Dunkin' Donuts Thursday said it will open 10 shops inside Wal-Mart stores, helping the world's largest retailer broaden its branded fast-food offerings.

News of the deal could be a further blow to Dunkin' Donuts' rival Krispy Kreme Doughnuts Inc. (KKD), which has already set up shop inside seven Wal-Mart Stores Inc. (WMT) locations. Krispy Kreme warned earlier this month that the low-carbohydrate dieting craze would dampen profits, and it cut its expansion plans.

Krispy Kreme shares fell more than 4 percent in New York Stock Exchange trading.

Dunkin' Donuts, run by British-based spirits company Allied Domecq Plc (search), plans to open its first store within a Wal-Mart on Friday in North Wyndham, Conn. The others, set to open within three months, will be located in Connecticut, Massachusetts, New York, Ohio, Pennsylvania, and Vermont.

In addition to coffee and doughnuts, some of the shops will offer ice cream from Baskin-Robbins (search), another Allied Domecq brand.

"Wal-Mart and Dunkin' Donuts share the same mainstream American customer base," Jon Luther, chief executive of Allied Domecq Quick Service Restaurants, said in a statement.

Bentonville, Arkansas-based Wal-Mart has been steadily broadening its offerings of fast food in an effort to provide respite to shoppers navigating its vast, large-format stores.

The retailer also houses some 950 hamburger McDonald's Corp. hamburger stands, and it recently entered a deal to offer 100 sandwich shops run by Blimpie International Inc.

In addition, Wal-Mart has about 1,700 of its own Radio Grill and Wal-Mart snack bars, said Sharon Weber, a company spokeswoman. Wal-Mart limits its restaurant offerings to one format per store, she said.

"We really are looking at different formats and different plans to offer our customers," Weber said, adding that it was too early to determine how many total Dunkin' Donuts were planned. "It is important for us that they can sit and relax."