Canadian favourite Tim Hortons is filling a hole in the U.S. doughnut shop market and has java lovers south of the border refilling their coffee cups.

"This cup started full. It's empty now. And I love it," American Skip Ervin told CTV as he enjoyed a cup of coffee at a U.S. Tim Hortons outlet.

There are about 200 Timmy's locations in the northeastern states and there are plans for more than 500 to be up and running by the end of 2007.

"I think eventually you'll see us in all 50 states. It may take a while but we'll get there," Tim Hortons franchisee Bob Burns said.

The reciprocal invasion of rival American doughnut chain Krispy Kreme has not been nearly as successful, however.

In fact, despite a warm welcome when it arrived in Canada three years ago, Krispy Kreme has failed to take a bite out of Tim Hortons' marketshare.

"The problem is really they are a one-product shop and the coffee is not exceptional. They're known for their coffee, they're known for their donuts," Geoff Smith, Assistant Professor of Hospitality and Tourism Management at the University of Guelph told CTV.

Unlike Krispy Kreme, Tim Hortons has expanded its menu to include bagels, sandwiches and soup.

And that, CTV's David Akin says, makes Tim Hortons' lunch menu even more popular than McDonald's.

"What Tim's has done, they've managed to continue to re-invent themselves," Smith says.

Krispy Kreme is closing three stores and three kiosks in Ontario and its future expansion plans are unclear.

Officials have blamed their poor showing on a late stock market filing.

With files from CTV's David Akin and The Globe and Mail