The company will close some of its 15 locations in the Chicago area, perhaps reducing the number by about half.

The company filed its petition Tuesday in the St. Louis-based U.S. Bankruptcy Court for the Eastern District of Missouri.

President Laura Schlegel said the restructuring would be "an organized sale" of some properties and that Sweet Traditions hopes to emerge from bankruptcy within 120 days. "We are open for business," Schlegel said in a phone interview. "We're open today, we'll be open tomorrow. The doughnuts are hot and the coffee's brewing."

Schlegel said one factor in the bankruptcy was the company's obligation to make lease payments on Chicago-area properties that were not supporting stores. Four such properties were never converted to Krispy Kreme stores, and Sweet Traditions exited three others earlier this year but still had to pay leases.

Sweet Traditions said it has secured $700,000 in "debtor in possession" financing from Allied Capital Corp., a publicly-traded investment company based in Washington, D.C. Sweet Traditions said it will use the money to supplement its cash flow and fund continuing operations during the reorganization.

The company said it will conduct business as usual, paying employees and administering health benefits. Next year, it plans to roll out new products such as frozen drinks and ice cream.

Sweet Traditions, which opened its first Krispy Kreme store in Ferguson in 1997, rode the surging popularity of Krispy Kreme's sugar-coated, fluffy doughnuts. But several years ago, the franchise operator butted heads with Krispy Kreme Doughnuts Inc. of Winston-Salem, N.C. — the country's second-largest donut seller.

Sweet Traditions sued Krispy Kreme in July 2005, claiming that the larger company was burdening Sweet Traditions with onerous requirements that were damaging sales. Krispy Kreme's request that franchisees send it 4.5 percent of their gross earnings, as well as additional cash for a marketing and public relations fund, were points of bitter contention.

The lawsuit spun into a disagreement over whether Krispy Kreme had to send doughnut batter to Sweet Traditions while the companies were in court. The case was settled in August 2006.

The bankruptcy filing lists Krispy Kreme as Sweet Traditions' largest unsecured creditor, with $2.5 million owed by Sweet Traditions.

Krispy Kreme "is very supportive of us and is looking to support us through this transition," Schlegel said. "That whole (llawsuit) thing has been put behind us."