Q4 2021 Krispy Kreme Inc Earnings Call

This with significant scale daily across the globe.

Looking at 2022 and beyond we see significant upside opportunity.

We operate in the Sweet Indulgent category, which is currently at $650 billion global industry and growing.

Today, we have just over 10000 points of access, but we expect to grow to more than 50000 points of access and just our existing and target countries over the coming years or five X increase.

We are also exploring new access points for delivery coverage.

Thanks, Mike and good morning, everyone.

I will start by echoing Mike's comments on how pleased we are with the strong results in 2021.

Or 21, 5% growth excluding the impact of an additional 50 <unk> week in 2020 for.

For the full year net revenue grew 23, 4% to 138 billion.

We saw strong growth across the world in 2021, and our donut and cookie shops through E Commerce.

First of all from a fresh daily donut deliveries to local grocery and convenience stores.

Organic revenue for the fourth quarter grew a robust 13, 9% or 19, 6% excluding the legacy wholesale exit we made in 2020.

Although we saw on the chrome disrupt operations in December the impact on our revenue was not significant with demand remaining strong across all our sales channels.

For the full year organic revenue grew 12, 5% or 13, 7% on a two year stacked basis, excluding the legacy wholesale exit organic revenue for the full year grew 21, 4%.

Our strong performance during the quarter EMEA was driven by the strength of our capital efficient hub and spoke model.

In the fourth quarter, we increased global points of access by 386 to 10427.

For the full year. This means that we increased points of access by more than 2000.

Going forward, we expect to add at least 10% more points of access each year, primarily through adding low cost deliver fresh daily dose.

These fresh down up merchandising units in grocery and convenience stores typically cost any 2000 to $10000 per door and are enabling us to drive economies of scale from our 411 local production hubs around the world most of which are experiential hotline safety shops.

In the fourth quarter, adjusted EBITDA increased 14, 4% to $47 7 million, which.

Which was above our expectations.

Hub and spoke efficiencies and price increases in September and November more than offset labor and commodity cost increases as well as increased corporate overhead driven by public company costs and short term incentive compensation.

Adjusted EBITDA margins in the quarter Rose 10 basis points to 12, 9%.

We believe that recent pricing actions will allow us to offset inflation and we will continue to review pricing inflation increases more than expected.

For the full year adjusted EBITDA increased 29, 2% to $187 $9 million with margins, increasing 60 basis points to 13, 6%.

As a reminder, we expect to achieve 15% company wide margins in 2023.

In the fourth quarter GAAP net income was $4 3 million.

<unk> diluted EPS compared to a GAAP net loss of $24 8 million or.

Negative 21 cents diluted EPS in the same period a year ago.

Adjusted net income for the quarter was 16 million.

The 17% year over year increase.

Adjusted diluted EPS in the fourth quarter was eight <unk>.

A decline of 20% due to the increased share count from the IPO.

Weighted average diluted shares outstanding for the quarter were $169 million.

For the full year GAAP net loss declined 76% to $14 8 million, which was impacted by $15 million of IPO costs during the year.

Adjusted diluted EPS for 2021 was 37 an.

An increase of 23% compared to 2020.

We were cash positive again in the fourth quarter, delivering $6 4 million free cash flow, helping us to finish the year with a net debt leverage of three six times, which is a reduction versus the prior quarter.

In the U S and Canada segment total revenues in the fourth quarter increased 10, 5% to $249 million.

Or 18, 8%, excluding the impact of the additional 50 <unk> week.

Organic growth in the fourth quarter increased nine 1% or 17, 3%, excluding the exit of our legacy wholesale business we.

We saw all our product lines and sales channels performed well in the quarter and our September and November price increase has proved successful demonstrating the strength of our fresh daily donor business.

Organic growth was also a robust 17, 3% on a two year stacked basis for the quarter.

For the full year total revenues grew 18, 6% in the U S and Canada to $928 million.

With five 5% organic growth or 18, 3% organic growth, excluding the exit of our legacy wholesale business.

Organic growth Tia stack was 15, 4%.

And E Commerce revenue for 2021 was $134 million, an increase of 15% compared to 2020.

Adjusted EBITDA for the U S and Canada in the fourth quarter increased 42% to $31 8 million.

With margins expanding 290 basis points to 12, 8%.

The increase in margins was driven by strong revenue growth and a fresh doughnut business, especially sales per DSD door with pricing offsetting wage and commodity inflation.

In November I highlighted that U S cities that have fully implemented the change from legacy wholesale to deliver fresh daily are seeing a 300 to 400 basis point benefit to margins, which continued in the fourth quarter.

This is due to the higher price points achieved with these fresh daily Donuts and efficiency benefits of our local delivery model, especially in covering fixed cost back at the production hubs.

I gave the example, then if the Tampa market, which has seen local EBITDA margins grow to over 20%.

At this time I will showcase the Albuquerque market, which has increased revenue per hub by 29% year over year to $5 7 million.

Driven by a 350% increase in DSD revenue year over yet.

This has led to a 700 basis point increase in local EBITA margins.

Which were over 20% in the fourth quarter.

Both of these cities a former franchisee markets, which we previously acquired and are now showing how implementing the hub and spoke model proven in international markets also works in the U S. The.

The success, there and the strategy in other U S cities explains a high level of confidence in the U S and Canada segment going forward and our ability to achieve our goal of 15% adjusted EBITDA margin for the segment within three years.

Revenue per hub in the U S and Canada increased to 4.0 million.

In the fourth quarter compared to $3 8 million in the previous quarter and $3 5 million a year ago.

The biggest driver of the fourth quarter growth was a 55% year over year increase in sales per DSD deal, which averaged more than $600 per DAU per week for the first time.

Points of axis in the us and Canada increased by more than 1000, 2021 to 5723, driven by DSD door expansion.

We expect to add about 150 fresh points of access in the first quarter of 2022 in the U S and 500 for the full year as we expand the program in both existing and new cities.

Hubs these folks in the U S and Canada increased by five during the fourth quarter to 126.

One milestone this quarter came from our digital insomnia cookies business, which now for the first time has adjusted EBITDA margins on par with our U S. Donor business, we continued to see tremendous potential for this rapidly growing brand.

We also saw good progress on profitability in a startup business branded sweet treats in the fourth quarter, whereas more than doubled our production capacity. This year, which in turn has helped us to reduce our cost per unit.

While branded sweet treats are not yet profitable in the fourth quarter the losses reduced considerably and we remain on track to be profitable by the middle of 2022 as demand continues to grow.

Net revenue in our international segment, which consists of our equity markets in the U K, Ireland, Australia, New Zealand, Mexico grew 26% in the fourth quarter to $19 million, while organic revenue grew 31%.

Organic revenue growth on a two year stacked basis was 22%.

For the full year net revenue grew 45% to $333 million, while organic revenue grew 37% or 19% at two year stacked basis.

International adjusted EBITDA for the fourth quarter grew 25% to $27 million on margins of 23% in line with the prior year.

For the full year adjusted EBITDA grew 83% to $81 million driven by the strong performance of our Omnichannel model across all of our international markets.

Adjusted EBITDA margins for the year expanded 510 basis points to 24, 5% driven by the efficiencies gained from the strong performance of our hub and spoke model.

International sales per hub increased from $6 4 million in 2020 to $9 $1 million in 2021, leveraging the 36 existing hubs to deliver donuts to more fresh points of access.

518 points of access more for the year and 82 more for the quarter.

Revenue per <unk> was over $1000, which explains the high levels of profitability in our international segment.

Turning now to our market development segment, which is made up of a franchise business and equity owned Japan market total revenues in the fourth quarter grew nine 9% to $31 4 million.

While organic revenue grew eight 8%.

Strong performance in Japan, and our franchise markets was partially offset by franchise acquisitions.

For the year market development revenue increased 12, 7% to $123 million, while organic revenue for the year.

Grew 11%.

Adjusted EBITDA in the fourth quarter for market development was flat at $11 million, but grew four 5% for the year to $41 million.

We continue to be very optimistic about our growth potential which is reflected in our 2022 outlook for 2022, we expect revenue growth between 11, and 13% and organic growth between 10, and 12%, which is above our long term guidance of 9% to 11%.

We expect all three reporting segments to contribute to this growth and as a reminder, we will no longer be lapping the exit of our legacy wholesale business in 2020.

We plan to add more than 1000 points of access in 2022, mostly DFT dose.

We expect adjusted EBITDA to grow faster than sales in 2022.

Up 12% to 16% to between 210 and $219 million with margin expansion in both the U S and Canada and international segments.

We anticipate an income tax rate between 23, and 25% and adjusted net income diluted a 65% to $69 million, an increase of 18% to 24%.

We expect adjusted diluted EPS of <unk> 38 to 41.

And when comparing EPS in 2022 to last year. It is important to remember that we will be impacted by share count dilution from the IPO in the first half of the year.

Excluding that impact adjusted EPS growth will be similar to the adjusted net income diluted growth of 18% to 24%.

While we do not provide quarterly guidance and general earnings growth will accelerate through the year as the benefits of a hub and spoke model continued to come through Covid disruption subsides footfall traffic in New York increases the profitability of branded Sweet treats improves and we continue to absorb inflation through pricing as needed.

In January we have seen some operational disruption from Amazon and a high number of winter weather events the unusual.

Which will only modestly dampened our Q1 results demand remains high for example, we saw good growth for Valentine's day. So I do not believe these to be significant impacts for the full yet.

In 2021, we spent eight 6% of revenue on capital expenditures in 2022 that will drop below 8% to around $115 million to $120 million.

Our 2022 Capex includes investing in approximately 15 production hubs lottery experiential hotline shops, as well as more than 30 insomnia cookie locations.

Time, we expect Capex as a percentage of revenue to decline to 6% or below.

In 2022, we will continue to pay down debt and expect to end the year below three times leverage with a long term goal of approximately two times.

Our balance sheet improves our EBITDA increases and our capex as a percentage of revenues declines we expect our free cash flow conversion to also improve from approximately 10% in 2021 to more than 20% in 2022 and over time growth of 50%.

Lastly, we continue to remain confident in our long term growth algorithm of 9% to 11% annual organic revenue growth, 12% to 14% annual adjusted EBITDA growth and 18% to 22% annual adjusted diluted net income growth.

Operator, we can open the call up to Q&A now please.

Thank you as a reminder to ask a question you will need to press star one on your telephone.

Sorry, your question press the pound key.

First question comes from John Glass of Morgan Stanley You May proceed with your question.

Thanks, very much good morning.

Josh just a high level question I think I heard you correctly, but correct me if I'm wrong that the enterprise EBITDA margin for 'twenty three should be around 15%. If thats correct. I think this year 22, it's maybe 14 plus or minus so it's a large step up can you just walk through what the I understand the efficiencies gained in the business but is there.

Anything in particular assumed in 'twenty, three that would drive or what are the pieces. The assumed in 'twenty three that would drive that big of a step up in EBITDA versus 22. Thanks.

Yes, Hi, John Thanks for the question.

And you're right two.

2022, the guidance we've given.

Lives.

Around about a 50% basis points improvement in margin and we continue and we expect thereafter to continue to drive up margin as we benefit from the hub and spoke model I gave examples earlier in the call around cities, which are seeing delivered fresh daily AD to the mall.

<unk>.

On top of that E. Commerce continues to grow strongly also leveraging the hub and spoke model.

And the branded Sweet treats business, although small is going to become profitable this year as well as markets like New York in the long run so all of those combine to give us that level of confidence in the long term profitability of the U S and Canada segments.

Got you, but <unk> 15 was an enterprise goal correct in 'twenty three I just wanted to verify that.

Yes, absolutely.

I think that the U S is the biggest driver of that we're very pleased with the ongoing momentum in profitability in international and.

Hence youre right 15 overall.

Thank you and just finally, what is the full pricing now that you've taken a couple of price increases in the U S and U S and Canada, what is that running now.

What is your assumption on overall inflation in the P&L in 'twenty two so we can gauge how that offsets that inflation. Please.

Yes.

Q4, obviously.

As shown the fresh premium sweet treat business like ourselves, we can manage that inflationary environment that you reference with price increases.

After the November one we effectively ended the year with double digit price increase for the year in the U S high single digit on average across the world.

The guidance, we've given here today.

It does assume that we are able to manage both from that price increase and if we so choose if needed further price increases.

Still grow our margins in 2022.

More specifically to your question.

On wage inflation, we did see it accelerate through 2021 small stable now and were assuming high single digit for 2022 and on the input cost side. A look we have great line of sight of that because we have actually already covered more than half of the year.

Sugars fully covered for the oil and gasoline through 2023, so that means we have a lot of confidence in our ability to deliver on the margin increase that we've been talking about already.

Got it thank you.

Thanks, John .

Thank you. Our next question comes from John <unk> with Jpmorgan. You May proceed with your question.

Hi, Thank you I noticed that the DFT doors in the U S actually kicked down.

In the fourth quarter relative to the third and I just wanted to see if there was any symbolism that as you're focusing on fewer higher profit types of accounts. If the amount of learning that you have in the DFT.

Segment is kind of increasing your confidence in terms of generating.

No more profitable accounts and if.

You can put that decline in the fourth quarter relative to the.

The increase in DFT doors that we're expecting in fiscal 'twenty two.

Sure thing, yes, I mean, it's always really important for us to deliver fresh daily daus.

High traffic locations and deliver the margin growth.

Growth that we expect.

And we're going through a transformation in the U S.

Cleanly transform from this legacy wholesale business over the last 18 to 24 months and international markets. The churn on those DSD does very very low less than 1% as we go through the transition in 2021.

We've definitely been learning as we go and have identified those that aren't as efficient, but overall the churn is still well below 5% and dropping Q4 is a lot going on in the grocery stores and the convenience still seasonal.

<unk>.

So it was.

It was great for me to reference that we've already got new doors going in in the new year for 2022.

We expect 150, new DFT does.

In the first quarter in the U S and around 500 for the full year over 1000 across the world. So a good momentum with our customers good momentum across the U S cities and internationally on DFT, a key driver of growth and margin progression.

And if I may and this is just a clarification from the release I mean, there was a fairly sizable sale leaseback gain in the quarter.

Could you talk about what that was it does look like it's excluded from your consolidated adjusted EBITDA, but just wanted to make sure that was the case in the segment levels as well.

Joey with me here do you want to just referenced Sanjay yes sure. So we did have a sale leaseback of a few properties in the fourth quarter generated a little over $11 million in cash for US. It was an $8 7 million GAAP gain that we did add back for the adjusted EBITDA. So I wanted to make sure that that was represented appropriately.

Thank you.

Thanks, Sean.

Thank you. Our next question comes from Sara Senatore with.

Think of America you May proceed with your question.

Great. Thank you very much.

Next to ask if that's maybe some of the underlying dynamics happening in your access points.

You mentioned.

Our product lines and sales channels performed well, but was there any mix benefit you saw either opening in higher sales volume markets and where you did say there was some disruption from <unk> did you see any mix shift could DFT.

From drive thru.

Or are there just.

I understand the underlying dynamics, there and whether there is any reason to think that either they persist.

In coming quarters, or maybe there's a bit of a reversal.

As Ashford demanding and patterns normalize and then I just have a quick follow up from that.

Yes, so first off one of the things that really happened in the quarter.

The demand curve that really drove the businesses, particularly around our seasonal approach. So youll see the Halloween assortment in.

Holidays really did thrive they did exceptionally well when you saw the COVID-19 impact as it moves around.

We saw minimal impact on that in the business as a whole and you just saw that the fresh DSD business as it continues its assortment and when you start to see a bit of mix even from holiday doughnuts and start to go in there. They also get a pickup as well. So it gives you an idea how that business and how the channels work, we see the same approach even starting.

For the year and Janney.

January and even parts of February as you can see the potential of the DFT as it drives fresh really drive that DSD business. That's the number one attribute the customers continually ask us all the time.

They value fresh more than anything else sort of what we do when we can apply this omnichannel approach the mix the pricing potential that you have because when we get into different assortments and now you can choose the assortment that you want to have inside of the retail you can choose the assortment you want to add in delivery you can choose the assortment do you want to.

<unk> and <unk> as well.

And perhaps I'll just add Sarah.

<unk>.

On the channel perspective in the U S, which.

<unk> is obviously a big driver of growth overall, we actually see all the channels are growing the biggest the biggest contributor to your mix question is delivered fresh daily.

But e-commerce .

<unk> grew in the fourth quarter, we expect that to accelerate a little bit from a growth versus prior year point of view in 2022, because obviously, we're lapping a big big impact of the pandemic in 2020, we see the growth coming through we see the drive through coming through we've seen some new currency. So it's actually seeing a balance of growth across <unk>.

All those channels in the U S and international so it's quite a balanced.

Profile that we're now selling into now of course in 2022, we will no longer be lapping the exit of our legacy wholesale business.

And hence that that should be reasonably even through the year as well.

Great. Thank you very helpful and then just.

On the margin you mentioned.

<unk> fulfillment rates for sweet treats that interesting because most restaurants have difficulty managing supply and could you just talk about whether that had any impact as an offset to the improvements you've made in supply chain and perhaps talk about what's left to be done Ken periods of Chalmette further thank you.

Branded sweet treats business, which is the <unk>.

So we make.

On shelf.

For Walmart and now increasingly other grocery and convenience stores.

<unk>.

Donut bites and many coolers are.

Launch with made so that'd be a startup business less than 5% of U S and Canada segment sales launch you've made in the pandemic, we definitely had fulfillment challenges.

As it expanded grew even faster than our supply chain was able to manage in the third quarter, which impacted profitability in the fourth quarter. Thanks.

Thanks to great efforts from the team and we put in additional lines production lines were able to significantly improve that as Mike referenced and that reduced the profit impact that we had.

In Q3, Q4, we still not profitable on Brian the Sweet treats as it continues to grow we will move into profit by the middle of 2022.

We're keeping up with demand now, which is which is great demand as Mike referenced continues to build at record levels with over 15000.

Distribution points across the U S. So we're pleased with that progress.

And pleased that we are moving towards what will be.

Our margin.

Maybe essentially even accretive business in the long run.

Great. Thank you thank.

Thank you.

Thank you. Our next question comes from David Palmer with Evercore. You May proceed with your question.

Thanks.

Question on the sales per hub.

You have points of distribution growing per hub and do you have that.

Maybe we can call out the front door sales.

How much do you imagine youre out the front door sales had been hindered not just in the markets like New York, but that overall by Covid caution do you view this as sort of it.

Sort of an easy recovery.

Some some percentage points that could come in sales per hub just from the outfits front door sales.

So David it's a really good question when you think about it.

The business really thrive.

Particularly around windows seasonal events happen, so when Halloween happened when the holiday Assort happens when Valentine's day happened, we do not see that impact from Covid people want to access our brand because of the gifting nature of it we know right now just saw how you can think about that 30% of <unk>.

Every doesn't box amount of its purchase is actually get you can also see when we actually play in the channels in mind, we did something on a $12 12, which for US is day of the dozens we did something and actually delivery channel. We can drive the business, sometimes up to 50% increase.

Just in E. Commerce, so we have the ability to move around and our customer moves around that our number one focus is how do we make sure our crispy creamers can be safe every day and we can operate and we didn't lose them a lot of operating days. So they shift around that I don't see that as a <unk>.

<unk> change when it opens up because our customers really use to how they want to engage with our brand. Yes, there's no demand impact that we see even from omicron recently, when we when I referenced omicron disruption, it's purely Christopher Creamers. Unfortunately.

<unk> positive and just the operational disruption around that we've estimated that just for the last week of December .

Partial in January at less than 2% of sales so for double digit growing business. Its just not a meaningful change for us.

And then and just a.

So as a follow up on the points of distribution gains you talked about double digit growth in those.

And one of the feedback.

That we get on this on this company and the stock is that there's a lot of moving parts. So that people have a hard time being confident about the sources of growth and the points of distribution is a big part of that is.

Are there any sort of comment that you can make about your pipeline and the visibility you have into that double digit points of distribution growth.

Yes, so if you think about the.

Pipeline today in the U S and even in the international markets, where we're trying to grow 10% a year those are existing customers. We're really comfortable about how that pipeline will grow we just talked about that youll have mixed shift sometimes between particular inside of the U S and Canada market as I take a look at better optimizing that so there is a clear.

Line of sight, what we really see is that from 10000, where we are today as we actually see the 50000 a month.

<unk> had to really get into those points of access.

We see that as every single one of our core markets is able to to drive the U S will drive another 10000 points of access we see the international markets, which is split between the international segment and the market development segment. Another 30000 points of access it's the simplicity of the model, which is you get that hotline shop.

And then you leverage whether it's 40 or 50 up to even 90 spokes that you apply to that.

Shop in that a lot will depend on if it's in an urban market as an incentive.

Urban market, but the model is proving itself everywhere, we are cross country, so were pretty comfortable what's there it is different.

As people like to have a very typical franchise models, which has just opened up shop on same store sales.

That's not how we want to run a sweet treat shop, which is really about how we maximize the donut opportunities, which is around the seasonal part and then making sure we get to customers where they are through this whole omnichannel and hub and spoke model.

That also starts to become simple when we start to say can you execute that consistently and we've we've.

We've had the privilege of doing this for the past six years alright that public is now seen this actually in the past almost a year as they start to see the hub and spoke model truly the DSD system come to life.

Thanks ill pass it on.

Thanks, David.

Thank you. Our next question comes from Brian Mullan with Deutsche Bank live receiving your question.

Hey, Thank you just a question on the <unk> business. It looks like you added 26 units last year on a net basis about 14%.

Growth can you just speak to how the business handled that pace of growth last year from an operational perspective are you pleased with what you saw and then related what kind of pace of unit development do you think that you could get to over the next several years. There is 40 to 50 units something you think they have the ability to grow into.

Yes, so the pacing as the team starts to scale. They start to have talent they start to be able to get the right management bench.

And over the course of 2022 will grow our EBITDA.

12% to 16% expect that to continue in the long run.

So yes naturally we we signal that that will pay down.

That because we're a strong free cash flow business.

Eight year. Our next question comes from Bill to go to a securities May I proceed with your question.

Thanks, Good morning.

He just wanted to wanted to follow up on on kind of pricing outlets with your <unk>. So this is kind of simplistic but you.

You are looking for 10% to 12% top line growth, which is slightly above your longterm algorithm I think you're implying that.

At least at mid to high single digits benefit from pricing, but in your original algorithm. Obviously I don't think you had that much pricing so is it.

An assumption that there is some elasticity. This year is it just we're only in February and so we're being very conservative on kind of what volumes do.

Or is it are there some tougher comps that that that that's offsetting does any color of how.

It would seem to apply that it's a lower than average volume growth this year with that pricing to get your to your 10% to 12% numbers. So to help me bridge that would be great. Thanks.

Sure thing.

The first thing you wanted to say is that our expectation for 22022 is not changed we've come in with.

Guidance that is above the long term algorithm and we start the very optimistic in terms of being able to deliver that guidance, we seal segments contributing.

Valentine's day was.

Was a nice start and we saw strong demand. So nothing has changed on that yeah. We have a number of puts and takes over all the time going on in the business and as we start the year coming out we guidance range above the long term algorithm has been our focus.

Pricing and Premiumization as Mike's talked a lot about with fresh.

We treat such as ourselves always been in our strategy and we will drive volumes.

Transactions this year not just grow from from from pricing, which you're right is implied at the moment in the high single digits for 2022, but we'll see how we go.

We are also very pleased to of course use it to cover that inflation will have to adjust accordingly, as we see fit.

No change to the model.

Okay, and just to be maybe to understand as the year progresses.

It's a commodities or labor or other things get better would you kind of make up.

Would you offset some of the pricing with more promotions other things just to to continue to drive volume I assume you have a lot of a lot of arrows in your quiver to to attack it.

Yeah, I mean, that's not the first step that we look at it we really look at maximising again.

Seasonal approach and when you get the right assortment the right packaging the right storyline that drive.

Crispy cream and you can see it from our holiday that with volume driven.

Halloween that with volume driven Justice mentioned again, Valentine's day volume drilling when we actually really drive the merchant approach to the business.

And it's volume driven when it is also a premium right. So it's pretty unique. So we continue to do that we can elevate our brand and get volume and price.

Okay, great. Thanks, so much.

Thank you Bill.

Thank you. Our next question comes from Jared Gargle with Goldman Sachs. Let me proceed with your question.

Alright, Thanks for the question and all the details of this morning.

Maybe a higher level strategic question as we think about that.

The thousand points of access opportunity.

You've gone through.

Period of I guess, Premiumization I would say with the fresh donut products, how do you balance the brand positioning of that more premium fresh products with the the opportunities.

Maybe maybe that might somebody considered maybe down market in terms of convenience store accessibility and then I just want to follow up on the commentary Angust kitchens.

Alright. So you look at the 50000, we put out there you still have to do that a fresh spoke having.

Hub-and-spoke model.

50000 to give you another snapshot from the grocery and convenience aspect there.

There's 1.3 million doors.

We're not even getting close to 5% so access to the fresh product would still be.

Scarce and we look at how you represent the donuts, whether it from cabinets in the display from the merchandising the DFT that also goes through.

On top of delivery et cetera is a really big opportunity, adding on I know you're going to talk about growth kitchen, but we look at that we could look at that but we also look at dark shops, which actually piggyback, along where our route and I spoke to our today. So we control the quality what you want to make sure that the donuts or fresh.

The number one thing that the customer continuing to look at and again in the space of 1.3 million potential doors being disciplined about just doing 50000, which is significant growth to five X growth story right now.

We're pretty comfortable about maintaining that scarcity and the hubs, which really are going to be unique that drive that brand awareness and you can get all the channel approaches that you want to see.

Great. That's that's definitely helpful.

Call them gross kitchen, I am not sure are.