Krispy Kreme to 'vigorously defend' itself from franchisee

The lawsuit filed Sept. 29 in Los Angeles County Superior Court accuses Krispy Kreme and its executives of making false representations to persuade franchise owners to personally guarantee the franchise's financial obligations. The suit also says Krispy Kreme systematically inflated its prices and engaged in deceptive business practices.

www.usatoday.com
October 6, 2005

Krispy Kreme to 'vigorously defend' itself from franchisee

CHARLOTTE, N.C. (AP) — Krispy Kreme Doughnuts (KKD) will "vigorously defend" itself against a lawsuit filed by its largest franchisee that says company executives misappropriated marketing money and billed for phony charges, the company said Thursday.

Richard Reinis and Roger Glickman, two partners in Los Angeles-based Great Circle Family Foods, also say in their lawsuit that Krispy Kreme was trying to force their company into bankruptcy.

Krispy Kreme spokeswoman Laura Smith said Thursday that the company has been served with the lawsuit and would have no further comment beyond a short written statement pledging a vigorous defense.

The lawsuit filed Sept. 29 in Los Angeles County Superior Court accuses Krispy Kreme and its executives of making false representations to persuade franchise owners to personally guarantee the franchise's financial obligations. The suit also says Krispy Kreme systematically inflated its prices and engaged in deceptive business practices.

Krispy Kreme also required the franchisee to contribute to a brand fund that Krispy Kreme was required to spend on marketing and advertising, Reinis and Glickman contend. Krispy Kreme appears to have misappropriated the money and refuses to account for the expenditures, the lawsuit says.

Along with Krispy Kreme, the defendants include former chief executive Scott Livengood, former senior vice president of franchising Phil Waugh, former chief operating officer John Tate, and Kroll Zolfo Cooper, the consultant hired by the Krispy Kreme board of directors to manage the company after the departure of Livengood.

The company faces several other lawsuits, including one that alleges workers lost millions of dollars in retirement savings because company executives hid evidence of declining sales and profits.

Krispy Kreme is also the target of a federal criminal inquiry in New York and a Securities and Exchange Commission probe into financial irregularities.

Copyright 2005 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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