Doughnut firm dunked

Owners at locations scheduled to close will be allowed to re-open a generic coffee and doughnut store if they wish.

The Toronto Sun
December 15, 2001

Doughnut firm dunked
Country Style forced to seek protection from creditors
Maryanna Lewyckyj

Canada's third-largest doughnut chain is in the hole.

Country Style Food Services filed for bankruptcy protection yesterday while the chain restructures.

The 38-year-old firm closed 21 stores last week and will close another 30 this week, but will continue to operate about 150 to 160 profitable stores in hopes of revitalizing the business.

Nine stores in the Toronto area will be closed, while about 30 will remain open.

"The locations that are closing aren't viable for many reasons," Pat Gibbons, who became Country
Style's president Sept. 10, said yesterday.

"We had to get rid of the stores that were dragging us down. Some people will be hurt … but for the great majority of people it's the right thing in the long run."

CREDITORS
When the firm filed for bankruptcy protection, its secured creditors were owed $15 million, while unsecured creditors were owed $6 million.

"The current investors have given us a vote of confidence by agreeing to inject new money into the company, which will help us make the restructuring plans work," Gibbons said.

He says the Country Style brand name is still strong, and the doughnut chain will rise again.

"We opened five stores last week, we're opening five stores in January and February and we plan to open 20 stores over the next 10 months," Gibbons said.

He pointed out that most of the locations being closed didn't have drive-through lanes, which account for 70% of business.

GENERIC STORES
Owners at locations scheduled to close will be allowed to re-open a generic coffee and doughnut store if they wish.

The news comes the same week U.S. doughnut giant Krispy Kreme set an opening-day sales record of $70,920 when its first Canadian location opened in Mississauga.

A pioneer in the doughnut and coffee business, Country Style has seen increasing competition from Tim Hortons, Coffee Time and chains such as Starbucks and Second Cup.

Despite the slowing economy, Tim Hortons will have opened as many as 180 new outlets by the end of this year and plans to add another 170 in 2002.

"We are doing very well," said Patti Jameson, a spokesman for the Tim Hortons chain. "We're approaching 2,000 stores in Canada and 130 in the U.S. with more than 55,000 total employees.
We see no sign of slowing down over the next few years."

Krispy Kreme plans to open 31 stores in Ontario, Quebec and the Atlantic provinces over the next six years, creating 3,200 jobs.


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