with Duane Reade Walgreens and the drug channel, we're even piloting with McDonald's right now in the QSR channel.
It's made us realize that our consumer is looking for convenience when they're out and about in their everyday activities. It's made us realize that the potential points of access universe, that Total Addressable Market is even higher than we thought when we started the program, hence the 450,000 points of access TAM that I mentioned here.
One thing that's vital to us, and one thing that we have been steadfast around throughout this transformation, though, is that it's always fresh daily and it's always made locally. We're gonna stick to that whilst we go after this opportunity. That's what makes us special. It's not convenience that makes us special. We need to be more convenient, but it's making sure that the brand promise is always there.
The way we think about how we're gonna go after that points of access opportunity in the U.S. is shown in this slide here. The vertical axis shows how we're gonna geographically expand through the country and provide more points of access. The horizontal, how we're gonna add new customers and new channels. We put here at least a 15,000 points of access opportunity.
As we learn more, our confidence grows, and it could well be more. We have 6,000 points of access today, mostly DFD doors in our existing markets and our existing customers. If you go up the chart, we think we can increase that by about 50% just by infilling in underserved cities. We're in Chicago, we're in San Francisco. We sell DFD there, but we haven't really fully penetrated cities like that.
We're not even in Minneapolis yet. We're not in Boston yet. We see about 50% growth, another 3,000 points of access just with the existing customers. Don't worry, our existing customers want us in all of those cities. Actually we're adding new customers. Another 3,000 points of access we see as an opportunity that we're going right after with in our existing channels, grocery and convenience largely, adding those to those geographies.
As I mentioned, we're in constant conversation with new customers all the time, and we'll be announcing additional listings in the coming months. We've realized this importance of convenience, and as long as they stick with fresh doughnut made locally, means that we can distribute in new channels.
As a placeholder, we capture at least 3,000 more there, whether in existing geographies or new geographies we expand into. Our confidence is obviously increased as we've built the model and shared the success with our trading partners. I mentioned earlier, execution in the store, in our shop is so important to us, always living up to that brand promise.
Here, you'll see how we display our donuts in several of those DFD locations. Actually, we're focused here on the DFD on the grocery channel within DFD. In convenience, it's nearly all displayed, as an individual loose donut that people can get one, make a box of three, make a dozen, take home. In grocery, largely, we launched into the grocery channel in the U.S. in the middle of the pandemic. We have many conversations with our grocery trading partners around people touching food.
In the spirit of just getting going, we focused mostly on getting those fresh doughnuts into the grocery stores, not in our ideal presentation, but more in packaged fresh displays like on the left-hand side of this chart, tables and tower displays like this. It's been incredibly successful. It's driving a lot of our success. We see a significant opportunity to upgrade that merchandising.
There's a case just here in the center here on the right. This we call our hybrid case, which not only displays the loose doughnuts, but also the packaged fresh ones as well. This is the typical case you'll see in some of our international markets like the U.K., but is only in a few stores, grocery stores in the U.S. today. Where it is in the U.S. with our trading partners, they're very happy with it.
It's adding sales around more than 30% to the store. In fact, we have also some stores that are taking both types of display, the tower package display and a display like this, and they're seeing 70% increases in revenue per door. Our plans over the next few years are to significantly increase the proportion of the estate that is selling grocery and get that revenue per door up even higher than it is today.
We estimate on average, the estate can come up at about 20% average revenue per door just from doing that. Talking about execution in DFD, we also wanna make sure that not just the physical merchandise is up to standard and excels and meets the power of the brand, but that the products themselves are living up to what everybody dreams about.
In DFD, we find that when we launched it, we were just pushing out the great products that we're famous for initially. We didn't launch it with the LTOs. Dave shared with you earlier how important those holidays and celebratory occasion and partner offerings are to our business. They create enormous brand awareness and these great campaigns like the pumpkin spice example he gave.
Over the last couple of years, we've been adding LTOs into the DFD channel. Now it represents about 40% of the retail calendar is what you'll see in DFD. In 2023, that'll be 75%. We actually want it to be the same for the consumer, whether or not you purchase your donuts at the grocery store or at our donut shops. That way, we can live up to that brand promise.
Of course, these are premium offerings, set at a higher price point. You can see from this Halloween example how we've been evolving in DFD, and I can't wait. This example's from the U.K., in the U.K., in DFD during Halloween, you'll see examples like this in our LTOs going forward in 2023 and beyond, which when we know we get this right, we add more than 15% of sales during those periods into the DFD channel.
This is all about making sure that it's not just about adding the doors, but that the DFD experience is as special as our famous doughnut theater experience. I've spoken a lot about growth, but to maximize the potential Hub and Spoke model, we also need to see productivity come through.
We know from that Tampa example, we know as we drive incremental off-premise sales, that there is a flow-through advantage to the bottom line. We're a young company in this transformation. It has taken time to build all the capabilities in our people and processes to ensure that we deliver this across the board.
As such, across every line of the P&L, to ensure that we deliver the 250 basis point improvement that we expect Hub and Spoke model out to 2026, we have a series of initiatives and programs that are vital and important, and we're focused on across the organization. Whether it be on product and distribution costs, the team is working, for example, really hard on centralized demand planning and supply planning to reduce waste. This is a fresh business.
We naturally have waste at the end of the day. We take it away. We're never gonna have yesterday's donuts on shelf. In that context, we have an opportunity to manage the waste better. I'm gonna deep dive on how we're going to optimize our network and automate production.
Generally, we're working on labor efficiency, across the board now. We've implemented tools like HotSchedules, and using Oracle to make sure that we have our labor set for the right amount every day of the week, every week, and every season of the year. There's quite a lot of variability in consumer behavior around that. Of course, as we grow, there are economies of scale and opportunities for us to leverage. I'll talk about more in the finance section later.
Double-clicking first on production automation. For those of you who are able to see the doughnuts being produced today or are familiar with doughnut production, when you visit one of our Hot Light Theater Shops, it is an incredible process. It takes over 30 minutes, starting with the mixing of the dough all the way through to the packing of the doughnuts ready to go out for DFD or to be handed over the counter in the shop. Actually, although the first part of the process is largely automated, you see those doughnuts coming down the line spectacularly, a big part of the process is still requires a lot of manual intervention.
Whether it's icing the doughnuts, that picture there shows our Krispy Kreme is literally take the Original Glazed doughnut and take a bowl of icing, that's how it's done. It's awesome, it's pretty repetitive. We fill the doughnuts and top them by hand. We take them off the line and pack them and tray them by hand. No wonder we spend over $100 million a year on labor, on production labor in the U.S., with 60% of that labor on those post-production processes once the Original Glazed has gone through the glazer. We see a real opportunity across both our five doughnut factories and 240 Hot Light Theater locations to address that issue.
We have been trialing for some months now a variety of technologies which remove that labor component, particularly arduous for our Krispy Kremers, from the equation. On the left here, you see that's in one of our donut factories, in-line icing, instead of taking the donut and putting it in a bowl, flipping it through the conveyor, integrating it into our production processes. There's technology for in-line filling. There's even technology for taking the donuts off the line and putting them in the box. It's amazing when you see this stuff, you talk about theater, it's a lot of fun as well. On our mind, particularly in the donut theaters, is to ensure the theater experience continues.
We really see an opportunity to go after this manual labor cost and indeed bring another unique element to the Hot Light Theater. We plan over the next 18 months for about 18% of our donuts to be produced on automated lines like the ones I've just described, which would save immediately around about $2 million a year just on that program.
We'll then learn, and as we go, look, see how much more of the estate that applies to and we can adapt the technology and be successful with. I'm gonna talk to you about another big program to ensure the Hub and Spoke productivity flows through, and that's understanding and adapting our legacy shop network. This network was built up over decades without any of this strategy in mind.
In the US, this excludes Canada, by the way, in the U.S., we have 240 of these production hubs today. 127 of them we've adapted to be hubs with spokes, delivering just like that Tampa shop to local grocery convenience stores and elsewhere. It's a big business. We now have 45% of the revenue off-premise and delivering solid, strong margins and growing margins.
You look on the right-hand side of this chart, you see we also have hubs without spokes. These are production theaters that we've decided during the course of the transformation not to convert to hubs with spokes. There are many reasons for that, the biggest being the space you need to stage and get ready and ship out the doughnuts in the back of house.
In some cases, the retail shop is just too busy, and that is the case for a lot of these high performers. $140 million of revenue going through those 59 high-performing hubs without spokes at over 20% EBITDA margin. They're obviously a really important part of the estate. Most of them are classic shops loved in their communities, some for decades and decades. We also have a group here of 54 low performers, and this number is after the eight that I announced that we closed during the last earnings call, which generate only $70 million of sales and are breakeven. All of these EBITDA figures I'm quoting here are before the allocation of overheads, by the way.
Our focus right now, of course, it's making sure we lean in on the hubs with spokes and continuing to expand that. We're also realizing we're needing to address these low-performing parts of the system. We have developed four strategies to do that. The most obvious one being to close them. We, as I said, we've already closed eight, and we anticipate another 10-15 that we'll be closing in the coming months. All told, around about 20 that we will close. The similar numbers I mentioned in the last earnings call.
We're taking the equipment from those sites and redeploying it elsewhere because our biggest challenge is nearly always supply of doughnuts to meet the demand these days. What we're doing in others, though, is we're looking to remodel the shops.
Some of them we're just plain old simple converting Hub and Spoke like we have been for the last few years. It's just now we've realized with the size of the prize that some which may be economically were a bigger investment, it's now worth just converting them. About 5-10 of those we're doing right now. We're also learning how to convert them in different ways. You see on the top left head there, that staging area is pretty big. You have to be really thoughtful. If you've got a lot of volume coming out to the DFD doors, you need areas to pack and stage those doughnuts.
We're finding that some stores which maybe have a small lobby business, we're closing the lobby, putting up screens so the customer sees the Hot Light but doesn't look into what is now actually a factory. We still have a walk-up window, a drive-through, we use the lobby space not for people to sit and have a coffee like they were doing before, but to stage, produce, and get ready for shipping out the donuts.
It's a very capital efficient way of adapting our estate. The ones we've done already have seen virtually no impact on the top line and a significant improvement to the bottom line. There are others, about 10-15, where we're gonna go completely the other way. We're gonna take out the production labor, I mentioned how much we spend on it, and turn them into spokes themselves.
Fresh Shops, selling donuts, but not making them anymore. There is a slight adaptation. We are taking some and we're trialing what we call mini theaters, where they're just making some Original Glazed, and using the Hot Light that way. The whole point is we're being a lot more agile in our strategy, applying different ways to get the donuts out, deliver on the consumer promise, but really leverage these assets better and improve our overall financial profile. Hence why for an investment of only around $5 million-$8 million, we're expecting a 50- 100 basis point improvement from adjusting this estate alone. I took you through a lot there. Maybe it's worth giving you a case study.
When you look at this, I think you really understand both why we've discussed so much our confidence Hub and Spoke model, not just from the top line, from the bottom line point of view, but also the importance of addressing these legacy units. In Dallas, we bought the Dallas franchise early 2020, actually was in pretty bad shape. The doughnuts and the customer experience wasn't up to the level that we wanted it to be. By the time 2021 had finished, we'd done a lot of work to improve the experience for our customers from a retail point of view and have moved to quite a significant loss as a result. We're not about short-changing our customers, we needed to invest in the retail estate.
We needed to put the right people in the shops. We had these 10 hubs, though, that are now selling $11 million in revenue a year at a loss. Clearly our strategy, and you've heard a lot about it, was adding DFD doors. We found we chose two of the hubs were appropriate to invest in and adjust and add DFD doors. We immediately in 2022 were able to get 192 doors across the Dallas-Fort Worth marketplace. You can see in those two hubs with spokes, the profitability immediately soared. Just as I said, just like the Tampa example, you see an 18% EBITDA margin in those two hubs with spokes, which is sustained through 2023. That's current assumption. We'll see if we can do even better.
What we're doing now is starting to look at the rest of the estate. We are closing three of the other hubs, and one of the hubs that I described that is now drive-through only with DFD door and no lobby business is the third hub that we've added with spokes. The plan now, given what we've already seen, is to get those hubs with spokes to be at least 10% EBITDA margin or better, without spokes, in 2023, and obviously get the market to profitability.
This is what I talk about in a lot of the earnings calls about our confidence level in the hubs and spokes. You get so frustrated when you see Dallas, which is a tremendous success for us, but the profitability isn't there yet. Addressing these hubs without spokes is the heart of that.
When you look at the whole estate, the future will be a Hub and Spoke network, whether it's hubs with spokes or hubs without spokes. We expect to add and convert our shops to deliver, to be able to deliver more than 8,000 points of access across the country by 2026, supported by 160 or more Hubs with Spokes. This will, as I've explained, increase the sales per Hub, deliver more sales, getting us up to $850 million or more in the Hubs with Spokes. Those Hubs with Spokes will be by far the biggest portion of our estate and drive, of course, the profitability that I've discussed.
Also crucially, the hubs without spokes will be at a similar level of profitability as we scale back on the low performers and continue to support the high performers. I've covered a lot of information here. It's really focused on maintaining the momentum that we have, not taking anything for granted, driving our growth, and we expect that will deliver us more than $1 billion of fresh revenue by 2026.
By adding new channels, adding new markets, adding new customers, continuously bringing exciting premium offerings to our consumers, whatever the channel. It's so important that the omnichannel experience is great from both a business and a consumer point of view. Thus we wanna see those benefits Hub and Spoke model coming through.
We know that that way, as you drive these additional points of access, you can get the great returns that you saw in the Tampa example, not just for there or for a few places, but for the whole estate. That is our real focus moving forward. I'll finish up there by thanking you for really believing in the growth that we see. Now we have every reason to believe in the bottom line flow-through and capital return that we know is happening underneath. You'll see it more visibly moving forward. I'm gonna hand over now to Matt to talk about how we're doing a similar thing across the whole world.
Thank you, Josh. Good morning, everyone. I'm Matt Spanjers. I'm our Chief Growth Officer. I'm excited to talk to you guys today about accelerating our global expansion. I've been with Krispy Kreme for about the last six years. I was part of the team that did the acquisition and take private, then came into the team full-time. Prior to joining Krispy Kreme, I was with Caribou Coffee and Einstein Bros. Bagels, and before that with McKinsey & Company.
Josh talked about the transformation of the U.S. business over the last five years. Our international business has gone under a transformation of its own. We've acquired a number of our highest priority markets around the world. We've expanded our network of franchise partners and improved the quality of our partners overall. We've implemented omnichannel strategies around the world and are building pipeline for new market growth.
In doing so, we've doubled our points of access and significantly increased our EBITDA around the world. Most importantly, in doing so, we built the foundation that now enables us to accelerate our international growth story. The international opportunity for Krispy Kreme is massive. Today, we're gonna talk about the strength of our existing model, the pipeline for that new market growth, and this incredible runway that we have in front of us.
Three key messages I want you to take with you today. First is that we are a global brand with a proven omnichannel business model. 30 countries today, 5,400 points of access. This model works from Sydney to London, Tokyo to Cape Town, Korea, Central America, Southeast Asia. We have shown that Krispy Kreme Donuts and this omnichannel model work in a wide range of geographies and cultural environments. We have tremendous white space to grow into. Within our existing markets, we see an opportunity to grow our points of access by 5 x. In parallel, we're building a pipeline of new market growth that will fuel us into the future.
Three, momentum is building, right? Coming out of COVID, we're seeing continued demand for our product. We know the role that Krispy Kreme plays in the lives of consumers, and global interest in the brand has never been higher. We're talking to more and more partners every day, high quality, well-capitalized global operators who know that bringing Krispy Kreme to their local markets is a recipe for success. Stepping back, our international business is already significant and highly profitable today. Nearly half of our system-wide sales come from outside the U.S. and more than half of our profitability.
There are a few different components to our international business that I wanna orient you to today. It starts with our equity-owned businesses in the U.K. and Ireland, Australia, New Zealand, and Mexico. We report these businesses as part of our international segment. These are well-developed businesses, highly profitable. There are also our equity-owned businesses in Japan and Canada. Less developed businesses, huge opportunities for growth.
On this slide, I've reflected all of our equity-owned businesses in the green slices of the pie. There's also, in the yellow, our international franchise business, another 25 markets around the world where we're executing the same omnichannel strategy, leveraging our high-quality local partners. You can see that all elements of the business have been growing.
We've increased system-wide sales 11% annually and more than doubled our points of access in the last five years. There's a huge runway for continued growth across all these businesses. Mike talked about the 75,000 points of access. 60,000 of those we believe come from outside the U.S. We have 5,400 points of access today and opportunities to grow in both existing and new markets. In our existing markets, we see 15,000 points of access opportunity in our owned equity markets and another 15,000 in our franchise markets.
We've identified a 30,000 points of access opportunity in new markets. This isn't new markets across the entire world. This is the pipeline that we are working on today, markets that we plan to enter in the next three or four years.
Now I'm going to walk a little bit through our existing business to give you an idea of why we're so confident in the growth there, as well as our pipeline for new market growth. I'll start with the U.K., Ireland, Australia, and New Zealand. In many ways, these are the markets that are Hub and Spoke growth strategy. We acquired the U.K. market in 2016, soon after the acquisition and take private of Krispy Kreme. What we saw in the U.K. was pretty interesting right away. What we saw Hub and Spoke model, right? They were operating from these highly efficient production hubs and delivering doughnuts out to a network of Fresh Shops and grocery partners, most notably Tesco.
It was obvious that this model, Hub and Spoke model that we talk about so much today, was what was driving these incredibly high levels of productivity. We knew this model could be replicated. After acquisition, we continued to drive growth in the market. We entered Ireland just a few years later and are continuing to grow in Ireland. Ireland itself is a huge opportunity for growth. We've only recently opened a new donut factory in Ireland that allows us to capture the D.F.D. opportunity. Next year we'll be opening a new hub in Belfast to enter Northern Ireland. The U.K. and Ireland we think of as some of our most developed markets, right? There's a highly Hub and Spoke network. There's still a ton of opportunity for growth.
Even in a market like the U.K., we see opportunity for an incremental 2,000 points of access over the next several years. Australia is a similar story. We acquired the business in Australia in 2018. They had established their own version Hub and Spoke model. In Australia, they were leveraging a partnership with 7-Eleven, one of the largest convenience store operators in the market, to deliver fresh doughnuts every day to a greater number of points of access.
Again, this model was driving exceptional levels of profitability. We entered New Zealand very shortly after acquisition, established a Hot Light presence Hub and Spoke network, quickly entered DFD, built out the New Zealand market. Australia is a well-developed market, but there's continued potential for growth.
We see an opportunity to increase points of access by 50% over the next couple of years. Some of that we expect to come from Woolworths, a recent pilot we've entered with the largest grocery store operator in Australia with over 1,000 locations nationwide. Seeing the success of the omnichannel strategy in the U.K. and in Australia, we turned our attention to Mexico. In Mexico, the Krispy Kreme brand was already incredibly strong, but a donut shop only presence. DFD had not yet been explored in the market at all. Since the acquisition, we've doubled the business and increased the margin up to the low 20% levels consistent with what we see in our other more established international businesses in the U.K. and Australia.
We've begun piloting in DFD in both the grocery and the convenience channels, including a pilot with OXXO, who operates more than 20,000 locations across Mexico. There's also a geographic expansion opportunity within Mexico. Almost half of our business is in the greater Mexico City area, so we've been expanding. We've opened new hubs in Guadalajara, Veracruz, and we see opportunity to continue geographic expansion into the northwest of Mexico.
Over the next couple of years, with the success of DFD, we could see this as a 4x or 5x points of access opportunity. There's Japan and Canada, more recent acquisitions, as I said, less developed businesses, but similarly well-loved brands with great opportunities for growth. The business we acquired in Japan not even two years ago, very strong brand, but a relatively small business.
Retail only, not as efficient as what we see in more established Hub and Spoke networks. We quickly introduced e-commerce. They had nothing as of the time of the acquisition and have begun piloting DFD and are seeing great success, particularly in Tokyo. Tokyo is a huge opportunity, largest city in the world, 14 million people. Our pilot now has us up to 100 DFD doors compared to 500 doors in a market like London.
We see Tokyo as a huge opportunity. We're opening a new doughnut factory in Tokyo this month, which will enable us to continue expanding our DFD pilot across the market. Canada, a much smaller market for us today, only 16 doughnut shops, four hubs in total. It happens to be one of the most profitable markets in our entire system, much loved brand, and a great team on the ground.
We're excited to continue adding capacity and growing the Canada market. We're opening a new manufacturing hub in Toronto that will enable us to start piloting DFD. We're also entering new geography across Canada, planning to open hubs in Edmonton and Winnipeg in the next year or two. Those are our equity-owned businesses. Franchising is also an important part of our business and will continue to be a major driver of our growth. Some of our largest franchise markets include South Korea, the Middle East, a number of markets in Southeast Asia, a number of markets in Central America, and we continue to build this part of the business every day.
The omnichannel model, when executed by a strong local operating partner, works well. We have an amazing set of partners around the world who are excited to continue growing Krispy Kreme. Our franchise model is similar to what you would see from other large franchisers. We sell development rights and fees as our partners open up new geography and new shops, royalty on all of our omnichannel sales, both our retail sales and our DFD sales.
Then we sell our franchise partners doughnut mix and doughnut equipment that enables them to operate. As an example of our franchise model, I'm sharing a case study from Americana, our partner who operates across the Middle East and North Africa. Americana's performance has been exceptional. They're an amazing operator of a number of global brands.
We know that Krispy Kreme is their favorite because they tell us that every day. They've continued to drive growth over the last several years, doubling their points of access and consistently increasing their system-wide sales. Americana is a great example of an omnichannel partner that understands what we're trying to do and is driving growth. We plan to continue growing with Americana over the next several years.
They've opened Egypt for us two years ago, Jordan, a highly successful opening this year, and we have plans to continue entering new markets. In addition to our existing business, Mike said we expect to open three to five markets a year going forward. 2023, we expect to open even more than that, given some pent-up demand post-COVID and the strong demand we're seeing for the brand around the world.
This does include Ecuador, a market we've not previously announced, where we've recently signed a development agreement with an outstanding local operator. Beyond 2023, we're in a number of discussions about continued growth in Western Europe and South America, including opportunities with Spain, Germany, and Brazil in South America.
These are not yet signed agreements, but discussions we have underway. When we look to new market growth, we're taking a thoughtful view of how we want to deploy capital. We want to balance the level of risk with the level of investment and make sure we're taking the total global Krispy Kreme picture into account. When the size is great and the risk is manageable, our preference is to have some level of direct investment in the opportunity.
That could be through direct investment with a local partner or a joint venture partnership, like we'll talk about in France going forward. This type of model makes most sense for us, as we said, in the U.K., Australia, France, and prospective markets, potentially in Western Europe, and maybe a few others around the world. When the size of the opportunity is smaller or the risk is higher, our bias is towards a franchise model that limits our capital investment up front but still allows us to bring access to Krispy Kreme to more of the world. I mentioned the three to five new markets a year. Going forward, 80% of our new market growth will be with franchise partners. We expect about 20% of the new markets to be some level of equity investment or joint venture.
When we look at the 2023 new openings, all of our new openings for 2023 will be with franchise partners, with the exception of our entry into France, where we've entered into a joint venture. I'll talk a little bit more about this joint venture opportunity in France. It's a great case study for how we want to use equity to grow with a high-performing local partner. We think France is a great opportunity for us to establish Krispy Kreme in Western Europe. It's a great market. We know the demand is there, and we've got a plan to expand over 500 points of access over the next five years. Our partner in France is Wagram, an outstanding local operator who currently operates a chain of coffee house cafes across France.
They're excited to bring doughnuts into their portfolio. We're hard at work in building a local team to drive the Krispy Kreme opportunity. Our current plan is to open the Hot Light in Paris sometime in the middle of 2023 and to quickly establish Delivered Fresh Daily network and Fresh Shops across the market. The partnership with Wagram is structured as a joint venture where we have a 33% stake in the operation through the startup phase, with an option to take a controlling stake after the startup.
It's a great model for us, where we leverage the strength of that local partner to drive the business as a local owner-operator. We get an opportunity to understand how the business is performing over time and can take more control as the business evolves.
Turkey is a great example of how we can use franchising to drive growth around the world. Franchising is gonna continue to be an important part of our growth strategy and makes a ton of sense. Turkey's a market Krispy Kreme had actually been present in for a number of years. We had a local partner who was not realizing the full potential of the opportunity.
We've been able to bring in a new partner in IS Gida, again, very well-capitalized operator of a number of global brands, incredibly excited to bring Krispy Kreme into their portfolio. They've put forth a really aggressive development plan that allows us to grow 500 points of access across Turkey over the next several years. An omnichannel model leveraging Hot Light locations, Fresh Shops, and Delivered Fresh Daily.
This growth is gonna increase system sales in Turkey by 10x over the next five years, helping us grow the brand in a major market where we know there's high potential, but limiting our overall risk and capital investment. In this model, we realize the benefit from royalty, expanded sales, equipment, and mix to support the high growth in the market.
The next several years promise to be transformational again for Krispy Kreme outside the U.S. I'll restate some of the key points. We are a global brand with a proven omnichannel model. We know that Krispy Kreme works around the world. We have white space to grow into, both in our existing markets and in our new markets. Three, the momentum is building. There's tremendous energy around the Krispy Kreme brand globally. We are growing in new markets.
We are building pipeline with an amazing network of new partners. By 2026, we expect to reach more than 12,000 points of access, enter 10-15 new markets, more than $650 million in revenue, and $170 million in EBITDA. The energy around Krispy Kreme is incredible, the potential is there, and we are accelerating our growth into international. Thank you for time. With that, I think we take a 10-minute break, and then we will reconvene to hear from Seth on Insomnia. Thank you.
Ladies and gentlemen, we will be returning to the presentation in approximately one minute. Thank you.
Hi, my name is Seth Berkowitz, and I'm the Founder and CEO of Insomnia Cookies. Insomnia Cookies started in 2003 at the University of Pennsylvania when I was just a junior. We've come so far in the last 20 years, and I'm so grateful to be here to share our journey and our future vision with you.
Insomnia Cookies is an incredible brand. We have a unique and differentiated business model. Our performance and track record speak for themselves. Each key element that you see across the page here, our Gen Z community, our Own the Night brand, our digital-first platform, our delivery expertise that goes back to day one, our asset-light model, and our highly profitable bakeries has helped us create a category, a category of late-night cookies that we have owned since day one, and we are positioned to win.
This has driven our growth so rapidly over the course of 20 years, and it has clearly defined our brand. Roughly 20 years ago to the day, there was a knock at my door when I was in college at UPenn. At the time, we were playing Halo, I think was the game at the time, Halo, Madden. Regardless, I had lost. So I go to answer the door, and the Papa John's delivery guy is there holding a pizza. Not such a unique story, right? Delivery of pizza, pretty common for a college student. For me, it was the third time I had answered that same door, and the same delivery guy was standing there. I turned to my friends, and I said, "Guys, what is going on? How are we ordering this same really mediocre product every night? It's greasy. I don't want it.
I want sweets. I'm starting a cookie business." They said, "We're 20. What are you talking about? Sit down. It's your turn to play." I said, "No, this is something I'm going to work on." I spent the summer building up a recipe, trying really hard to make sure it was the best cookie that could be delivered warm and delicious. I launched Insomnia Cookies in October of 2003, about a few weeks after my junior semester had started. I only got two or three orders the first few weeks. It was a couple of friends heard about it. I had the opportunity to hand out cookies on Locust Walk, which is the main street at Penn, or kind of the main thoroughfare right through the center of campus.
I got access to the dorms so I could put up these little yellow flyers that I still have that are really kind of amazing to look at. Open 8:00 P.M. to 2:00 A.M. for the first year we were open. We're still getting some orders coming in. One night, The Daily Pennsylvanian, the school newspaper, put me on the front page in that same backwards baseball cap, the guy in the bottom left there. It read on top, Rudy Giuliani, America's mayor, comes to Penn. At the bottom, college junior starts cookie business. It's me with this backward baseball cap and a hand mixer, and the phone starts ringing. I got 86 orders that night.
I think I got 65 of them completed, which is not a hit rate we aspire to today. I felt pretty good. Just me, my own car, the one phone, and the small little oven that's basically a kind of a double-deck oven. There's two little racks to make cookies on and executed on those 65. Basically what I learned that moment and continues through to today is that that need, that craving that I felt resonated so meaningfully with my college friends, with that college community, and with that kind of own the night Insomniac community. It began to blossom, and it's grown today into this amazing cult-like Insomniac community. When we say Insomniacs, we mean our internal employees. We mean our external customers. Insomniac is one and the same. Who are they? They are college-driven, right? Anchored there, Gen Z, 50% 18-24.
As we've grown from college to city, we've tested suburbs, we're following their life journey and building lifelong relationships that matter. We connect with this community through our shared values. We are all Insomniacs. Dream big. Stay hungry. Bake to perfection. Do what's different. Indulge in life. Each one of these values are a shared notion of what Insomnia Cookies, how we stand up and who we are. It's the passion for our brand. It's the entrepreneurial spirit. It's the creative products and experiences that we live. It's the authenticity and originality of our Insomniacs through and through. It's the fun. It's the own the night party. It's the moments of sweet joy that we can share together. It all comes together through what we refer to as imagine what's possible. It's our cultural destination. It's the notion that we reinvented what cookies were in the U.S.
We will do the same globally. We will continue to reinvent who we are each and every day through this mantra of imagine what's possible. I'll tell you, though, this group of Insomniacs internally and externally has an extreme high level of expectation. We need to deliver on three very basic words. There's an emotional, meaningful connection. It's rooted in the brand. It goes back to that first night when I delivered warm, craveable, delicious delivered cookies, right? Everything was about bringing those cookies to their door. When they open the box, they're wowed. When they're warm and they take a bite of that delicious product, they're wowed.
When they're wowed, they tell their friends, and their friends tell their friends, and we generate so much demand and so much love that all we need to do is stay true to these three words, meet these expectations, and the cult community grows and grows and grows. If we follow this obsession and we're true to our promise, we're gonna be able to deliver on a goal of warm cookies in 95% of U.S. households. We seek this goal not only in college campuses, but in major metropolitan areas to make sure that we can deliver warm cookies at each and every turn. Another element of our personality and our brand, and it goes with the name Insomnia Cookies very naturally, is the fact that we can own the night. This is a considerable moat for Insomnia.
We sell more than 80% of our products after five. In the winter, that's at night, right? In the summertime, it's still 60%-70% of our business. The night is something that we can truly specialize. We can make it a moment that people remember. We can open up seven days a week until 1:00 A.M. and close 3:00 A.M. on weekends. We can generate lines out the door every single weekend, every single grand opening, and once a year, and hopefully more, there'll be another opportunity to do this, we have a PJ Party, the largest in the country, 'cause who else can host a PJ Party? We convince people to show up in their pajamas, in their shorts, till 3:00 A.M., we'll give you a free cookie.
Literally a million people show up to our stores each and every year in September. I welcome you all to join us. It's an incredibly fun night next year. It's the best, and it's something that only Insomnia Cookies can do.
In the short time that we've been able to build this brand, it's been generated through the warm, delicious delivered ethos. It's been through our value set, and I believe it's something, and I'll ask Mike and the team this, I'm sure they'll agree with me, that it's what captivated the Krispy Kreme team. It's what was attractive to them. The notion of warm and hot together, the value sets are so connected. The leadership mix and our values, they really connect meaningfully, and we were able to create a wonderful partnership a little bit more than four years ago.
Since that time, all we've done is grow. We've been able to grow our unit count, we've been able to grow our revenue, we've been able to grow our margin, it's through the guidance and the leadership and the mentorship that we get each and every day across the aisle by function, by department. But it's really about that shared ethos and those shared values that have helped us grow together with Krispy Kreme. I've told you about the brand and about those connections and about the community, but the business itself is extremely unique. We have stores that are compact at times, right, 500 sq ft for those I had the opportunity to take you last night to our bakery. 600 sq ft over here on Hawkins Street generates nearly $1 million in sales, right?
$1,500 a foot. $1,000 a square foot is our standard at Insomnia Cookies. We have an incredibly efficient labor model. In less than four years, we've been able to unlock 500 basis points of leverage through our labor alone, our AUVs have grown 35% to $850,000 and growing. Some of our top markets can generate north of $2 million.
We've seen a lot of growth, and it's unlocked through these bakeries that are super efficient, super asset light, and we can repeat that model over and over again. It works because we can stretch the four walls of our bakeries. It's not just about the retail business that comes in through the door, even though we love those customers, we love those experiences 'cause you can smell the cookie from the street.
It generates so much engagement, and it's so meaningful when we can own the night. The digital stretches those four walls. We have roughly 50% of our revenue going through digital and delivery. Our e-commerce AOV is more than 2x retail. Over the course of the last couple of years, we've been able to unlock a much larger delivery zone through an innovative process, through partnering with third parties at certain times to allow us to fulfill a 10-mile radius and delivery zone, helping to build towards that 95% goal that I referenced earlier today. When you put this all together, the model works absolutely everywhere. It's proven portability.
Starting in the Northeast at UPenn in 2003, going out to Davis, California, in the West in 2016, Insomnia has migrated across the country, first starting in college, then in major metropolitan cities, generating high AUVs. City and college are on par. There's parity there. The best of all worlds is we can be incredibly efficient. We can build them for $300,000 each, roughly pay back in one year or even less. At times, it could be under a year. We can repeat this consistently to generate more and more growth over the course of the long term. We're so excited about what the brand can do emotionally. We're so excited about those connections that they create.
We're excited about the model that we can repeat and scale, but we also can start to create meaningful confidence about how big Insomnia Cookies can be. At the moment, we're at 152 college locations. We have 71 city stores in major metropolitan areas like New York, Boston, D.C., as far west as L.A. We have a couple of alternate formats as well as suburb stores. We're trying to push the envelope on what creativity and what imagine what's possible means for Insomnia, and we're testing what large suburbs can look like as we follow the journey of our Insomniacs. As they move out of the cities and into suburbs, we wanna make sure that we can be there for them as well.
Lot we've been able to accomplish is our 230 bakeries across the country, and our footprint has currently reached 31% of the U.S., or more than 100 million Americans that we can deliver to each and every day. When you add this all up, we believe the domestic opportunity is more than 1,000 locations in the U.S. alone. There are 500 university campuses with more than 5,000 students that we can target confidently. There's many more university campuses at the 5,000 mark or more than 500, but we confidently believe we can reach these 500 because they mirror the campuses we have today.
There's more than 300 nightlife markets that are city-centric that mirror the markets that we have today, we believe alt format and large suburb can at least be a hundred stores, adding up to a thousand in the U.S. In 2023, we're gonna launch in Manchester, in U.K., we're gonna open in Canada, we're gonna hopefully reach up 50-100 stores for each of those markets in very short order, allowing for global opportunity when you extrapolate it out to the rest of the world and more than 3,000 stores as well. Massive addressable opportunity for us. A thousand bakeries, which will be the thousand right bakeries to allow us to reach 95% of the U.S. and the global opportunity will follow, we're very excited to see that come to life.
I'll tell you for myself personally, thinking about those first nights delivering cookies, I never really thought that a global cookie brand was possible. It's clear if we're true to our ethos, if we're true to our warm, delicious nature, this is something that we can achieve. The 2026 goals really do reflect this high growth opportunity. We expect to open more than 200 bakeries in the next four years.
We expect to grow revenue to $350 million. We expect to enhance our margins and bring them up to 17% and, generate EBITDA of nearly $60 million in 2026. When we deliver on our brand promise, we continue to grow our Insomniac community, We really believe that these goals are achievable, and we can do even better down the road. Insomnia Cookies is a brand that delivers.
We will continue to lean into our category creative spirit. We'll grow our Gen Z community. We'll build on that own-the-night brand and personality. We'll leverage, enhance, and increase our capabilities around digital. We'll modify our delivery business to make sure that it can reach more Insomniacs with more warm, delicious moments. We'll be extremely diligent and efficient about our asset-light model, and we'll make sure our highly profitable bakeries are something that can be repeatable, reliable, and consistent and build a track record that we can really be proud of. Thank you so much for your time. It was a pleasure to spend a few minutes with you today, and I'll turn it over to Josh.
Thank you, Seth. What a phenomenal business partner Seth is. Inspiring, and what a great business it is too. My job now is to summarize for you all how this all comes together into our financial expectations out to 2026. You'll see here a compelling value creation story, one that's about high growth, high profitability, also crucially high capital return. Of course, we have a strong financial track record already. We have grown the business on average 18% a year in revenue over the last six years, thanks to largely our points of access expansion across the U.S. and around the world. That's meant that we've become a more than $1.5 billion business in revenue, and we've achieved it through our Hub and Spoke model.
This is why you see the sales per hub increase. As we add those points of access, we're driving up sales per hub. This means we're using largely our existing assets to drive the growth, hence why our confidence in the asset utilization approach to the model. The quality, therefore, of the EBITDA growth is really important to us, and the EBITDA has grown to, we expect, $190 million by the end of this year. That's a 14% CAGR in itself or a 12.5% margin. The best is yet to come. You've heard from all my colleagues around the plans that we have, and as Mike said, we have more than 75,000 potential total addressable market and points of access, and that is gonna be at the heart of our growth.
Between 10 and 15 points of access growth a year, averaged here at about 12.5% on the chart. That will translate into, we expect, double-digit, 10% organic growth on an annual basis, taking us up to $2.15 billion in revenue or more by 2026. Again, we'll be doing it by focusing on a lot of our existing assets. That's why we will continuously track this sales per hub. Are we getting the best out of what we've got to deliver on that growth?
See the flow through to the bottom line Hub and Spoke model, taking our EBITDA from an estimated $190 million at the end of this year up to well over $300 million by 2026 or nearly 15% in EBITDA margin.
Here, I break down for you a little bit more detail by our reporting segments how those sales projections are built. Each one, sitting behind this is a detailed plan, market by market, city by city, channel by channel, initiative by initiative. Here we just summarize at the highest level. Again, this is the U.S. only. At the top, we've taken Canada and put it down into our market development reporting segment moving forward so that it gets the focus that it needs. There's tons to do in the U.S.
You see how we've broken out the sales into its three sub-businesses in the U.S., obviously the biggest being the fresh business. We see that growing to over $1 billion by 2026. As Seth said, Insomnia becomes actually an even slightly bigger slice of the pie with its growth of at least $350 million, and we expect Branded Sweet Treats to be over $100 million by then. That's a CAGR for the whole U.S. segment of around 10%. International, just a little bit less, a lot of growth still expected there. Mexico, a big part of that, as Matt described.
Market development, already a big franchise, and U.S. part, franchise part of that business means that that grows slightly lower at 7% CAGR, but a lot of within that, a very exciting high potential growth in businesses like Japan and Canada. Total company CAGR was said of 9% or 10% on an organic basis. It's not just about the top line. I've talked a lot in the U.S. section about what we're doing in the U.S. to deliver on the bottom line, too, to make sure we harness the benefits of that hub-and-spoke model. I won't repeat that here. Instead, I'll say a lot of those initiatives in the U.S. do apply elsewhere. It's just the impact is so much more significant in the U.S., given the legacy network that we've historically had.
A couple of global initiatives on top of the U.S. initiatives worth highlighting. We still make all our donut equipment in-house, here in Winston-Salem, North Carolina. Given the level of expansion we see with these points of access, we are now working with third-party partners to see how we can support that growth around the world, and that we expect to give us efficiency benefits as we go as well. The same goes for shared services. Most of our back office shared services are also done in Winston-Salem. We've now started already to identify ways to have roles done to support the U.S. in Mexico, for example. All told, these add up to an EBITDA improved margin improvement of over 225 basis points, which I break out here for you in the three reporting segments again.
You see how the biggest driver is, of course, the U.S. fresh margin, but all the businesses are contributing to the EBITDA growth. We think that the positioning of the brand enables us to continuously drive profitability across the world as we grow the model. As I mentioned before, we wanna take the EBITDA margin in the U.S. fresh business from around 11% to over 14%, which obviously explains a lot of that shift in the overall U.S. segment. On top of that, of course, Insomnia also becoming a bigger share of the pie, given the projections that Seth just shared. I've mentioned capital allocation a lot during this as well. Our strategy is about targeting our capital investments to the highest return opportunities.
Just a couple of years ago, we were more than 8% of our CapEx, of our sales was CapEx. We've driven that down to just over 7%. We expect it to be just under 6% by 2026. We're gonna continue to invest in the business because we have so many high return opportunities. We think of it with a sort of portfolio approach, if you like. We look at markets like Mexico or indeed Insomnia in the U.S., which have very clear roadmap, high growth and immediate high return on capital. Naturally, as a percentage of sales, we're allocating more capital to those markets to support the growth and generate the return.
In markets that are more mature, like the U.K. and Australia, that still have plenty of growth opportunity, we are investing in capacity just more selectively, just in the highest ROIC opportunities so that we can ensure that we provide the funds for the likes of Mexico and Insomnia. The U.S. is, not surprisingly, a little more complex. Most of our focus is just getting those DFD doors supported. It's very low cost to open. Even one of these cabinets that I shared with you today costs less than $10,000 to produce. It's a low cost model, we really wanna drive that given that we've got this still spare capacity within the system. We're also looking, as I mentioned, to invest in production automation, which drives down profitability, but it also indeed should increase capacity as well.
Again, another high return investment. We will selectively in the U.S. add in key cities where we know the Hot Light they're just waiting for it. Of course, we will support growth in that way too. Hence why as a proportion of sales, the investment is a little lower. We are also keeping a few funds back to make sure we're able to invest in the long term as well. As Matt showed, there's some phenomenal opportunity out there. We expect to be investing more over time in France as that grows. Seth mentioned the international entries for Insomnia. For example, we're working with our Krispy Kreme U.K. business to launch Insomnia in the U.K. there, and we'll provide venture funding for that.
Top of mind throughout all of this will be how do we leverage our existing assets? How do we leverage the existing hub capacity? How do we make Hub and Spoke productivity comes through? Hence why we talk about an ROIC target more than 25%. We get that with the likes of a Tampa. How do we get that across the whole system? We get that with and more like 80%, 90%, 100% with the likes of Insomnia. How do we make sure we keep investing behind that? That franchise model, although a lot of what we've done is about taking control of the system, as Matt explained, the franchise model, a very, very high capital return model of course as well, and we'll continue to lean in on that.
Our financial outlook. I'll start by 2022. We have effectively reiterated our guidance that we shared a few weeks ago with these numbers that we've shared today. $1.52 billion in revenue is what we expect, which is at the top end of our range, near a 12% organic growth. Little lower on the EBITDA range that I shared a few weeks ago, but very pleased to finish solidly in the year with what we expect to be $190 million in EBITDA by the end of the year. Looking forward for 2023, there's a few moving pieces still, particularly in those currency markets. For now, we're just gonna share that our expectation is that revenue and adjusted EBITDA will grow low double digits next year on a constant currency basis.
We'll update you in the next earnings call on our more detailed projections and guidance for next year. For 2026, we've discussed this a lot. You've heard it in all the plans. We're expecting this 9% CAGR on the top line to translate to a 14% CAGR on EBITDA and move us from $0.29 EPS is what we expect this year, out to around $0.53 in 2026. This all assumes constant dollar levels, obviously not necessarily in our control. What we have assumed that the commodities remain at elevated levels. A couple of them have come down recently, but we're not assuming massive savings in those numbers on commodities.
We really are assuming mid to high single-digit labor increases because not just because of inflation and those aspects around the world, but it's so important to us, for our Krispy Kremers, to always feel supported, super engaged. The Krispy Kreme that welcome someone to the store is such an important part of our brand proposition. The leverage here, 2x-2.5x, reflects a combination, of course, of that EBITDA growth expansion, and we will pay down our debt over time as well.
With our capital efficiency that I've just shared, the strong balance sheet we already have, with still a high proportion of our long-term debt at fixed interest rates through until at least 2024, we expect the cash conversion to be around 40% by 2026, as we manage the interest and the cash taxes proportionately to deliver a nice flow through to the bottom line. Continuously making sure, though, that we can fund our high capital return growth, which as you've seen today, we have so many examples of and have the ability to pursue. I will hand it over to Mike now, but one last thought. High cash conversion, strong ROIC and capital efficiency, double-digit growth is what we've done before. Double-digit growth on the bottom line is what we're doing now as well.
Thank you. Mike.
Thank you, Josh. I'm just blessed again. I've got a really good team. We talked about the growth story that's in front of us on Krispy Kreme, and you heard about the growth story that's in front of us now with Insomnia. All right. We talked about not just the growth, but what are the details behind it? What's the path? What journey are you on? Whether it's from the brand, whether it's about optimizing the U.S. and maximizing that, whether it's about driving the international opportunity, which is significant, as you got a sense for, and then really getting into a little bit of details about what is this amazing cookie brand that's there and the partnership that we had and continue to have.
You see a little bit of how cultures and how brands can really work with each other and how the teams really work with each other, 'cause it's about Krispy Kremers and Insomniacs making this happen every single day. If I leave you before we get into Q&A, it again goes back to, let's talk about the five points I brought up before. On the Krispy Kreme side, the brand love and awareness is exceptional. It's one of the highest brands I know in terms of how people connect with this brand and where do they wanna take it. 99% awareness, in case you didn't think about that's not normal, right? It's exceptionally high when you even think about it. That's 400 producing doughnut shops that get that type of awareness. There's a discipline to drive that. There's a discipline to drive the omnichannel model.
It is about getting access to customers. It's about thinking about the brands that you wanna have access with, thinking about the channels, and how that DFD model, which is leveraging those doughnut shops, actually works, right? You can start talking about 75,000 points of access and not changing how it delivers to each customer. Needs to be the same. The DFD model works when you leverage it. It's about continuing our double-digit top line and bottom line growth. Been doing it, continue to do it. We see it in front of us. It's battle tested when you're thinking about all the omnichannel and everything else we've been facing over the past few years. Continue and are confident we'll continue to do that forward.
It's a great U.S. business opportunity in Krispy Kreme, and it's just a significant opportunity outside of the United States of America. That is a wonderful spot to be, when you complement that with a brand like Insomnia, you know, with a founder-led business still there with us, he starts talking about a TAM, you know, the other one's 75,000 points of access in Krispy Kreme, now we're talking about 4,000 cookie bakeries around the world, learning from how all of the past that happened in Krispy Kreme. I really appreciate the team. I'm gonna give you a little insight. We're gonna take a five-minute break, so we can set up for our Q&A, we'll start now. Okay?
Welcome back, everybody. Thank Thank you for joining us. Hope you enjoyed the presentation. Joining everyone on the stage is our global leadership team from Krispy Kreme, including Cathy Tang, our Chief Legal Counsel on the right there, as well, Seth from Insomnia. We'll now turn the floor for question and answers. For those of you in the room, please raise your hand and wait for a mic to ask a question so everyone can be heard. Please state your name and your company before your question. For those of you participating virtually, there's a Q&A submission box at the bottom of the webcast. Please enter your question there and we will read them aloud in the room. With that, we'll begin questions.
Hi. Thank you. John Ivankoe with JPMorgan. There was one of the slides, I could probably find the number, yeah, that talked about the margins of hubs with spokes of 17%. The margins of hubs without spokes that were good ones were 20%. You know, I don't maybe I had forgotten that number if you talked about that before, but I wouldn't have necessarily guessed that relationship.
You know, so, you know, someone could say, "Okay, well maybe there's an average unit volume difference, or there's a legacy difference, or it's all in rent costs," or there could be some unusual things that explain that because on the surface it would say, okay, you know, DFD drives more dollar sales, but it drives lower percent margin, but you still get higher dollar margin, which of course is the point of running a business is dollar margin and not percent margin.
I just wanted you to kinda go through like, I guess, why that relationship is maybe the opposite of what would be logically expected. You know, as you think about over time, the incrementality of that DFD business, I mean, I would imagine it would be something hugely in excess of 20%. You know, just kinda how you see the incrementality of the DFD business playing out. If the question's not clear, I can reword that. Thank you.
All right. Thanks, John. I gotta figure out and take this one. First of all, to clarify the Hub and Spoke data for the U.S. that I shared in the chart, which showed a 17% four wall margin, so that excludes some of those overheads, they'd be worth about another five points, includes some markets where we've added spokes, but we still have room to get that productivity flow to the bottom line, and the most significant of those is New York. Actually, if you excluded New York, it would be nearer to eight. I clarify that because adding DFD, adding off-spoke sales absolutely increases dollar EBITDA and over time margin EBITDA as well. It does do both. We've seen that in numerous places.
When you reference the hubs without spokes, and I know there's a ton of new data we've shared today, and we'll have time to catch up afterwards to make sure it's clear. I split the chart into two parts, the high performers and the low performers. Yes, indeed. There are some high-performing shops, some of them generations old, which are retail only, that are loved in their communities, and people go to them every time they hear about an innovation or a celebration at Krispy Kreme. Some of them go to them a lot more often than that. We do have that heartland that's been there and been at the heart of Krispy Kreme's evolution, and we will maintain those and be happy to have them in our core. It's just specifically the hubs without spokes.
Some of them actually built in the last few recent years that don't necessarily make sense because they don't have the right population around them or the physical asset themselves isn't set up for success that actually I showed were only break-even, and then you've got to pay for the overheads on that. Absolutely, the flow through to the bottom line of DFD is there. We estimate on a like-for-like basis, around about 40% flow through when you add sales of DFD off, you know, spoke sales to the production hub that flows through to the bottom line when you go through that process.
The whole point of the plans that I shared today is to get it to the point where you can see all that on an aggregate basis, not just by digging into the data, which of course we do in our team all the time.
Thanks for all the detail today. Jared from Goldman Sachs. You showed a chart that described a 40% growth in points of access over the last several years, and I think 11% growth in the donuts being sold. Wanted to help get some color on helping sort of bridge that gap. Is it lower productivity in these DFD doors that's driving that? Can you help us maybe frame out what that productivity looks like as we go forward?
Maybe, you know, sort of bridge what a relationship between point of access growth and volume growth actually does look like. Then just sort of maybe a tangential follow-up would be on frequency. I know during the IPO there was a lot of focus on incremental frequency as part of the strategy. I think you were in the 2x-2.5x a year for your average customer to visit. didn't hear an update on that today, we'll just look for an update on how that frequency number is tracking.
You'll take that, but I'll do the first one. Hi, Jared. Thank you for the question. Absolutely. We've been driving points of access very quickly over the last few years through this fresh DFD model in particular, starting from quite a low base. Historically, the business was largely retail business, and those retail locations. Obviously, we'd have an annual sales value significantly higher than an individual DFD door. A DFD door may do between $30,000 and $50,000 a year, whereas a retail location, let's say, does around $2 million.
You get a natural impact in terms of value and volume, in terms of difference between points of access growth and volume growth, because those retail shops are just selling so many more donuts. A big intervention, a big change of the system. You see a dramatic difference between the 40% and, I think it was 11% volume growth. You asked about how does that look going forward? It will close over time. Absolutely. We continue to strive to drive in the U.S., points of access volume, at over 10% a year, and turn that into retail... into volume of donuts. We also continue to strive to sell more donuts in our retail and via e-commerce. It will close over time, but in both cases, it's double-digit growth.
Just to add on to your frequency question, over the last 12-18 months, I feel good about from a shop perspective, we've been pretty much able to hold frequency despite significant price, so that's been sort of a win in the shops. What has been more difficult to manage through and understand just the impact is DFD, it's difficult to tell which sales are penetration, which sales are true frequency from existing customers. We can say we know that all the DFD sales are fairly incremental. I can't quantify exactly the increase in frequency from a single consumer shopping across channels right now. We do know our frequency in e-commerce we do know about e-commerce versus versus in-shop customers.
Folks who use us in both e-commerce and shops, we see that frequency has gone up to over 2.8. With our loyalty customers, which is expanding, it's closer to four. That 2.8 is an increase of what we've seen over the last years. We feel pretty good about our ability to hold frequency in shops, particularly when you add on the frequencies that are more difficult to quantify in DFD in the U.S. and across the world.
Thanks. Dave, David Palmer, Evercore ISI. Question on that $600 million in revenue growth you planned out from 2022 to 2026. I wonder how much of that growth do you think is gonna come from the roughly 7,000 or so new points of access that you're expecting to grow over that time? If that doesn't readily come to mind, I mean, perhaps you could just let us know roughly what sort of sales per point of access would you be contemplating, and then maybe even how that compares to the past.
I think at a high level answer, I'm happy to get into the detail offline, is that absolutely, points of access is the strongest driver of growth in our system. We do expect growth in the retail business. We do expect growth from e-commerce, probably a little bit faster than the on-premise business. Yeah, the apps, points of access is gonna be the biggest driver of growth on its own. You know, I talked a lot about adding different omnichannel capabilities in DFD, better products like LTOs, better merchandising. These are expected to definitely juice up the growth. I would say, the majority of the growth is points of access.
You've got, all the other channels growing modestly, e-commerce probably next, the retail shop, last of all, but we expect them all to contribute to growth.
Hi, Jessica Schaefer from Bank of America. Earlier, you had a slide where you're talking about the difference in sales from kind of the different setups for DFDs that you have. What do you know about how customers are purchasing different products based on the type of DFD? Is it like the same customers purchasing more or like incremental customers driving sales? How is that factoring into the number of access points that you think you can have?
Thank you for the question, Jessica. That has been harder to get to give you a absolutely clear answer just from a measurement perspective. Our DFD sales, we absolutely know some of these are folks who frequent both our shops and DFD sales. To measure that reliably across the world, even in the U.S., it's a little bit easier in the U.S., is difficult. It's easier to do in markets where it's mostly a cashless society, and we have access to credit cards across that. In the U.K., we know it's complimentary, and we know that we have a great deal of crossover. In some place like Mexico, where it's more cash-driven, it's very difficult to do. I can't give you a quantification of that.
It's a blend of penetration and frequency in the DFD doors. It's something we're continuing to work on to get better measurement, to give tighter answers to a question like that.
What we do know, though, Dave, is the incrementality is, from memory, around 90%, yeah?
It's 92%. We, yes, we do measure it through decision sciences, you know, statistical analysis, like what is the incrementality of those DFDs, and that's done through extensive surveys, quantification there. We have that to rely on, and we know the incrementality is extremely high. 92% is a U.S. number. It varies over time and across markets, but in all cases, it's extremely high.
Hi. Brian Harbour, Morgan Stanley. Maybe just to follow up on John's question. For the margins on the hubs with spokes, and as you're adding spokes, I mean, do you see there being like a natural level where they settle at? I guess, you know, specifically in the past, you kinda talked about how the U.K. was like the ideal, right? obviously The U.S. probably will never look like the U.K. just because of density. Like, where do you think that could kind of go over time in the U.S.? Because I realize also there's just, you know, the cost of delivery and stuff associated as you start to add more doors. Where does that kind of settle?
The capacity of these donut theaters is quite amazing. If you think of how when you watch the donuts coming down the line, think about that actually working three shifts, seven days a week, it means that you can foresee us generating sales $12 million-$14 million per hub going forward in the long run. When you've that in mind, there's always more sales that can flow through the bottom line, not just from pricing, but from volume too. We have stores that deliver in the U.S. for more margin well into the high 30%. I mean, if there's a topping out, we've not hit it yet, but we certainly know that there are stores that can do that.
As you mentioned, around the world, we have stores doing that and more. Given the overall average being 17% for the hubs with spokes, about 20% if you exclude New York, we know we've got tons of room to grow. I'm not worried too much about hitting a ceiling yet, given how much of the estate we can drive increased profitability towards. Actually, yeah, I mean, the example I thought of, the one that's about 35% is L.A., is actually increasing its profitability even as we speak. Plenty of reason to see the upside there.
Just one other. You know, you talked about kind of optimizing the presentation of the DFD channel. I guess the question is, like, how many of the doors are that? Or how many do you need to put that into? Is there, you know, some capital cost as you replace, like, that tower, the tower model with that door? I guess I'd just be curious, like, how much does that cost?
This one, that particular one that happens to have a digital screen on it costs towards $10,000. They don't always need to have the digital screen. Obviously, we showed you our very best today. They can cost anywhere between $5,000 and $10,000, where it's a full display like that. The towers and the like cost around about $1,700- $2,000. Yes, there is an incremental cost there. But when you're talking about 30%-70% increase in revenue, obviously the flow through and the payback is a matter of months. When you multiply out the cost of DFD doors, it's not a significant amount of capital compared to our overall capital budgets.
You asked about how much of the universe is currently looking like this. The convenience stores, which represent about a third of our doors, are a whole variety of different loose style cabinets that may not be as fancy as the one we have here in the room, effectively give the consumer offering what they're looking for in terms of their being able to choose their own and the like. Of the grocery stores, most of them now are the package fresh. We do have a few customers that have cabinets like this. To think of some, Ralphs, Stater Brothers, just to give a couple of examples. There's plenty of upside there. This is opportunity as opposed to the standard that we have today.
We're delivering, you know, nearly $600 per door with those existing tables and towers. It tells you the, the opportunity to get towards 1,000 that we see in the U.K. or Australia once we get these cabinets more established. The case studies are strong. I mean, we're able to take to those grocery customers great case studies from the locations where we have put them in place.
We have a question online from Andrew Wolf from C.L. King. The U.S. sales per door are lower in the convenience channel, Josh, than at grocery stores. What are the implications for overall channel profitability of convenience?
We actually do very well in convenience from a profitability point of view because there's a higher proportion of the doughnuts are sold loose as opposed to pre-packed, and there is naturally an economy for the consumer if you buy a pre-packed doughnut in dozen versus a number of singles. That's part of how we manage that profitability in the convenience store. Often the convenience store locations are on the way to somewhere else. If you're delivering to a Kroger or Walmart, Publix, and there are gas stations, convenience store locations on the route, it's actually very economical to stop by within reason. We are rigorously focused on making sure that they always pay back.
Some of our convenience store customers are always saying, "Can you stop in more?" We're quite focused on making sure that the sustainability of the door is always there. We don't wanna add doors to the estate just for the sake of it. We wanna make sure that they are self-financing and support the hub back at base camp, if you like.
Josh and Matt, in your TAM assumptions for QSR and club, do you have any sales per door assumptions for them? Then are we selling in QSR or club outside of the United States today?
I'll start. We are selling in club in a few markets around the world, relatively small scale, but we see it as a strong opportunity going forward. I know we've got a long history with club in Canada. We've done some pilots in Australia and New Zealand. I think there are a few examples around the world of where that's working. QSR, I don't believe that there are opportunities that there are existing pilots underway outside the U.S., other than obviously what we know about for McDonald's in the U.S. In terms of sales volume, you know, it's a bit hard to say, right? I mean, club, we would generally see considerably larger volumes given what you see. We're selling, you know, bulk purchases in high volume locations.
QSR, it, you know, we would expect to be somewhere in the range of what we would see in our traditional DFD doors across convenience and grocery.
Thank you. Historically been pretty hard for outside brands to get a permanent place at McDonald's in the U.S. I'm just wondering what you think would make Krispy Kreme different, either from a product or production standpoint, that might make a better position to be a long-term partner.
I'm sure a couple of us could answer this, but one thing that immediately comes to mind, whether it's a QSR player like McDonald's or any of our customers, is the ease of operations. The fact that we make, distribute, return, the doughnuts, whether it's to one of those QSR locations or a grocery or convenience store, is so easy for our customers. As long as they buy into the proposition itself, the next question is always with the operators, or how are we gonna manage this? I think this is a real advantage we have with our model, which is now well-practiced through DFD, that we just bring such an ease of operations for any of our partners.
Yeah. I'll say, I mean, the operations test we've done with McDonald's is that. It's a relatively small scale, nine-store test to understand what is it like to operate in this environment and this channel. I think, you know, we've been pleased to see that it operates like our DFD model, as Josh said. You know, we're delivering donuts on the same routes that we're delivering to Walmart or any other location, which gives us confidence that, more broadly, QSR could be an opportunity.
Yeah. Of course, if you're delivering to more places, there are other places along the way, it also could open up. That's one of the exciting things about our realization that the points of access TAM is bigger than we said before, because that means you can also access maybe a grocery store or convenience store on the way to one of those QSR locations that you weren't, you didn't choose to access before because it was a single destination. Almost an exponential effect, which is one of the exciting things about what we're learning as we build out the DFD model more and more.
Thanks. David Palmer again. Your guidance for 2023 assumes no, really no margin change. I'm sure people are going to wonder, you know, what's under the hood in terms of the timing of the margins, the gives and takes within that. I think there's some that would have expected a margin recovery after price net of commodities trailing. Any thoughts about the texture and the timing of margin in 2023?
Yeah. A couple of things to say on that. First of all, we haven't said there's no margin improvement. All we said was low double digit growth on the top and bottom line. I take your point that you haven't got the detail yet, and if both the numbers are close to each other, it would be relatively low. I mean, the main thing to consider in that is of course the currency assumptions that would play out, assuming the currency and the U.S. dollar remains strong. For the first half of next year, we'll be lapping that in the first half from a weaker dollar at the beginning of 2022. That's the only real headwind.
We of course, do have inflation. We'll be taking further pricing action in line with our strategy as we go, as we have over the past year in both the channels, and we'll be driving for that productivity. You know, I now understand the question, but it's certainly our mindset, particularly with the U.S., to continue to drive the bottom line. I mean, the other one that has been, we've been working with, of course, is the U.K. We'll be lapping actually a very strong Q1 in the U.K. in 2022. We know the U.K. has faced a lot of changes in consumer behavior in the last year, not just for us, but for many.
Our expectation is it'll be a cold winter, and they'll be very anxious around energy prices, and there will be some impact on their mobility, particularly in supermarkets, which will also be a bit of a headwind at the beginning of the year. Even though our confidence out to 2026 is very strong because of all the things we've shared today, certainly based on all those external variables, we are just giving that headline indication for 2023 at the moment.
Just more of a modeling question, though. If I look to 2026, I think I would've expected higher EPS from that level of EBITDA. Maybe it's an interest expense thing, but, you know, what are the other moving parts between those two?
EPS is a wonderful thing to project out to 2026. I think some of the variables to bear in mind is assumptions around interest. Of course, interest will be refinancing within the next 12 to 18 months. You know, there could be an impact there. The end of our fixed term is in the spring of 2024. Cash taxes, that's a difficult one to predict as well. Depends on next government and who can predict that. You know, we make assumptions. Make assumptions around appreciation, and obviously, we're investing in the system. I'm glad you think we'll do better than $0.53. We'll certainly strive to do so.
Seth, do you see the next crop of new store openings for you being any lower returns or different returns than what you've seen in the recent years?
No. No, we don't. We've seen a ton of success from our locations that have opened in 2022. We've actually seen expanded margins in those markets. We have all the confidence in the world that we'll be able to maintain where we are today.
Another question. Can you discuss, Dave, the ability to maintain premium pricing across our various channels such as retail, DFD, and QSR?
Absolutely. In general, in the U.S. and across the world in our DFD model, we look to match shop pricing. Now, there are from time to time temporary variances, just based on customer interactions. But whether it's our premium price tiers, our limited-time only innovations that go in through DFD, or whether it's our core offering, we'll always be endeavoring to match shop prices so our consumers are paying the same across these channels. That is very common in our established DFD markets. In the U.S. as we get more and more advanced, and certainly as we add more of these specialty plus price tiers into DFD, that will be the approach we take.
I'd only add one thing. As we all laid out, right, the goal is the DFD model. How do you get the same access and kind of the same merchandising mix that you'd like to get to the, among DFD doors, right? When you have that discipline, you'd like to maintain the pricing, so you can see price parity starting to happen at that. Eventually even premiumization of hand cut as you move into automation, you can even see that type of product continue to move 'cause you wanna see the doughnut experience happen across the channels.
Josh, you commented earlier this year that about 80% of your ingredients were hedged for 2022. Has that materialized? How much price increase have we seen over the last year? How many price increases have we taken so far?
Okay. Yeah, for 2022, and I'll update the audience on 2023 as well. For 2022, obviously we used hedging and actually forward contracts to manage the commodity inflation. Still, with the surges that we saw, particularly around following the pandemic and around the war in Ukraine, commodity inflation is above 20% for us in 2022. Hence why we've taken pricing around the world, a series of low single-digit pricing increases in different international markets, supplemented by mid-single-digit price increases in July and October in the U.S., including in DFD, and actual we're getting to effective pricing increase in both the U.S. and the U.K. at low single low double digit number levels.
You know, I'd say, I mean, did the hedging and forward contracts work? Absolutely. For those of you who saw, there was a force majeure situation on the sugar beet contract at the end of this year. You always get a little surprise here and there, but we're well used to that, managing our input costs and our commodities, and we're still able to guide to the $190 million EBITDA for 2022, which, you know, slightly up on last year, 7% up versus last year on a constant currency basis. Looking forward, we have been a bit more prudent after the learning of 2022 to buy even further forward on the commodities.
We're covered largely through Q3 now, and have even taken a couple of positions in some key commodities on Q4. We've got clear line of sight to our inflation next year, obviously we are planning internally around what pricing is appropriate in different markets and different channels to make sure that we can not cover that inflation whilst at the same time driving that productivity. Those combined explain why our confidence in the long run profitability remains.
Matt, you laid out an aggressive overseas expansion plan. Are you concerned at all about the quality of being able to service domestically, with respect to product ingredients or acquiring new equipment or parts for the business?
Generally speaking, no. You know, I think as we've built pipeline, all of our internal teams are lined up to, you know, support this growth around the world as well as supporting in the U.S. There are always some bumps in the road, right, as you're establishing supply chain in new markets. At this time, we are on track doing the things we need to do to set ourselves up to open six or seven new markets in 2023.
Yeah. I'd add one thing on that. If you start to think about the points of access, right? It's 10 to 25 hubs a year. Some are equity, some are partner, right? It's not this massive amount of hubs. The points of access, which is the cabinets, it's the towers, which is where you're gonna get the lot of where the growth is. The equipment, as you even think about not moving beyond to third party to be able to manage that as you start to grow that as well on the partner side of the business, pretty significant. You're adding capability to be able to do that. Again, just like when we do routes, right?
Think of it's a very disciplined hub model, then how do we make sure that we can have the you know, capability to make sure that our production capacity is always being maintained?
Thank you again, John Ivankoe from JPMorgan. I, two, or at least two unrelated questions. First, on the G&A side, I think you talked about SG&A giving you a 50 to 100 basis points of leverage. You know, I know every company reports SG&A differently and, you know, and you're certainly on one end of that, in terms of what's in your SG&A number. You know, numbers that have been kind of running in the high teens, You know, it's like kind of like there's no metric, you know, like relative to peers, unless they're very, very young companies that would kind of be at that level.
When you think about SG&A over time, and I know, you know, you kind of mentioned some opportunities you may have at an international market level. You've mentioned some opportunities you may have with Winston-Salem. You know, we heard, you know, your Chief of Peeps person try to kind of talk about, you know, maybe, you know, common sizing some, you know, some different, you know, compensation, if I heard that correctly. What is that long-term opportunity? When I know you don't wanna say Krispy Kreme and mature in the same sentence, but when you kind of think about what the long-term run rate is of SG&A specifically, what do you think that is as a % of revenue? Why do you use that metric? How do you benchmark yourself?
Okay. I think the first thing to say is just to think of the context of the level of change around the world that we've gone through. You're talking a, I'll say, southern corporate headquarters type of situation, to a global multinational with Krispy Kremers and teams of businesses that are part of the company all over the world very rapidly. We've been acquiring teams, acquiring businesses, and folding them in at a context of very high growth. This isn't a time where you start to cut back on supporting that growth. In fact, you want to do everything you can to support the growth. We changed the name to support centers. The very much the focus is around how do we make sure we support the expansion.
Some of the things we put in our G&A may not be entirely comparable. We put a lot of manufacturing resources that is making equipment, for example, in that G&A. The comparisons and the benchmarks you might reference may not be entirely applicable with, for example, a restaurant or coffee shop. We're very, very different on that score. We definitely know that as we grow, many of the infrastructure and overheads will be fixed of management. Only so many senior managers you need. Indeed in those markets, are there opportunities when the teams are doing the exact same work in all these different countries to share best practice and indeed share resources. That is definitely the direction we're going.
When we put on the chart global shared services, that is our mindset. What's our long-term benchmark? I think we said 50% to 100% improvement over the next three years. I think that would continue over time, even beyond 2026, because the growth is double-digit. Not gonna give an actual target for SG&A, but we definitely see that the economies of scale and the model will continue for some years to come. We won't go and skimp on the support center because when you've got that much growth and you're a premium proposition, you've always got to deliver at the highest level. We're not going to be a super low cost back office type of environment.
Even over the last 18 months, I mean, you really have opened up, you know, who your potential addressable customer is on the DFD side in the U.S. Certainly, I mean, we've had this conversation. I've had it at conference calls, we've had it privately. It's like understanding the profitability of DFD per account, understanding that not every account can be profitable, certainly not seven days a week. You know, it's like, you know, maybe, you know, like how lumpy the business is. Yet, if you're at a grocery store, you wanna have that full every seven days a week for the customers that do come in.
I guess how has the intelligence evolved in terms of, you know, things like, you know, DFD per drop, per door, per route, you know, as you're kind of thinking about this and, you know, really using technology or data as you have it of really, you know, optimizing market profitability?
It's fair to say that we've been in a rapid expansion mode over the last couple of years, not necessarily a optimization and rationalization mode for the DFD doors. When you keep hitting the thresholds that make it work, you feel good, and you keep going. We don't see we sometimes get honeymoons in some geographies because people get so excited to access the doughnuts, but they're relatively short-lived. You quickly get to get a good understanding of the stable, weekly sales. Also, our customers have got used to us saying to them, "I'm sorry, we're not going to distribute in every one of your locations." That took a little bit of them getting used to. We are constantly monitoring.
It's not so much the door profitability, although that is where something we consider and manage. It's the route profitability that really counts because it's the routes that have the fixed costs associated with them, the driver, the truck, etc. We're really focused on making sure we optimize the route. Sometimes you can use a Fresh Shop to make sure the route works. Sometimes you use a mix, not just based on geography, but of different sizes of stores, to most effectively capture the optimization. You know, we don't expect significant rationalization of the portfolio going forward, but we do expect some optimization as we go, less than 5% churn, to make sure that we've always got a very healthy estate of DFD doors.
Yeah, I mean, getting it right every day isn't easy, and that's something that we really are building our skills in. I talked about supply planning, demand planning, we're moving that much more centralized now. Originally, we would ask the general manager to figure it out with his or her local drivers. What we found is, they would over distribute because they never wanna be out of doughnuts. and so
With your gross margin, you certainly don't wanna be out of doughnuts.
No. Especially with the way inflation is these days, everything costs a lot more. That's an area where we are focused at the moment and continue to see opportunities. It's all about maturity of the model. If we were talking about the U.K., in this conversation, we're talking about the U.S. They've been doing it a lot longer. The returns are lower and the sales per door are higher. We know that this could be a big unlock too, just mastering our craft of DFD.
The final question. Branded Sweet Treats, I mean, in my notes, correct me if these numbers are wrong, I think lost $10 million approximately in fiscal 2021 on $37 million in sales. I think that's, on a, at a pretty close number of sales, has kind of turned profit positive, or at least not negative in the middle of 2022. Is that kind of set up to be a hockey stick at this point? I mean, the fixed costs are already in, the relationships are there. Obviously, it's a frozen product that you ship, very different than DFD and delivered. It's the opposite of DFD, quite frankly. Like, how important is that business and how important is Branded Sweet Treats and kind of the algorithm that you've laid out?
Well, I'll take the first bit of that, which is in 2022, you're right. We are now able to have a profitable business from quarter to quarter on our Branded Sweet Treats line, and that will continue in 2023, despite honestly relatively flat total revenue. I think the numbers we had in there, $10 million in profit, $100 million in sales by 2026 or so on that. In 2023, that is a build year where we've realized that if we can alter both our manufacturing distribution methodology to serve. I mean, the pandemic did change things. It changed the way people stock in store. It changed the way people access the brand. A lot of the customer dynamics have changed.
We think an ambient formulation, which is something that's under development now that meets our very high quality standards, is something that we think will be a game changer for us, enable broader distribution of folks who don't have the capability to slack and thaw, donuts. That's one big thing. The other thing is an innovation pipeline, again, in CPG, which is very different than fresh. One of the joys of a fresh business is you can innovate very quickly. CPG is an entirely different set of muscles you have to flex to gain an innovation pipeline. Again, that's being readied for some innovation, setting the stage in 2024. Finally, we've learned that you know, to really get the conversion cost down, we need to be more in control of the manufacturing environment.
We're doing a lot of things in 2023 to take control of that manufacturing environment, help us get conversion costs down. Those three things together set the stage, you know, we believe, for some of the hockey stick type growth you're talking about in 2024 and beyond. We have to get those three things right, make sure we get them right, and make sure we have the model, like, really well adapted to scale in the way you're describing. We have yet to prove that to ourselves and go on, but we anticipate that happening.
Thank you.
Dave, in terms of branding, how do you manage the brand perception of Krispy Kreme with the brand perception of the stores we enter in for DFD? How do you maintain the quality difference of the products across the channels, including your Fresh Shops?
Yeah. Two topics. First, from a customer perspective, I mean, we are selective about the customers we partner with, both in the U.S. and across the world. If we feel there's a potential partner out there that might be convenient for us to go to in terms of shop location, but doesn't have either the brand affinity or just the type of environment we think is appropriate for the brand, well, then we don't need to go to those doors, you know. Every door in the world need not be a Krispy Kreme door, and we've had good success with that. In terms of the quality standards, it's a great question. This is Delivered Fresh Daily, the expectation is we consistently perform at a high level of quality.
That's something that is an everyday area of focus to ensure that our doughnuts, from the time they're manufactured, to the time they're on shelf, and to the time they're in a consumer's household, and to the time they're consumed, that at that point of consumption, it is still a very fresh doughnut on par with what you'd get at the shop. That is a major focus, and that is an ongoing every day. It has to be an absolute compulsion to ensure that you keep those doughnuts fresh. As we get better and better, as we've, in our mature market, has been doing for years, we know we can maintain that quality of the shop. Because the brand is everything good that happens and everything bad that happens.
Every single doughnut in every single shop, every different point of access is reflective of the brand. We're, you know, we're very. We guard that preciously, and we make sure we maintain the highest quality throughout any type of distribution mechanism.
The, the unit economics for Insomnia are obviously off the charts, and so I just wonder how you think about the governors of growth for that. you know, in other words, what's. What's too fast? Because you obviously would want to be greedy and grow that as fast as possible. Then also, you talked about the city center and the university markets that you're going to target. I think some people will just naturally think that the sites you have are among the best that you can have. Any sense of deterioration as you go in new store economics as you go into new markets? Thanks.
First and foremost, we know if we deliver warm cookies, the system speaks for itself, as I talked about earlier today. I think we've followed our strategy clearly. We focus on delivering, expanding those delivery zones, and when we do that, the margin has proven to show up, and we're still just getting to where we can go. We're very confident in what we've put forward and where we're gonna head.
The 1,000-unit TAM is really a reflection of what we've learned over the course of the last 20 years, right? We've opened stores on College, City, suburb, and all of them have worked all with different complexions, but basically through the same principles of own the night and making sure that there's restaurants and bars and late-night activity around us.
If we go after that market, it has worked time and time again. We're very confident that deterioration is not something that's in our future and that we can open up in a 1,000-store system.
With that I mean, the way your e-commerce is growing at the moment, I mean, as you've started to extend the delivery zone with aggregators, in fact, you're improving both the base and new ones, so we're actually seeing even better economics as you add these new ones.
Yeah.
Sort of a governor of growth, you know, what percent growth is too much?
I really think through the lens of about 20% unit growth per year gives us confidence that 100 stores per year is in our near future. If we're gonna deliver on that promise, we need to make sure that execution is key, that we can deliver premium product and experience, and I think 20% unit growth is something we can rely on.
Matt, internationally, you're using the high margin franchise model to grow the business. Are you planning to start franchising again domestically to expand our growth and continue to support the possible QSR opportunity?
Josh, you can feel free to add on. I mean, not at this time, right? As part of our transformation in the U.S., you know, we wanted to take control of the system, kind of own our production, own our quality, own the omnichannel experience. You know, as you know, we have some franchisees remaining in the U.S., largely small markets we're in control of, say, 48 of the top 50 DMAs. We really feel like for us to execute the omnichannel model in the U.S., it's best done by us, by our teams of Krispy Kremers to ensure that quality and consistency of experience.
We will pause for 30 seconds for people to enter any final questions they may have online or take any further questions from the live audience. All right. It appears there are no further questions at time. That concludes our question and answer session. I will turn it over to Mike to final remarks.
Hot Light back on. I really appreciate everybody coming down, spending some time with us and virtually. I hope you enjoyed the story. It's about growth. It's about an opportunity both in the United States of America and the international markets, about two incredible brands, amazing management team I'm behind this.
Thank you for taking the time and coming to visit with us and ask us questions about our business. For folks that were participating virtual as well, wish you a Feliz Navidad. Enjoy your holidays or whatever you guys wanna take time and travel safely. Thank you very, very much. I'll thank you to all the Krispy Kremers and Insomniacs around the world that just do a great job every day in serving these amazing brands. Thank you very much. Appreciate it.