FROM OUR COLUMNISTS
AT KRISPY KREME, A REMINDER OF RESTAURANTS’ DIGITAL RISK Tech Check: Fallout from a cyberattack sunk the doughnut chain’s stock to an all-time low. Restaurants pursuing more digital sales should take notice.
KRISPY KREME’S ONLINE ORDERING WAS DOWN FOR A MONTH. PHOTO: SHUTTERSTOCK
JOE GUSZKOWSKI
K rispy Kreme’s stock took a beating this week after the chain reported low- er-than-expected sales and earnings for the fourth quarter. The reason for the shortfall? A cy- berattack that knocked out the dough- nut chain’s online ordering system for about a month late last year. The outage cost the chain almost 3 percentage points of organic sales growth and about $11 million in prof- its, the chain said Tuesday. Krispy Kreme CFO Jeremiah Ashukian said insurance will offset some of the losses and that the compa- ny does not expect the attack to have a long-term impact. But that did not stop investors from driving its stock down more than 30% to an all-time low of less than $6 a share. (It had rebounded slightly by Thursday.) The situation is just the latest exam- ple of the risk restaurants are taking as they shift more of their business to dig- ital channels. Digital orders have more than tripled since 2019 and now ac- count for about 18% of industry trans- actions, according to Circana/CREST data. Some chains, like Sweetgreen and Wingstop, now do a majority of their sales online. Others are investing heav - ily in loyalty programs that allow them
to collect detailed data on their custom- ers, like phone numbers, emails and payment info. There are efforts under- way to digitize even on-premise orders. It has become conventional wisdom in the industry that digital is the future. And for good reason: Consumers like the ease of being able to order online and getting rewarded for doing so, and restaurants learn more about their cus- tomers in the process. But it also makes restaurants a big- ger target for hackers, who may be looking to steal personal information, extract a ransom or simply make a statement. In the last two years alone, at least five large chains have been hit with attacks, including Panda Express, Pan- era Bread, Yum Brands and Five Guys. Tech suppliers such as NCR and Grub - hub have also been breached. It comes as cyberattacks are becom- ing much more prolific in general. 2024 was the worst year for cyberattacks in history, according to network security provider NordLayer. It cited data from Amazon showing that the number of threats jumped from 100 million to 750 million per day in a span of just seven months last year. That’s thanks in part to AI tools that have allowed even non-computer-wizzes to become hackers. “We’re seeing a world today where
there are tools that are cheap, there are tools that are accessible, and there’s some bad-intentioned folks out there that want to disrupt a brand, particu- larly in this geopolitical climate, dam- age the brand of U.S. marquee compa- nies,” said Adam Dumey, global VP of retail for tech services provider World Wide Technology. It has become conventional wisdom in the industry that digital is the future. The good news is, restaurants are making progress on building their de- fenses. More than half (53%) of oper- ators surveyed by the National Res - taurant Association said they plan to invest in cybersecurity measures this year. That’s up from 45% who said so last year and 34% who said they made an investment in 2023. Some large res - taurant companies have even hired chief information security officers to help guard their networks. These are not sexy investments to make. They’re not going to drive traf - fic or wow stockholders or go viral on TikTok. But they are part of the price of going digital. And they can pay off in the long run. Just ask Krispy Kreme.
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