No. of Recommendations: 2
Stock Analyst Notes: Krispy Kreme
by Morningstar Analysts | 10-08-04 | 08:25 AM

We have removed our rating for  Krispy Kreme KKD following the firm's announcement Friday that the Securities and Exchange Commission had entered a formal order of investigation concerning the company.

Apparently KKD failed to reach an agreement with the SEC regarding the continuance of an informal investigation

Until now, we had given the company's management the benefit of the doubt with respect to certain franchise-acquisition activities. We believe that the SEC's decision indicates that, for some reason, cooperation between the company and the agency in the preceding informal investigation broke down, leading the commission to seek the greater legal powers of a formal investigation.

There may be some substance to the charges of improper revenue recognition and the convoluted franchise buybacks.

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