Doughnut chain Krispy Kreme Australia has entered into voluntary administration due to some underperforming stores.

The company has appointed Mike Smith and Peter Hillig as joint voluntary administrators of the company.

Krispy Kreme Australia director John McGuigan said the underlying business nevertheless remained strong.

“Krispy Kreme has excellent brand recognition and good turnover and profitability in its better stores,” he said.

“However several factors, including location, sales declines, high rents and high distribution costs, have meant that a number of stores are losing money.”

According to Krispy Kreme, the company was at risk of not meeting its financial obligations if it continues to trade under its current model.

“Directors have determined that a restructure is necessary and the appointment of a voluntary administrator is the responsible action in view of the risk of insolvency if the company continued to operate in its current form,” McGuigan said.

“The directors believe the company’s core business, which has a seven-year history in Australia, remains strong and that a financially stable company will emerge from the process.”

McGuigan also noted that there are possibilities of redundancies as a result of this outcome.

“In the event that there are redundancies arising out of the voluntary administration process, all employee entitlements have been protected and will be met in full,” he said.

“All suppliers and other creditors will be kept fully informed by the Voluntary Administrator throughout the process.”

It is anticipated that all Krispy Kreme stores will continue trading while the process gets underway, the company said in a statement.