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Quiznos Case Proceeds To Trial

Death of a toasted sandwich salesman Quiznos had sought to strip eight franchisees of their franchises after a franchisee gripe site posted the suicide note of a Quiznos franchisee on its website. The note blamed the Quiznos Corporation for ruining his business and his life. The franchisee, Bhupinder “Bob” Baber, was found dead last November in the bathroom of a Quiznos restaurant in Whittier, California, after pumping three rounds from a .380 caliber handgun into his own chest. …. Another group of angry franchisees, the Toasted Subs Franchisee Association (TSFA), took up his cause, and posted his suicide note on its website to raise money for the Baber family. Quiznos quickly responded by yanking the franchises of the eight directors of the TSFA, and the TSFA responded by filing for an injunction in federal court in Denver seeking to hold onto their franchises until the defamation allegations filed by Quiznos could be litigated.

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The AAFD Awards Cuppy’s Coffee Franchise with Contract Accreditation

The American Association of Franchisees and Dealers (AAFD) announced today that Cuppy’s Coffee & More, Inc. (Cuppy’s) has been added to the AAFD’s roster of companies earning AAFD Accredited Contract status. This special distinction is available to recognize new franchise systems, or new ownership and management teams, whose franchise agreements substantially conform to the AAFD Fair Franchising Standards, but that lack operating history to evaluate franchise relationships. Cuppy’s is a specialty coffee drive thru franchise business that offers coffee, lattes, espresso and smoothie drinks. Cuppy’s is a new brand that is arising from the ashes of a much troubled brand known as Java Jo’z. As part of its response to rebuff suggestions that its new ownership is still connected to Java Jo’z problems, Cuppy’s management has committed itself to a collaborative franchise culture that adopts high standards of mutual respect between franchisor and franchisees. Cuppy’s franchise agreement earned nearly perfect score of 99.5% conformity with the AAFD Fair Franchising Standards, the highest grade ever achieved. Cuppy’s Coffee & More, Inc. is a Texas corporation wholly owned by Mr. Doug Hibbing and is headquartered in Fort Walton Beach, Florida. Medina Enterprises, Inc., an affiliated company which is owned by Mr. Robert Morgan, is the contractor for the system’s restaurants and other units, as well as a provider of office and staffing services to Cuppy’s. In May 2006, Medina acquired some of the Java Jo’z assets, including the Java Jo’z brand, which was later assigned to Cuppy’s. The Java Jo’z brand was confronted with major issues regarding Trademark ownership, allegations of unfulfilled contracts and personal problems of its prior owner. Cuppy’s new management team assessed that the myriad of inherited problems required a radical approach to change. That approach involved re-branding, a fresh start on training and support, and most importantly …

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Can a Full Time Mom Effectively Run a Franchise?

This one apparently can: Party after party This mom and Picture This Party franchisee brings her twins to the parties see organizes. Her business is just party after party — children’s parties, to be exact. The Zion woman is owner of Picture This Party Inc. and a franchisee of Noah’s Ark Animal Workshop, which teaches children how to stuff their favorite animals at parties. …. “I don’t have to leave the house unless I’ve a party, and then I can take the twins with me,” she said. As owner of Picture This Party, she hosts birthday parties and other happy occasions for children. The parties usually have a theme, such as a dragon, a mermaid, Batman or a pirate, for which she furnishes costumes, balloons and cakes. She also snaps pictures at parties.

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Law Franchise for Sale!

AmeriVestors, Inc. announced yesterday that it has commenced the preparation of legal documents to be filed with State and Federal Government agencies in order to offer franchise opportunities for Justice by the People . Upon filing of the UFOC, the company will file notice and fees with the Texas Secretary of State, so that it may commence the sale of franchise opportunities in the State of Texas. Justice by the People, Inc., a wholly owned subsidiary of AmeriVestors, Inc., serves consumers that wish to save hundreds, even thousands of dollars, in their simple, uncontested legal matters. The US legal industry is a $184 billion sector. The company offers approximately 80 legal documents for uncontested legal issues such as uncontested divorce, living trusts, incorporation, etc. The company has designed a model to create a national franchise chain providing high quality, accurate and affordable legal document preparation services for simple, uncontested legal matters. Justice by the People does not offer legal advice in the preparation of its clients’ uncontested legal documents. Now maybe there will be some “copy-cat” law franchises coming out soon. Can you submit some names? To start things off how about: “McMalpractice” or “Lawless & Lawless”

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Satisfaction Guaranteed for Franchisees?

Here is a unique selling idea from Cex, a retail technology franchisors in the UK – Get some of your investment capital back if not satisfied within 12 months. It’s probably difficult to meet the “conditions” for this partial reimbursement and cancellation of the franchise agreement, but at least the idea of giving a franchisee an ability cancel with a small percentage of your money back within 12 months is a step in the right direction. The devil is always in the details, but by the time you get approval on your location, build out and are ready to operate, I would imagine most of your 12 months from signing the franchise agreement are over. CeX Franchise UK – ‘Satisfaction Guaranteed’ source: The Franchise Magazine So confident is CeX of its franchise opportunity that, for a limited period, the company is offering a ‘Buy Back Guarantee’ for new franchisees. Subject to conditions, CeX will refund stock, shop build and fit costs and take over the store management and running costs should the franchise not meet the franchisees’ expectations. In the fast and ever developing world of high-end electronic entertainment, CeX provides a valuable service to technology enthusiasts wishing to stay ahead of the game. The ongoing advancements of mobile phones, MP3 players, digital cameras, computers and games consoles means models are quickly updated and replaced. The CeX business model allows customers to buy-and-sell part-exchange quality second-hand technology and entertainment products at attractive prices and with a 12-month warranty – CeX is the one-stop-shop for gadget lovers.

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Top 10 of 2007

Entrepreneur’s Franchise 500’s Best Franchise Businesses — Franchise 500 Top 10 Entrepreneur managezine’s best of the best. Subway Dunkin’ Donuts Jackson Hewitt Tax Service 7-Eleven (the recently bought out the White Hen chain in Illinois) UPS Store Domino’s Jiffy Lube Sonic Drive In Restaurants McDonald’s Papa John’s Pizza link to the the remaining 500. Here are a few I noticed in particular (some for good, some for bad reasons): 384. Nature’s Way Cafe: Healthy foods, salads, wraps, soups, smoothies 325. Cash Plus Inc. : Check cashing & related services 312. Rent-A-Wreck: Auto rentals & leasing 298. Steak n Shake: Steakburgers, fries, milkshakes 273. Nestle Toll House Cafe by Chip: Cookies, baked goods, coffee, ice cream 252. HomeVestors of America Inc. : Home buying, repair & selling system 225. It’s Just Lunch Int’l. LLC: Dating service 212. Pita Pit Inc.: Pita sandwiches 151. Super Suppers: Do-it-yourself home meal preparation 105. Bark Busters Home Dog Training: In-home dog training 87. Qdoba Mexican Grill :Fast-casual Mexican food 75. CiCi’s Pizza : All-you-can-eat pizza buffet 72. Sport Clips: Men’s sports-themed hair salon 58. Jimmy John’s Gourmet Sandwich Shops: Gourmet sandwiches 56. Edible Arrangements: Floral-like designs from sculpted fresh fruit Franchise 500 Criteria (important): All companies, regardless of size, are judged by the same criteria: objective, quantifiable measures of a franchise operation. The most important factors include financial strength and stability, growth rate and size of the system. We also consider the number of years in business and length of time franchising, startup costs, litigation, percentage of terminations and whether the company provides financing. Financial data is audited by an independent CPA. We do not measure subjective elements such as franchisee satisfaction or management style, since these are judgments only you can make based on your own needs and experiences. The objective factors are …

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More Franchise Disclosure is a Good Thing, but Waiting another 30 years is Not.

In its first major overhaul of its franchising regulations in nearly 30 years, the Federal Trade Commission is finally calling for greater disclosure by franchisors. The FTC aims to insure that prospective franchisees “avoid harm” when considering a franchised business, the FTC said in publishing the revisions, which will become mandatory next year. Under the revised franchise rule, confidentiality agreements preventing current or former franchisees from talking about their experiences would have to be disclosed. Regulators often recommend that would-be franchisees contact former or current franchisees to get their take on a business. The FTC also wants franchisors to provide information about franchisee associations operating under a trademark, so prospective franchisees can learn more about the pros and cons of a system. Some examples of franchisee associations are: North American Association of Subway Franchisees NAASF, and Dunkin Donuts Independent Franchise Owners DDIFO. Franchisors will now have to reveal lawsuits they brought against their franchisees under the revisions; the FTC’s original rule only required that franchisors disclose litigation filed by franchisees. “The nature of the relations between the seller and the purchaser, as reflected in litigation, is of central importance” in assessing a major investment such as a franchise, the commission concluded. Other requirements include disclosure of exclusive territory. Often franchisees think they won’t have to worry about another franchise opening up down the street, only to find that they’re not protected. “Taken together, each of these amended disclosures … will enable prospective franchisees to better assess the quality of the franchise relationship, and their likely success as franchisees,” the FTC said. However, I am disappointed that the revised rule fails to require disclosure of a franchise’s financial performance. I think it’s very important to the future success of franchising that more franchisors make financial representations and I believe it …

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Miscellaneous Franchise News

zpizza, a California Pizza Kitchen-light concept, has store sales average of $550,000. Lenny’s Subs is up to 700 franchises granted, still trailing Jimmy John’s grants of 1,000+ Meet the new U.K. Master Franchisee of Auntie Anne’s Panera Bread’s new design (Nice!):

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10 Common Mistakes of Prospective Franchisees

Another oldie but goodie article for franchisees from Inc in 2000, abbreviated below: 1. Not reading, understanding or asking questions about the disclosure document. As you read the document [UFOC], keep notes on those areas that are confusing and unclear. While you may want your attorney’s opinion, give the franchisor the benefit of the doubt and first ask its representatives to explain their understanding. Then check the remainder of your concerns with your attorney…. One of the most common problems between new franchisees and the franchisor is a misunderstanding as to responsibilities. Among other things, this can cause problems in meeting the schedule for Grand Opening dates. 2. Not understanding or having an inaccurate or incomplete interpretation of the franchise agreement and other legal documents to be signed. You and your attorney should carefully review the franchise agreement, the lease or real estate agreements, and any other contracts. First, make a list of questions to go over with your attorney, then present your concerns to the franchisor. Get the franchisor’s clarifications in writing. 3. Not seeking sound legal advice. Locate and retain an attorney, preferably one experienced in franchising. 4. Not verifying oral representations of the franchisor. You may want to tape-record all your meetings with the franchisor. If you ask permission to do so, it is generally admissible in court if the need arises later. It also lets the company representatives know that you are tracking their words…Send a registered letter to the franchisor and a copy to the representatives memorializing your notes with a request for their response to any items you want clarified. 5. Not contacting enough current franchisees. …find out whether the franchisor has introduced you to specific franchisees compensated for their help to solicit new franchisees. Ask them….has the franchisor held up its end …

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Lost the Game of Chicken

I lived in South Florida for about a year and regularly ate at the Chicken Kitchen (background article). The restaurant flame roasts chicken on a very large open grille for all guests to see, and then chops up the whole chickens for plates, bowls or burritos. The bowls were quite healthy, filling and reasonably priced. Chicken Kitchen was recently involved in a nail-biter law suit. One of its franchisees caused a serious auto accident. Who was liable? Only the driver and franchisee, or also the franchisor? Let’s do this law school style (all you lawyers know what I mean): Plaintiff (P): Joshua S, motorcycle rider hit; represented by lead attorney Ervin A. Gonzalez with assistance from Deborah Gander. Defendant (D): Chicken Kitchen USA LLC; represented by Frank Alloca and Bill Davis of the law firm Buchanan Ingersoll & Rooney in Miami. Facts: An employee of D’s franchisee was driving to make food deliveries for its restaurant. P was driving down the street in his motorcycle with friends. The franchisee’s driver hit P, causing severe neurological damage and the loss of his right arm. P’s Claim: The Miami franchisee was an independent contractor, and it was therefore not responsible for any of the franchisee’s actions and omissions. D’s Claim: Its franchisee was an independent contractor and therefore was not responsible for their acts and omissions Issue: Is a franchisor legally responsible for the actions of its franchisee’s employee when the employee crashes a stop sign and causes bodily injury? Holding: Yes. Reasoning: Chicken Kitchen USA is legally responsible for the acts and omissions of its franchisee because it controlled or had the right to control the day to day business activities of its franchisee pursuant to its franchise agreement and operating manual. The jury subsequently award Joshua S $2 million. I’m not …

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Winner of Coffee Taste Test

You are not going to believe this… Consumer Reports conducted a coffee taste test, and the winner was [drum roll please]….Cuppy’s Coffee!!!…..OK, I kid. The winner was McDonald’s, who beat Dunkin’ Donuts, Burger King and Starbucks (I’m sure Starbucks loves being lumped into that group). McDonald’s coffee “beat the rest,” according to Consumer Reports. It was “decent and moderately strong. Although it lacked the subtle top notes needed to make it rise and shine, it had no flaws.” I agree.  I like the new protruding sipper lids. As for Starbucks, its coffee “was strong, but burnt and bitter enough to make your eyes water instead of open.” I somewhat agree. I’m a big fan of coffee (with cream please). But, a friend of mine ruined my coffee drinking experience with one statement. He said “coffee looks and tastes like muddy water”. Now, when I drink my daily coffee with cream, I look into the cup and damn it, it looks (and sorta tastes) like muddy water! – – – – On a different note, do you want to know what investment bankers and M&A/LBO guys think about when they look at franchisors? They often look at breakup value and leveraging assets (primarily real estate of their company-owned stores) on the balance sheet.

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Independent Franchisee Associations

BusinessWeek documented Bhupinder “Bob” Baber founding of the Quiznos Subs Franchise Assn and its litigation soap opera.  The independent franchisee associations of Diary Queen, Subway, and few others are also mentioned along with their individual legal battles with the franchisors.  For example, Dairy Queen franchisees litigated over the new DQ Grill ‘n’ Chill concept, and Subway franchisees litigated over a potential loss of influence over an advertising fund.   Toasted Subs Franchisee Assn members pay $50 per store per year for membership – well worth it in my opinion.

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Domain Names that include Franchisor’s Name – OK?

Imagine this – You are a Subway franchisee and you are believe that you are being cheated by the franchisor over payments relating to the transfer of leases and equipment costs. So you set up a web site, SubwayUncovered.com to vent your frustration and tell the world of your experience. Subway, of course, will will try to protect its brand through the legal system. In this case, Subway is claiming trademark infringement from using the Subway name in a domain name. Trademark infringement complaints in these cases usually involve the claim that there is a strong likelihood of confusion in the reader’s mind that this may indeed be an official Subway property, and that confusion will dilute the brand’s goodwill. The final arbiter of domain names is usually the World Intellectual Property Organisation (WIPO), and the organization hasbeen permitting the use of trademarks in domain names when the site comments on the company. This Subway dispute happens to be taking place in the UK but the concepts are relevant in the US. The operator of PayPalSucks.com has some great advice for those of you interested in this topic. It gives good advice on how to setup a protectable “complaint” site with the company’s name in the domain, and it illustrates the point with the actual letters from the attorneys on both sides of the PayPalSucks.com dispute (which he won).

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

While 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 …

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Pizza Inn Soap Opera

Pizza Inn is ~400-unit buffet, delivery, carryout, sometimes-drive thru pizza chain in the soutwestern United States with a drama filled past few years that would make some soap opera’s jealous. In 2002, the then-CEO Rogers of Pizza Inn borrowed about $2 million from the company to buy company stock. The stock sank and Rogers couldn’t pay back the company’s cash loan. Rogers was fired as CEO and Pizza Inn wrote off the debt and moved Parker, then President, to CEO. Shortly thereafter, ex-CEO Rogers sold his 27% stake in Pizza Inn to a private investment firm escaping with a tidy profit. With the private investment firm holding a controlling interest, the current executives sought to protect their jobs by writing employment agreements with Pizza Inn. The employment agreements provide that if the four executives left for “good reason” or were removed from their posts, they would receive payouts totaling $7.4 million (Parker would have pocketed $5.4 million, Olgreen $630,000, Clark $605,000 and Preator $597,000), more than twice Pizza Inn’s 2003 profit of $3.1 million, which would have surely bankrupted the company. Eventually the private investment firm got their wish and the shareholders elected new candidates to the board of directors. Parker, the CEO with the parachute employment agreement, resigned and claimed this trigger the parachute and the company owed $5.4 million (he sold 98,000 shares a few days before). He eventually won a settlement of $2.8 million. Pizza Inn even sued its former legal counsel for its role in advising the company on the huge severance packages (the lawyers were supposed to work for the best interest of the company, not the executives). In the meantime, revenues of the franchisor fell due to lower franchisee sales which resulted in the franchisor suffering less royalties and less revenue from the …

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Stone Cold Sales

Telling nugget of information in this article about Stone Cold Creamery: So far per store sales at its 12 international stores in the Pacific Rim are running at about $1 million annually, about three times higher than at U.S. stores. (In the U.S., stores have two to three workers on a weeknight shifts and five to seven on weekend nights). Pulling in $300,000-$400,000 in gross sales per store is below what most franchisees would consider a fair return on investment. LABOR COSTS WEEKDAYS:12 hours day x 360 days per year x 3 workers x $10/hour average $130,000 WEEKEND EXTRA:5 hours day x 150 days per year x 3 workers x $10/hour average $22,500 TOTAL: $152,500 If labor costs are 30% of your overall costs, this infers that your costs are about 3.33 x $152,500 = $507,825 That seems extraordinarily high but its hard to be more accurate without more data. —- Discussions on Stone Cold Creamery in the discussion forum

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