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When Blogs Attack – Cuppy’s Coffee & Java Jo’z

shark franchiseWhile some claim any free PR is good PR, that doesn’t hold true in the franchise world. I would wager that the vast majority of people before they become franchisees do some searches on the Internet (or their loved ones will do it for them) about the franchise. Blogs come up high in search engines because, in part, to frequent postings and incoming links. They serve as a powerful self-disinfecting spotlight. But, this spotlight can be abused by franchisees who failed because of their own fault. Nevertheless, franchisees will flood towards franchisors that are committed to ethically maximizing both for themselves and franchisees.

The Java Jo’z / Cuppy’s Coffee story

  • There has been a lot of negative blogger buzz with shark ferocity surrounding Cuppy’s Coffee and Java Jo’z. Apparently, Cuppy’s Coffee (formed in May 2006) purchased the assets of Java Jo’z Coffee & More, LLC. Allegedly, Java Jo’z orally promised a return of the $20-30,000 franchisee fee if the franchisee did not build out. However, things turned bleak – the CEO was sent to the pokey for tax issue, the assets were sold to Cuppy’s Coffee, and now there is supposedly no money to return the franchise fees. The Franchise Agreement does not provide for a refund of franchise fee, but allegedly oral promises were made to franchisees by Java Jo’z and its CEO, Roy Snowden. The asset sale under impending bankruptcy is suspiciously ill-timed and no one has released dollar amounts to determine whether fair value was paid. And if it was, where is the money?
  • Should people be concerned about the ethics of Cuppy’s? Probably not at this point. Many details are unknown and just because people lose money does not mean anything unscrupulous occured.

I have a few questions:

1) Why did Aaron Weinstock from a few miles outside Fort Walton Beach register in Florida the business: CUPPY’S JAVA JO’Z COFFEE & MORE, INC. ? Is Aaron Weinstock related to Kristin Weinstock who name appears on blog spamming, and it always reads:[update 1-25-2007: this text has been deleted] As both an Employee and an Owner, I get to experience Cuppy’s in a way that not everyone can. I love Cuppy’s because of the dedication of the employees, to each other and to the Franchisees and Licensees. I also love having the chance to work with our owners every day, and learn from their experiences to help me in the process of opening my own store.

2) If Doug Hibbing, President of Cuppy’s Coffee, never had a legal relationship with Java Jo’z, why did a Russell Hibbing register “Java Jo’z International, Inc.” in Nevada last year?

For fun – what are the possible claims/theories of liability based on the allegations that have swirled around?

1) fraudulent conveyance/transfer:
As attorney Paul Steinberg pointed out, and Cuppy’s objected via a tersely worded letter from their attorneys, the asset sale may be unwound if under the Uniform Fraudulent Transfer Act, if Cuppy’s received or bought assets from Java Jo’z and Java Jo’z

(1) intent was to hinder, delay, or defraud creditors (pay back the franchisee their deposits),
(2) Cuppy’s did not receive a reasonably equivalent value in exchange for the transfer or obligation, and the debtor

(a) was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or
(b) intended to incur or believed or reasonably should have believed that the debtor would incur debts beyond the debtor’s ability to pay as the debts became due.

Under the Bankruptcy Act, an aggrieved party may bring suit against those persons who received transferred property and may recover from the transferees the value of that property if they have subsequently converted the property.

2) criminal conspiracy

US Code Title 18, Part I, Chapter 19, § 371. Conspiracy to commit offense or to defraud United States:

If two or more persons conspire either to commit any offense against the United States, or to defraud the United States, or any agency thereof in any manner or for any purpose, and one or more of such persons do any act to effect the object of the conspiracy, each shall be fined under this title or imprisoned not more than five years, or both.If, however, the offense, the commission of which is the object of the conspiracy, is a misdemeanor only, the punishment for such conspiracy shall not exceed the maximum punishment provided for such misdemeanor.

3) civil RICO statutes
Most civil RICO claims are filed under Section 1962(c), which makes it unlawful to “conduct or participate, directly or indirectly, in the conduct” of an enterprise through a pattern of racketeering activity. The four primary elements are “(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.”

4) civil conspiracy
The typical elements for civil conspiracy include: (1) an agreement (2) by two or more persons (3) to perform an overt act(s) (4) in furtherance of the agreement or conspiracy (5) to accomplish an unlawful purpose or a lawful purpose by unlawful means (6) causing injury to another.

Hat tip: The Usual Suspects = Paul Steinberg, Blue MauMau, FranBest, Ben Scoble, Franchise Pick, and probably others that I forgot (sorry!)

About Ryan Knoll

Attorney and advisor with an interest in franchising. Feel free to email me comments and questions on the "Contact Us" page.
26 comments
Joe
Joe

I agree with David above.... Franchisees must get a franchisor to committ to their promises in the franchise agreement or else you may be taken for a ride. I personally believe the franchise model is a great business model. However, the nature of franchising does make it easy for predators to take advantage of unsuspecting franchisees. That being said, like the old cliche, 'you can't believe everything you read' must be taken into account when you read bloggers. I read a lot of blogs/comments about franchises and many of them are false. There are some great franchise models out there that fail in some markets due to market or because in reality some franchisees shouldn't be entrepreneurs. Take everything with a grain of salt.

David
David

I always tell franchisees, 'if it's not in writing then the conversation you had with the franchisor might as well have not happened.' I feel sorry for the franchisees who got themselves involved with Cuppy's Coffee franchise development. Get it in writing folks. Also, I do see the power in blogging and I think it's great as long as the blog information you are reading is in fact correct. I personally am in the fitness industry and some of these blogs I read about fitness are absolutely insane and written by people who have no idea what they are writing about. Check out the reliability of the bloggers you are reading to ensure you are getting 'good' information.

B. Hoo
B. Hoo

look who's up to no good again Plaintiffs: ROY P. SNOWDEN and KIMBERLY M. SNOWDEN Defendants: JOHNSON & JOHNSON, ORTHO-MCNEIL PHARMACEUTICAL, INC. and JOHNSON & JOHNSON PHARMACEUTICAL RESEARCH AND DEVELOPMENT, LLC Case Number: 3:2010cv03510 Filed: July 8, 2010 Nature of Suit: Torts - Injury - Personal Injury- Product Liability Cause: 28:1332

Ryan Knoll
Ryan Knoll

[quote comment="480359"]Morgan & Doyle are back in business running 2 "biz op" ventures. Stay tuned for more developments.[/quote] what are they?

P.T. Barnum
P.T. Barnum

Morgan & Doyle are back in business running 2 "biz op" ventures. Stay tuned for more developments.

Phone Home
Phone Home

Anyone have a phone number that Dale answers? Cell phone or home phone or his brothers phone? They wont return calls.

Cuppy's Coffee Loses Accreditation With AAFD
Cuppy's Coffee Loses Accreditation With AAFD

I noticed in the above mentioned article that Mr. Purvin states, " the door is open to communication and an honest effort to resolve the growing conflict and controversy surrounding Cuppy's Coffee." Dale Nabors will never step forward into that door. He prefers running in the opposite direction. He is a coward and spineless. The franchisee's that he is running from are actually lucky. Down the road the francisee's that he does open stores for are just putting off the inevitable road to bankruptcy and failure. Dale Nabor's leadership qualities are a joke. He hides behind several very uneducate people that he has "brainwashed" into thinking they have a future with this "sinking ship," Cuppy's Coffee. Shame on you Dale Nabors, not only for the lives you've already ruined but the others that you will bury in the very near future. Dales Nabors famous last words... Believe (my lies) And Succeed (in going broke)

Paul Steinberg
Paul Steinberg

Those following the ongoing Cuppy's saga should view the two articles published this week on BlueMauMau.org. A year and a half ago, Ryan dug up a paper trail of companies linked to this scheme. Now, information is coming to light regarding "Supreme Building Technologies" and "Modular Buildings of Monroe" and "Superior Canopy Corporation." There has been some discussion and claims that several of the previous Cuppy's executives were secretly involved in these other companies. If anyone has information, please do post it here or on BlueMauMau.

jeff
jeff

Was Cuppy's just bought by Fran-synergy? Seems like quite the merry-go-round!

KP
KP

hey, anyone know the royalty fees for having a cuppy's coffee franchise?

norman
norman

If the Paul Steinberg talking has the middle initial W., went to St. Johns Law School and has an office at 14 E 4 St, NY, NY, Ste 408, then NY State filed two tax liens against him for around $32,000 from 2002 to 2005. Go to 1 http://appsext8.dos.state.ny.us/stwarrants_public/st_search and search just Steinberg, look for Paul W. That Paul W. Steinberg tries to win cases by striking at his opponents rights to free speech.

Paul Steinberg
Paul Steinberg

No one really knows what went on with the "asset purchase". According to an interview Cuppy's lawyer gave to Janet Sparks, it appears that they paid roughly $2.5M with about 250K down and the rest as a Note, the interview is on BlueMauMau. There are a number of odd things about the transaction, and you are on to something with the IRS comment. The IRS does not do this type of thing overnight, and I believe that this transaction was likely entered into with knowledge as to what was going to happen. Hibbing & Snowden go back a long time, and it is quite possible that there was more to this transaction than meets the eye; they just didn't plan on this whole thing coming out in the media. Once it did, I suspect that put a monkey wrench into their original plans.

Ryan
Ryan

Trisha - For some reason both of your post go caught in the Akismet spam filter which is one of the out-of-the-box spam filters many blogs use. It's possible your IP address was registered by someone as 'spam' in the Akismet database, so many blogs you post at will initial hold or delete your posts.

deep throat
deep throat

payments from 20,000 to 30,000 but you have to say that you didnt get paid if you dont do it they say they will sue you also they are sending emails with file attach that have virus be careful someone inside the company says this is the cuppys computer person that is doing this

Sean
Sean

1 lb. of Kona Blend for each 100 words deleted. Sean By the way, I was referring to coffee.

Jimmy
Jimmy

I'd remove posts on my blog for $50 each ;)

Guy Pelletier
Guy Pelletier

What I want to know, is how much does it cost to remove blogs and posts? Guy

Paul Steinberg
Paul Steinberg

This is now far bigger than Cuppy's or Java Jo'z or whatever it is called these days. It is about credible reports of serious violations of state and federal law. I have already spoken to one of the regulators. I have spoken to several attorneys, and have informed one of Cuppy's outside law firms (they have ones in Texas, Florida, Virginia and New York--that alone should tell you something) as to some specific facts which have been brought to my attention. If this were just about a single company, the story would pass. But where the response of a person or corporate entity strikes at the fundamental integrity of a larger structure (such as freedom of speech or franchise regulation or the security of the Internet from attack) there is necessarily a governmental concern which is far bigger than a spat among franchisees/franchisors.

Sean
Sean

RE: Concerned's comment "...Blogging... is a dangerous tool in the wrong hands." That's for sure!

Concerned
Concerned

Blogging and web forums are like double-edged swords in that it allows 'anyone' (SIC) the possibility to share their views publicly - no matter what it is. If I state an opinion it should be viewed as "how I see reality from my perspective" and not as fact. There are always, at least, two sides to every story. So if an issue concerns me I like to weigh the facts like a good scientist or engineer. Anyone can throw out hearsay and claim it to be fact, but I want to see the smoking gun the validates their claims. This whole business with the Cuppy's badmouthing started with Ben Scoble's blog claiming he was cheated by Java Joz's out of a $30,000 deposit. But my BIG question is, does Mr. Scoble even have a contractual claim to a refund at all? Also, if you dig deeper into the issues, and ask the right people you will see that Mr. Scoble squandered that money by having Java Joz (JJ) waste a lot of time and resources doing things for him he should have done for himself, while vacillating on decisions - like getting the proper leasing, etc. Should he be held accountable for that? I would love to see the contract Scoble actually signed with Java Joz when they entered in their agreement to build a Kiosk. To me, that is the smoking gun. (NOTE: Mr. Scoble did not purchase a Franchise. JJ was not and never was in the franchising business.) If that contract says that Mr. Scoble is entitled to a full refund regardless of the time and resources Java Joz put into helping him get into business, I say Java Joz's owes him that money. NOTICE, I did not say Cuppy's because Java Joz's financial responsibilities was not grandfathered into Cuppy's purchase of JJ. Cuppy's has NOTHING to do with this spat between Mr. Scoble and Java Joz and to drag them into it is irresponsible. The whole issue has gotten out of hand by both party's and needs to be resolved in a civil matter. Cuppy's is a outstanding young company with great people, and should NOT be judged my the deeds or misdeeds of its predecessors. It is a crying shame that good people are being effected by all this slanderous, emotionally charged-up issue that basically two people should be resolving, Ben Scoble and Roy Snowden. And I will add that I personally know Mr. Snowden. He is not the tax evading monster you guys are painting him to be. I am certain that if approached civilly this can all be worked out and the letter of the contact abided to - maybe more. But if you resort to name calling and slander you will get a lot of negative, counter productive feedback. This goes back to my thoughts on Blogging. It is a dangerous tool in the wrong hands. With the global reach of the internet it is even more scary. It could be you that is the next victim of malicious Blogging propaganda and slander, so the internet community needs to be more responsible, and let the law of the land deal with those that can't control themselves. Thank you for your time.

Steve
Steve

Hello All- I'm Steve the one whom ever blog seem to link to on the Ripoff Reports. I got the shaft back in Early 2004. I filed complaint after complaint to anyone I could think of. I guess if anyone of these agencies would have taken my issue more seriously, this all might have not happened. I pretty much given up on getting any refund back , with all these blogs and upset people, there is a glimmer of hope. And at least I hope no one else should get ripped of by these guys. I thought I'd join in on the blogging and started up one too. I do find this Cuppy's to Java Jo'z connection odd,

alexander
alexander

Why did Cuppy's file business names under the Java Jo'z name? It does sound like the asset sale was a staged way to avoid paying back the franchise fees.

Mr. Blue MauMau
Mr. Blue MauMau

FranchisePundit, I enjoy reading your insights, and thank you for mentioning our franchisee community. As an ocean lover myself, I greatly appreciated your picture of a great white shark representing the blogosphere. I have a slightly different take. When I think of the franchise blogosphere, I see fish collectively assembled in a long-tail shaped school that when necessary has a lot of small sharp teeth. In the cyber ocean, there is strength for us little guys in numbers. Regards, Mr. Blue MauMau

Ryan
Ryan

You're welcome, Sean :)

Sean Kelly
Sean Kelly

Thanks for the links, Ryan, and for covering this issue. It's really shown the power of blogging in getting awareness and discussion of important issues out into the open. Without your blog, Scobleizer, Blue MauMau, FranBest.com and the others you mention, no one would have known about these victims and the scam that they fell into. Maybe it'll keep someone else from making the same mistake.

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