Krispy Kreme Doughnuts, Inc. announced today that on Friday, February 7, 2003, an arbitration panel entered an award against its franchisee in Northern California, Golden Gate Doughnuts, LLC, and the Company in the amount of $7,925,000.

This arbitration award originates from a lawsuit filed in March 2000 in Superior Court in the State of California regarding ownership rights of the franchise. Subsequently, the matter was heard before an arbitration panel. The Company is evaluating the arbitration panel’s decision and is reviewing its options, including further use of the legal process.

A final award is expected to be issued after the arbitration panel considers additional costs and fees. As a result of this award, the Company will make a provision in the fourth quarter of Fiscal Year 2003. The company said in a statement that “this award poses no liquidity or capital resource concerns given the Company’s substantial cash, investment balances, and unused borrowing capacity under its line of credit facility which collectively are currently in excess of $80 million.”