WINSTON SALEM, NC-Krispy Kreme’s management awaits what it calls “significant” closures in the near future by franchisees that have faced financial problems. At issue are two firms that run the chain’s franchises in the Chicago and Southern California areas.

Both franchisees, St. Louis-based Sweet Traditions LLC, the operator of 23 stores; and the 11-unit Great Circle Family Foods LLC, of Los Angeles, have recently filed for bankruptcy. Krispy Kreme executives would not predict during their second-quarter conference call how many stores would close.

“I think there will be some other franchisees that will close some stores as well,” adds Douglas Muir, Krispy Kreme’s chief financial officer. The chain currently has 411 stores in operation, about 65% of which are in the US.

Most new-store growth by Krispy Kreme is currently overseas. The chain, which has 11 stores in foreign countries, had a second-quarter increase of 13 international units, while on the domestic front there was a net drop of six locations.

The second quarter saw sales and earnings fall, continuing a trend that began in the first quarter after the company had experienced a turnaround. In its Q2, which ended July 29, Krispy Kreme posted a net loss of $27 million compared to a $4.6-million slide during the same year-ago period. Store revenues fell 4.7%, to $75.3 million.

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