Amidst Dunkin' Donuts continued expansion into new markets, three franchisees have filed for Chapter 11 bankruptcy since the beginning of June. The latest is Kainos Partners Holding Company LLC, based in Greer, S.C., which owns and operates 56 Dunkin' Donuts restaurants in New York, South Carolina and Nevada.
According to The Greenville News (S.C.), the company will continue operating at least 20 of its 21 Dunkin' Donuts stores in upstate South Carolina, put plans for a donut bakery in Clinton on hold and hopes to complete construction of a store being built in downtown Greenville.
The Buffalo News Business Today reports that the franchisee will close four underperforming stores and a baking facility as it restructures. It will continue to operate 13 stores in the Buffalo Niagara region.
Kainos entered the Buffalo area three years ago, acquiring the rights to develop 40 of the chain's stores in the region. The franchisee blames problems with site selection, the cash drain of the donut-making plant and declining average weekly store sales.
In late June, franchisee Current River Capital LLC, which operates seven Dunkin' Donuts and Baskin-Robbins stores in the Nashville, Tenn., area, filed for Chapter 11 bankruptcy, according to the Nashville Business Journal.
Tampa Bay Business Journal reports that in early June, Sarasota, Fla.-based AlphaRock LLC and related companies, which own 18 Dunkin' Donuts franchises on Florida's West Coast, filed for Chapter 11 bankruptcy protection. The filing also includes a bakery that supplies baked goods to 35 donut local stores.
Dunkin' Donuts provided the following statement regarding the Kainos' bankruptcy:
"On Monday, July 6, Kainos Partners LLC, one of Dunkin' Donuts' 1,200 US franchisees, filed for Chapter 11 bankruptcy protection to reorganize its capital structure and enable the company to continue operations while they position themselves for future growth.
This experience is not uncommon for restaurants even in the best of times, and we want to assure our customers that we remain committed to the Buffalo, Greenville and Las Vegas markets. "With approximately 8,000 Dunkin' Donuts stores worldwide, our system overall continues to grow. We are committed to doing the right things to manage the realities of the present economic situation, even as we continue to look ahead with optimism at the future and the long runway for growth ahead of us, both domestically and internationally."
Franchisee switching brands
In unrelated news, Nation's Restaurant News reports that franchisee The Riese Organization, which has operated 13 Dunkin' Donuts stores in New York City, is converting the stores to the Tim Hortons brand.
Dunkin' Donuts provided the following statement regarding Riese:
"Dunkin' Donuts initiated a lawsuit in 2002 to terminate the franchise agreements of the Riese organization for alleged standards violations relating to health, sanitation and safety. As part of the settlement agreement reached in 2004, the Riese organization agreed to leave the Dunkin' system and de-identify all their stores by July 31, 2009.
"A request was made by the Riese organization in April 2008 for reconsideration of the agreement to allow it to continue as a franchisee beyond July 2009, but Dunkin' Donuts declined to reconsider its position. As a result, the settlement agreement remains in effect, and pursuant to its terms, 15 Dunkin' Donuts stores franchised to the Riese organization in New York City will permanently close on July 10, 2009.
"Notwithstanding the disenfranchisement of the Riese organization, Dunkin's presence in Manhattan and throughout New York City continues to expand. In the past five years, 244 new Dunkin' Donuts shops have opened in New York City, and we intend to continue this pattern of growth as opportunities arise."
