Krispy Kreme's Hong Kong franchisee to enter receivership

WINSTON-SALEM N.C. Krispy Kreme Doughnuts Inc. said Monday that its nine-unit franchisee in Hong Kong would enter into receivership, which is a type of bankruptcy.

Krispy Kreme did not say whether the franchisee, which has been in operation for two years, would liquidate or reorganize. However, the Reuters news service reported that the franchisee had retained a financial adviser to help it find liquidators, and that it planned to close five of its stores immediately.

Krispy Kreme said in a statement that while it was "disappointed by this development, the company's international growth strategy has not changed." The company noted that it recently had signed development agreements for new stores in Turkey, Malaysia, and mainland China.

Krispy Kreme has been relying on its growth overseas to offset shortfalls at domestic stores, which have been struggling with rising costs and sluggish sales. In reporting results for its Aug. 3-ended second quarter, Krispy Kreme said a strong performance by its overseas restaurants was entirely responsible for a 3.9-percent increase in systemwide same-store sales.

At the end of its second quarter, Krispy Kreme operated or franchised 494 doughnut shops, including 260 international units