Krispy Kreme is facing a blistering class action lawsuit after allegedly misleading investors about its failing partnership with McDonald’s, a deception that ended with a 25% stock plunge and millions in vanished equity.
At a Glance
- Investors allege Krispy Kreme misled the public about its McDonald’s partnership, inflating share prices
- The company paused its McDonald’s expansion after just 2,400 locations, well short of its 12,000-store promise
- A $33.4 million Q1 loss and withdrawn outlook sparked a nearly 25% crash in Krispy Kreme’s stock
- A class action lawsuit filed in May accuses executives of making “materially false” statements
- The lawsuit spans investors who bought Krispy Kreme shares between February 25 and May 7
The Glazed Expansion That Wasn’t
In 2022, Krispy Kreme began piloting fresh doughnut sales at select McDonald’s locations, with bold claims by 2024 that it would expand nationwide to over 12,000 outlets by 2026. But that sugar-coated dream turned sour. On May 8, Krispy Kreme admitted it was pausing the rollout and pulled its financial outlook. The announcement came with a $33.4 million quarterly loss and a 15.3% revenue decline, sending shares into a nosedive.
Investors allege that company leadership, including CEO Josh Charlesworth, knew for months that the partnership wasn’t financially viable but continued to promote the initiative publicly. One plaintiff, investor David Cameron, claims Krispy Kreme’s “materially false” statements caused him and others to suffer severe financial losses when the truth surfaced.
Double-Talk and Doughnut Deals
What makes this meltdown more infuriating for investors is the clear split between Krispy Kreme’s upbeat public narrative and the behind-the-scenes retreat. Even as financial losses mounted, Charlesworth assured the press: “We’re pleased with many aspects of the McDonald’s partnership,” and promised “profitable growth.” Yet in the same breath, the company withdrew its full-year guidance and started “reassessing deployment.”
Watch a report: Krispy Kreme Faces Class Action After McDonald’s Debacle.
The lawsuit paints a picture of executives clinging to optimism as a strategic smokescreen. Despite internal doubts and waning demand at McDonald’s outlets, the company pushed ahead with expansion talk, allegedly to prop up its stock price long enough to protect executive bonuses and fend off shareholder revolt.
A Familiar Recipe for Investor Rage
This case taps into broader frustrations with corporate America: inflated promises, minimal accountability, and working-class investors left holding the bag. When CEOs inflate forecasts to hype partnerships, only to reverse course under scrutiny, the impact isn’t theoretical—it’s measured in gutted retirement accounts and vaporized savings.
Krispy Kreme insists it still sees potential in the McDonald’s alliance, but with a legal storm brewing, the brand best known for hot doughnuts may be in hot water for a while. Whether this lawsuit ends in a financial settlement or fundamental change in executive accountability remains to be seen.
Until then, the caution for investors is clear: if the forecast seems too sweet to be true, it might just be glazed fiction.
