Krispy Kreme Doughnuts, Inc. vowed last week to fight a lawsuit filed by its largest franchisee that accuses company executives of misappropriating marketing money and billing false charges.
Richard Reinis and Roger Glickman, two partners in Great Circle Family Foods of Los Angeles, filed the lawsuit on Sept. 29 in Los Angeles County Superior Court. Great Circle Family Foods is Krispy Kreme’s financially troubled Southern California franchisee.
The lawsuit charges Krispy Kreme and company executives with making false representations to persuade franchise owners to guarantee the franchise’s financial obligations, according to USA Today. The lawsuit also says the doughnut chain inflated its prices and engaged in deceptive business practices, the newspaper said.
In addition, the lawsuit contends the company ordered the franchisee to contribute to a fund Krispy Kreme had established to support marketing and advertising. The company is believed to have misappropriated the funds and has refused to account for the expenses, the lawsuit states.
In a press release Thursday, Krispy Kreme said it would “vigorously defend” itself against the lawsuit.
The lawsuit is not the first Krispy Kreme faces this year. The Winston-Salem, N.C.-based company remains under investigation by the Securities and Exchange Commission for financial woes. Krispy Kreme also faces a number of shareholder lawsuits, which have been consolidated against the doughnut maker alleging that it “issued false and misleading statements, including false financial results.”
Five Krispy Kreme executives resigned and one retired in June after the committee recommended the officers who were responsible for the accounting errors be discharged from the company (Xtra, June 28). The six executives, who were not named, included four senior VPs who worked in the company’s operations, finance, business development and manufacturing and distribution departments.
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