Krispy Kreme enters voluntary administration

Published 11:00 AM, 1 Nov 2010 Last update 1:04 PM, 1 Nov 2010

AAP

Krispy Kreme is continuing to make doughnuts, despite the company calling in voluntary administrators to decide the future of its Australian operations.

The Australian arm of the US-owned company has cited poor sales and high costs in some stores for its decision.

But director John McGuigan says the underlying business remains strong.

"Krispy Kreme has excellent brand recognition and good turnover and profitability in its better stores," Mr McGuigan said in a statement sent to AAP.

"However, several factors, including location, sales declines, high rents and high distribution costs, have meant that a number of stores are losing money."

At risk of being unable to repay its financial obligations, Krispy Kreme said the firm had appointed Mike Smith and Peter Hillig as voluntary administrators.

Voluntary administration is designed to resolve a company's future quickly, with a meeting typically held within 25 or 30 business days following the appointment of the administrator to decide its future.

"It is definitely not liquidation, it is definitely not receivership," Krispy Kreme spokesman Matthew Horan told AAP.

"The directors have determined there has to be a restructure and they have determined that a VA (voluntary administration) is the best way to do that."

All Krispy Kreme stores would keep trading while the administration process advanced, Mr McGuigan said.

"The directors believe the company's core business, which has a seven-year trading history in Australia, remains strong and that a financially stable company will emerge from the process," he said.

All employee entitlements had been protected and would be fully paid to any staff who were made redundant.

Krispy Kreme has 50 stores across Australia, employing 660 staff.