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    Krispy Kreme faces challenges in Canada, too.

    TORONTO -- Krispy Kreme's Canadian operation, which is struggling to restructure with money from the U.S. doughnut chain, has turned down three offers and ended its search for a buyer.

    According to the Canadian Press, KremeKo, which holds the rights to Krispy Kreme in every province except British Columbia, initiated a sale process in mid-June, seven weeks after it filed for bankruptcy protection. It was soliciting offers for its assets as well as the rights to operate Krispy Kreme franchises in Canada.

    "The sales process has been completed; however, the offers received were not acceptable to the company," said court documents filed recently by the court monitor, Joe Pernica of Ernst & Young Inc., in Ontario Superior Court.

    KremeKo rejected three offers for some or all of its property, although it is keeping in touch with two of the bidders who "expressed an ongoing interest in the property on a going concern basis." In the meantime, it has been trimming costs, developed a business plan, and carried out negotiations with creditors GE Canada and the Bank of Nova Scotia.

    "As a result, the company is in a position to pursue other restructuring options," Pernica said, which could include continuing operations on its own or selling the property.

    North Carolina-based Krispy Kreme is lending KremeKo up to $1.5 million as it struggles to turn around. By Aug. 3, KremeKo had dipped into $700,000 of that. Pernica said KremeKo forecasts negative cash flow of about $300,000 through Sept. 4. As part of its revival operations, KremeKo has a new product -- "the doughnut hole" -- that it intends to promote heavily this month.

    It is also launching more than 20 new convenience store locations in the Ottawa market, with 60 more to follow in Edmonton in October.

    KremeKo won the Canadian rights to the Krispy Kreme name in 2000, and was required to open 32 stores within seven years, paying Krispy Kreme $40,000 for each store plus 4.5 percent of sales.

    The doughnut chain splashed into Canada in December 2001, with the opening of its Mississauga, Ont. location -- Krispy Kreme's first outside of the United States. Cash registers rang up more than $70,000 worth of doughnuts in one day, as customers snarled traffic for blocks around.

    By January of this year, losses mounted and KremeKo had shuttered six of its 18 stores. It filed for protection from its creditors on April 15, and has since closed five more stores.

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