Krispy Kreme Sued by California Franchisee

Krispy Kreme Doughnuts Inc., which is grappling with declining sales, accounting problems, and numerous government probes, said Thursday it has been served with a lawsuit filed by a franchisee in Southern California, the Associated Press reports.

The doughnut chain said it will "vigorously defend" itself against the suit, filed on Sept. 29 in Los Angeles County Superior Court by Richard Reinis and Roger Glickman, partners of Great Circle Family Foods, LLC.

Great Circle, Krispy Kreme's biggest franchise, sued the doughnut chain charging that executives misappropriated marketing funds, billed them for bogus charges, and tried to force the franchise into bankruptcy.

Krispy Kreme faces numerous other lawsuits and is also the target of a federal criminal inquiry in New York and a Securities and Exchange Commission investigation into financial irregularities.

In August, Krispy Kreme said an internal probe into its accounting uncovered evidence that former executives attempted to manage earnings to meet and beat Wall Street analysts' expectations.