Operator of 56 Dunkin' Donuts files for bankruptcy

WILMINGTON, Del., July 6 Mon Jul 6, 2009 1:30pm EDT

WILMINGTON, Del., July 6 (Reuters) - An operator of 56 Dunkin' Donuts locations filed for bankruptcy on Monday, the latest in a growing list of franchise operators to seek court protection due to a steep drop-off in sales.

Kainos Partners Holding Company LLC of Greer, South Carolina, operates the donut-and-coffee franchises in New York, South Carolina and Nevada, with eight more under construction, according to court documents. It employs 700.

The company said the recession has put its customers under extreme financial stress while food costs have risen.

Kainos Partners joins a growing list of struggling operators of Dunkin' Donuts, which has 15,000 locations worldwide. Last month, the operator of several Nashville-area Dunkin' Donuts and the largest Dunkin' Donuts franchise operator on the west coast of Florida both filed for bankruptcy.

Dunkin' Donuts is a subsidiary of Dunkin' Brands Inc, which is owned by Bain Capital, The Carlyle Group and Thomas H. Lee Partners.

Kainos Partners also said it discovered that its chief financial officer had engaged in $420,000 worth of financial transactions involving company assets for his personal use. The executive was fired in February.

Like the Nashville-area franchise operator, Kainos said its largest creditor is CIT Group Inc (CIT.N), which is owed about $25 million. Under the planned reorganization, CIT will reduce the amount it is owed in return for a 72.5 percent stake in the reorganized company.

Kainos Partners, Dunkin' Donuts and CIT Group did not immediately return calls seeking comment.

The case is In re: Kainos Partners Holding Co LLC, U.S. Bankruptcy Court for the district of Delaware, No. 09-12292. (Reporting by Tom Hals; Additional reporting by Chelsea Emery; Editing by Richard Chang)

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