Krispy Kreme franchisee emerges from Ch. 11

LOS ANGELES Krispy Kreme franchisee Great Circle Family Foods LLC confirmed this week that it has emerged from Chapter 11 bankruptcy proceedings.

According to Great Circle, the U.S. Bankruptcy Court for the Central District of California has confirmed the franchisee’s plans for reorganization. The company, which now operates 11 Krispy Kreme units in Southern California, has worked to restructure its operations and balance sheet and agreed to ensure the continuing operations of its units and the preservation of 240 jobs at those locations, it said. Great Circle also agreed to form a “renewed, collaborative and sustainable relationship” with franchisor Krispy Kreme Doughnuts Inc. and to further develop its market.

“Our restructuring has been a long and painful process,” said Roger Glickman, Great Circle’s chief executive, “but we emerge as a healthy enterprise thanks to the dedication and hard work of our outstanding employees and the loyalty of our cherished customers.”

Great Circle, once one of Krispy Kreme’s largest franchisees with 31 stores, its own distribution operation and more than $64 million in annual sales, filed for Chapter 11 bankruptcy protection in 2007. At that time, Krispy Kreme, which was once a growing brand and Wall Street darling, had experienced a reversal of fortunes from a downturn in sales and allegations of corporate misdeeds. Great Circle was forced to close its distribution center, sell or close 20 locations and change its business model to reflect the smaller unit format Krispy Kreme developed for international markets.

Steve Lineberger, president of U.S. stores for Krispy Kreme, said in a statement that the Winston-Salem, N.C.-based franchisor was pleased Great Circle has been able to emerge from bankruptcy.

“They are a strong operator, and we are very committed to assisting them as they move forward successfully,” he said. “There is much that Krispy Kreme and Great Circle Family Foods can continue to learn from each other, and we look forward to being a part of their future.”

Great Circle and Krispy Kreme have had a contentious relationship in recent years. The Los Angeles-based franchisee sued its franchisor in 2006, citing alleged accounting fraud and other poor business practices under the leadership of former chief executive Scott Livengood. Those differences have since been resolved, Krispy Kreme’s executive team has been changed and the chain is working to turn around its performance. Sales continue to slip in U.S. markets, while the company is expanding overseas. Its net profit continues to fall [3], especially as lease termination charges pile up from shuttered locations.

Krispy Kreme’s system includes about 400 locations worldwide.

Contact Elissa Elan at [email protected] [4].