Krispy Kreme Gets Fined - Analyst Blog

On July 7, the US Immigration and Customs Enforcement (ICE) announced that it has imposed a fine of $40,000 on Krispy Kreme Doughnuts (KKD) for violation of immigration laws. ICE alleged that the company has violated the law by hiring dozens of illegal immigrants at its doughnut factory in Cincinnati, Ohio.

The company has no authenticated documents for unauthorized workers at the plant. Consequently, Krispy Kreme has undertaken certain measures to amend its immigration compliance program to avert future violations of immigration laws.

It is mandatory for employers in the United States to fill the prescribed Immigration and Naturalization Service (INS) Form I-9 for each and every individual they employ. It is the duty of the employer to verify and inspect employment authorization documents and ensure that the documents are authentic and are related to the individual’s identity.

The employers are also required to update INS Form I-9 upon expiration of any employment eligibility documents submitted by the employee in order to verify that he or she is still permitted to work in the U.S. There are approximately 12 million illegal immigrants living and working in the United States.

In order to curb the increasing demand for illegal labor and protect employment opportunities for U.S. nationals, ICE is probing employers suspected of knowingly hiring illegal workers. This includes approximately 652 companies.

Krispy Kreme Doughnuts operates in the Quick Service Segment, which has been resilient to the economic turmoil to some extent. With less disposable income, the consumers are shifting base to Quick Service Restaurants from Upscale and Casual Dining segments because of their lower priced menu.

Krispy Kreme competes with McDonald’s Corp. (MCD), Yum Brands (YUM), Papa John’s International (PZZA), Chipotle Mexican Grill (CMG). The Zacks Rank for Krispy Kreme stock is #3 (Hold). Yesterday the stock closed at $2.73.