US doughnut maker and retailer Krispy Kreme Doughnuts has confirmed that its largest franchisee, Southern California's Great Circle Family Foods, is interested in putting itself up for sale.

Krispy Kreme chief financial officer Randy Casstevens said the company has had "some preliminary discussions" about Great Circle's interest in selling, reported Dow Jones News.

Casstevens and company spokeswoman Brooke Smith declined to comment on why Great Circle might be interested in selling and whether Krispy Kreme itself would be interesting in buying the franchise.

One newspaper reported the Great Circle is seeking US$80m for the franchise. Great Circle signed an agreement with Krispy Kreme in 1998 to develop 42 stores by 2006. It currently operates 22 stores.

Krispy Kreme has also announced it has paid $67m for the rights to the Dallas and Shreveport markets as well as the assets from its franchisee operations in those markets.

The transaction had been announced in June, but Krispy Kreme had not disclosed details of the deal.

According to a filing with the Securities and Exchange Commission, Krispy Kreme paid the purchase price with cash and a $55m promissory note from a Wachovia Bank. The company said it expects the promissory note to eventually be converted into long-term financing.