From CVS to Krispy Kreme: Why The Doughnut Maker Is Converting A Former Drugstore Into A Doughnut "Hub"

A recent partnership with McDonald's is requiring Krispy Kreme to open additional, larger hub sites -- including through unique and creative adaptive reuse

Krispy Kreme is utilizing the adaptive reuse of existing real estate to open new doughnut shops throughout the U.S.

Including at unconventional properties — such as former drugstores.

The doughnut maker is currently repurposing a former CVS drugstore in the Minneapolis suburb of Fridley into its newest doughnut “hub.”

So why is Krispy Kreme planning to turn a drugstore into a doughnut shop?

Well Krispy Kreme operates a ‘hub and spoke’ real estate model for the production and distribution of doughnuts.

Most doughnuts are baked at its 'hot light' theater shops.

But these stores both serve on-site customers and act as "hubs" to bake and distribute fresh daily (DFD) doughnuts to "spokes" like gas stations, grocery stores and restaurants.

There are currently ~152 U.S. Krispy Kreme company owned hubs that deliver to its ~7,000 existing spoke locations.

And the hubs are big revenue generators:

An average U.S. Krispy Kreme hub store generates ~$4.9 MM in annual revenue from on-site sales and those to its DFD spokes.

For context that is 3-4x higher than annual sales at an average Starbucks, Dunkin, or Dutch Bros site!

But Krispy Kreme is turbocharging its hub-and-spoke model by way of a deal with McDonald’s that was announced earlier this year.

Krispy Kreme had initially began delivering doughnuts to select Kentucky-area McDonald’s restaurants in 2023.

But the success of the early rollout led the two companies to strike a larger deal.

As a result, Krispy Kreme plans to deliver fresh doughnuts daily to all ~12,000 McDonald's restaurants in the U.S. by 2026.

But the doughnut maker now needs to add real estate — including many more (and larger) hubs to service the new McDonald's spokes alone!

So the Company is turning to a former CVS drugstore in Fridley, Minnesota to serve as one of its newest hubs.

The ~13,000 square foot building (which is >5x the size of a standard Krispy Kreme) will include a dine-in area and utilize the former drugstore’s existing drive thru window.

But it will also include areas dedicated to doughnut production, warehousing, DFD staging and loading onto delivery trucks.

The former CVS is conveniently located just off the busy I-694 highway that bisects the Twin Cities — a strategic location that will enable delivery trucks to pick up doughnuts early in the morning and quickly deliver them to spokes throughout the metropolitan area.

The CVS-turned-Krispy Kreme hub in Fridley is expected to open in Spring 2025.

But Krispy Kreme is likely also working on the creative adaptive reuse of other real estate for additional hubs.

Including, perhaps, other unconventional buildings and even larger building conversions.