I think there is brand management issues here. If he sold dough nuts, fine. But if he is selling them as Krispy Kreame, he is representing them with out permission. Should there be a liability question, who gets the finger pointed at them - Krispy Kreame or the kid?
Were I KK, I'd work with the kid to honor his initiative and set him up in a franchise where he lives. Win/Win.
So I'm having a picnic. 500 people are coming. There is an admission fee which covers all expenses and included 40 dozen Krispy Kreme.
Krispy Kreme's ownership of the 40 dozen ended at the KK door.