Krispy Kreme Doughnuts, Inc. yesterday announced that Krispy Kreme Doughnut Corporation, its wholly-owned subsidiary, has reached a mutual agreement with its Houston area franchisee, Lone Star Doughnuts, Ltd., to end their existing franchisor-franchisee relationship.

As of March 8, 2006, Lone Star's six locations will cease to be operated as Krispy Kreme stores. "Krispy Kreme remains committed to developing the brand in the Houston market and plans to re-establish stores in the area at the appropriate time," said Steve Panagos, President and Chief Operating Officer of Krispy Kreme. As a result of the agreement, the parties have settled all outstanding disputes and claims, including the dismissal of a lawsuit filed by Lone Star against Krispy Kreme Doughnut Corporation.