Students look at a closure notice outside a Krispy Kreme Doughnuts shop in Central yesterday. The donut chain in Hong Kong went into liquidation, closing five of its seven outlets yesterday. Edmond Tang

Donut chain Krispy Kreme Doughnuts went into liquidation yesterday in Hong Kong, after operating for more than two years.

Based in the US, Krispy Kreme is the third retail chain to wind up in October, following the closures of clothing retailer U-right and electrical appliances store Tai Lin Radio Service early this month.

Five of the donut chain's seven stores in the city were shut down yesterday, while the other two outlets at the airport remained open.

The sweet treats chain has appointed independent financial advisor Briscoe & Wong to place the chain into creditors' voluntary liquidation.

Managing director of Briscoe & Wong Stephen Briscoe said Krispy Kreme has around 125 employees, including 20 full-time staff, while its two airport outlets will probably be closed in the next two weeks.

"The employees have been paid for September, but not yet for October," said Briscoe, who also encouraged staff of Krispy Kreme to contact the Labour Department for making claims.

A meeting of creditors will be held on Nov 12 to appoint liquidators to deal with the chain's assets and claims filed by its employees and creditors, Briscoe added.

The doughnut chain opened its first outlet in the city in Causeway Bay on August 8, 2006, when it planned to open 19 more outlets over the next five years.

According to the appointed financial advisor, operation has been tough for the sweet treats chain due to high rents in Causeway Bay and Mong Kok.

The financial advisor also said directors of Krispy Kreme Hong Kong have been trying to find a buyer to take over the business over the last six months but to no avail.

The directors, therefore, decided to end the business in Hong Kong so as to avoid further losses.

Simon Wong, president of the Hong Kong Federation of Restaurants and Related Trades, said the business environment will be more difficult for the catering industry due to the recent financial turmoil.

"Hong Kong people are less willing to spend now. We expect the catering business to drop by at least 20 percent over the next two months," Wong said, adding that it is hard to predict when the crisis will come to an end.

"It is a survival-of-the-fittest situation. The ones with less capital and capability will eventually be eliminated," Wong said.

(HK Edition 10/28/2008 page1)