Krispy Kreme terminates license of largest franchisee

Just a matter of time when they file for bankruptcy

Krispy Kreme Doughnuts Inc. said Thursday it has terminated the license of its largest franchise operator, which means it can no longer sell doughnuts under the famous brand name.

Krispy Kreme said Los Angeles-based Great Circle Family Foods LLC, which operates 28 Krispy Kreme locations in Southern California, has not paid required royalties and fees.

"As a result of the termination, effective immediately, Great Circle Family Foods can no longer legally operate these stores as Krispy Kreme outlets and is required to remove Krispy Kreme signs and symbols within 30 days," said Krispy Kreme spokeswoman Laura Smith.

"The bottom line is while the company would have liked to resolve this issue in another way, Great Circle is in default of their franchise agreement and has refused to cure that default," she said.

Smith declined to say how long Krispy Kreme and Great Circle had discussed the lack of franchise payments before the licenses were terminated.

Krispy Kreme, which is the only supplier of doughnut mix and other supplies to its stores, has stopped shipping materials to Great Circle, which said in a statement it would fight the cutoff in court.

"We believe Krispy Kreme is in breach of all of our franchise and other agreements," the statement said.

"Krispy Kreme wants money to which we believe it is not entitled. Their monetary desires and our fight to keep our business will be resolved in court," the statement continued.

Krispy Kreme, which is the target of two federal probes over its finances, has been fighting with Great Circle over its dealings with the franchisee for several months.