Krispy Kreme terminates McDonald’s partnership citing ‘unsustainable operating costs’ of $28.9 million

Retail·RestaurantsKrispy Kreme terminates McDonald’s partnership citing ‘unsustainable operating costs’ of $28.9 millionBy Nick LichtenbergBy Nick LichtenbergFortune Intelligence EditorNick LichtenbergFortune Intelligence EditorNick Lichtenberg is Fortune Intelligence editor and was formerly Fortune's executive editor of global news.SEE FULL BIO Krispy Kreme is out of the McDonald's .Zamek/VIEWpressKrispy Kreme has officially terminated its much-hyped national partnership with McDonald’s, as CEO Josh Charlesworth said it created “unsustainable operating costs” and led to lease impairment and termination costs of $28.9 million

In other words, not enough donuts made enough dough

The fallout from the failed partnership was laid bare in Krispy Kreme’s earnings report, a sharp contrast from McDonald’s own resilient financial showing amid sector headwinds

Initially hailed as a major growth opportunity, the collaboration floundered under operational pressure and insufficient returns. “Our two companies partnered very closely, each supporting execution, marketing, and training, dering a great consumer experience,” Charlesworth said in a public statement. “Ultimately, efforts to bring our costs in line with unit demand were unsuccessful, making the partnership unsustainable for us.” Krispy Kreme’s Q2 2025 earnings statement details $28.9 million in lease impairment and termination costs directly attributed to the McDonald’s tie-up, on top of $22.1 million in asset charges

Charlesworth said the poor results primarily reflect McDonald’s deal. “We are quickly removing our costs related to the McDonald’s partnership and growing fresh dery through fitable, high-volume doors with major customers,” he added, saying the company expects to begin recouping fitability in the third quarter

Krispy Kreme is now accelerating plans to exit unfitable partnerships, refocus on fitable channels (including supermarket and convenience partnerships), and pursue international franchise expansion

It’s also selling its remaining stake in Insomnia Cookies and refranchising further , including in Australia, New Zealand, Mexico, and the U.K., with the aim of lightening its balance sheet and unlocking cash for future investments

McDonald’s sees stability and growth For McDonald’s, the Krispy Kreme partnership was a small experiment compared to the size of its regular

The donut sales represented only a minor part of the breakfast , and their removal has not dented McDonald’s financial performance

According to McDonald’s second-quarter earnings, the company has weathered economic uncertainty and changed consumer habits with surprising strength

CEO Chris Kempczinski emphasized that McDonald’s remains committed to dering “delicious, affordable, and convenient options” and will continue to drive growth through digital investment and innovation, recently announcing the return of items and new motions

McDonald’s referred Fortune to a joint announcement with Krispy Kreme the canceled partnership

Charlesworth said that the two companies “partnered very closely” on the venture in roughly 2,400 McDonald’s restaurants, but that it was unsustainable

The announcement also said that Krispy Kreme represented a small, non-material part of McDonald’s breakfast , and breakfast remains a core pillar of McDonald’s strategy

Krispy Kreme declined to

The road ahead for Krispy Kreme With the McDonald’s arrangement behind it, Krispy Kreme’s turnaround blue involves shifting focus toward higher-margin retail channels, franchise growth, and operational cost reduction

The company’s leadership susp dividends and renegotiated credit agreements, raising fresh capital to stabilize operations

Charlesworth acknowledged the hit but remains optimistic: “We are now moving decisively to eliminate costs tied to this partnership and expect to return to fitability by the third quarter, focusing on sustainable, fitable growth going forward”

This failed partnership highlights the risk and complexity of scaling niche ducts into the hyper-competitive world of fast food, especially as American consumers remain price- and convenience-driven

For McDonald’s, meanwhile, it’s as usual—the golden arches shine on, donuts or not

For this story, Fortune used generative AI to help with an initial draft

An editor verified the accuracy of the information before publishing

Explore this year's list.