COLD STONE CREAMERY: Franchisee Alleges FR “Churning”

What follows is a comment left by ex-franchisee JB Montgomery who alleges he’s the victim of “Churning” at the hands of franchisor Cold Stone Creamery. In franchising, “Churning” is the practice of reselling the same location or territory over and over at a profit.
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I am a recovering Cold Stone Creamery Franchisee. It will be year next month that we closed the doors and regained our freedom.

In the past 12 months we were under contract to sell our Cold Stone Creamery to a second generation buyer. During that time I saw Cold Stone Creamery Corporate stoop to an all-time low - and have seen first hand the cruelty of “corporate churning” at the expense of those who were “supposed” business partners.

Our first buyer (yes, the first of three in a span of 6 months) put cash on the table in April and was ready to jet off to Chattanooga and Phoenix for 3 weeks of training. This buyer had small business experience in the Hotel franchise sector and had comparable communication skills as other local CS franchisees, one of which is 15 miles to the north and became an owner 12 months ago. This buyer was required to pass a “attitude profile” (FranchiZe Profile, by Dynamic Performance Systems) test before he could continue in the Cold Stone approval process. He failed the 132 question test filled with subjective, rambling and random questions. At first I was shocked! Until I realized that this was the typical Cold Stone MO - that is, what’s the latest new fangled gadget to spend money on. In reality this profile test is a slick way of discriminating against potential buyers from a cultural and racial point of view….and against franchisees eager to leave the system. And, in my opinion, a violation of Section 17, unreasonable denial clause.

Our second buyer, had cash on the table and was also ready to jet off to Cold Stone University for training. He had family Marble Slab ownership experience and had developed a close relationship with the regional Cold Stone training store in Chattanooga, who encouraged him to pursue our store. Again, he had better experience and better communication skills than existing CS franchisees … he also failed the “Attitude Profile”. We talked the area CS reps into giving him a second chance at the test. This time, with the help of my wife and our business broker, he passed by a single point. The CS Area Reps approved it and gave him the go ahead. He passed the in-store evaluation, language test, the food safety course. He was now ready for the 23-day training….we were THRILLED and thought that we would be out by the end of July. BUT…before he could registered for training he needed to have an over-the-phone interview with corporate and then receive corporate approval. In late June we were shocked to learn that he had been turned down by corporate. We appealed to the corporate Ombudsman for assistance on this situation. Her only comment was “that’s business…”. I was shocked.

Our third buyer was a local Cold Stone franchisee who owns a store 15 miles to the east of us. He did not have cash to put down and would need assistance from Corporate to get financing from one of the preferred lenders - and perhaps direct assistance from Corporate. Corporate told us that they were working with this franchisee and they should have things worked out by the end of August, which just happened to coincide with the last bit of credit to our name. In early August, a shot across the bow came from the Cold Stone director of transfers who said, “you are aware that just because he is an existing franchisee does not guarantee that he will be approved”. I knew right then and there that they would not approve him. In late August we received word that corporate would not assist the local franchisee and they would not approve him for purchasing our store. I did not understand the “about face” from their willingness to assist earlier in the month….until later.

****

We closed the doors on Monday, August 27th.

By Friday August 31st, the Cold Stone area reps had the locks changed, inventory completed and the floors clean.

The week of Sept 14th, they had a buyer of their own up and running. They netted a cool $42,000 off a “new” franchisee rather than “allowing” us to sell to one of the qualified buyers.

****

I have been keenly interested in the past year in the Quiznos and UPS law suits. One could easily substituted “Cold Stone Creamery” in either of those law suits in revealing the product costs, labor percentages, kickbacks, franchisor horrors and the non-viable business models. Yet, this “golden child” of the ice cream industry continues to go undetected in their ruthless business practices, their flawed business model and their total disregard for the profitability of the franchisee.

If you are thinking about buying a CS franchise - DON’T DO IT!!!

MAKE & TAKE GOURMET: $30K Per Month?

Despite numerous shuttered Make & Take Gourmet meal prep kitchens and rumors of franchisee contract buy-out offers and franchisee group lawsuit against the franchisor, Watertown NY franchise owner Jennifer Vail says things are great. In an interview with the Watertown Daily Times, Vail reports that she has 20 employees, several hundred regular customers and an average monthly purchase of approximately $100 per customer.

At 300 customers, that would equate to $30,000 per month, or $360,000 per year. While a respectable amount, that’s quite a bit lower than the Cicero store sales figures the Bellsos fed the press last year:

Make and Take’s Cicero location sells, on average, 3,000 meals per day, Bellso says. In December 2006, during the busy holiday season, sales increased to 6,000 meals per day, she adds.

Make and Take’s Cicero location will generate annual revenue of $1.2 million to $1.5 million, says David Bellso, Make and Take’s franchise-sales manager.

However, Vail, with owns the meal preparation business with her husband, Alan, sounds busy but upbeat:

“It’s like a 24/7 job…. I just wanted something else that would branch off into another direction. And this seemed to be a great fit. And it has been. It’s been phenomenal. I’ve been very lucky.”

“… the great thing about owning this franchise, because they give us all our recipes every month and they give us all the prep instruction and they tell us how to do the station layouts and all of that. It’s pretty easy.”

“We have 4,200 square feet here, which makes us the largest Make and Take Gourmet. It had to be in an area that’s well lit, in a safe location, because we have a lot of women that come here by themselves and we’re open at night.”

“Alan and I also decided we wanted it to be in a high-visibility location. Some of the Make and Takes are in the back of complexes and aren’t as visible. We have a great walk-in clientele, which is very, very important. We also wanted to have one that’s large enough in case we wanted to expand.”

“It’s key to get people in the door. Once we get customers in the door, then we’re golden. It’s kind of a glitch having people not really understand exactly what it’s all about. It’s the convenience. We’re all so busy anymore that most people do not want to go home and cook.”

“IN A MONTH OF BUSINESS, HOW MUCH WOULD THE AVERAGE CUSTOMER SPEND? “Probably, on average, $100.”

“WHAT’S NEXT FOR YOU? “I don’t know. Not another Make and Take right away, that’s for sure. This is time-consuming enough for me…”

WHAT DO YOU THINK? SHARE A COMMENT.

QUIZNOS SUBS: PA Franchise Owners File Lawsuit

Source:  Blue MauMau

 

A class action lawsuit against Quiznos Subs was filed on July 3 on behalf of Pennsylvania franchisees by attorney Peter J. Daley and Associates, P.C. The litigation arises from the illegal business scheme by Quiznos and its "web of affiliated entities and individuals who control and operate the Quiznos franchise system," according to the Complaint filed in the U.S. District Court.

Through the alleged scheme, Quiznos is accused of having fraudulently induced franchisees into the system and then exploited their control and economic power in order to extract exorbitant and unjustifiable payments and expenditures from them. The lawsuit states, "As a result, Defendants [Quiznos] reap grossly inflated sales and profits creating an illusion of corporate growth and business prosperity while causing substantial, permanent, irreparable financial harm to existing franchisees."

…A number of other class action lawsuits have been filed over the past few years in various states including Colorado, Illinois, New Jersey and Wisconsin, as well as a national class suit, all by lead attorney Justin Klein, Marks & Klein law firm in Red Banks, New Jersey. 

The class action Complaint explains the two primary components to Quiznos’ alleged scheme. The first claims that after the sub-sandwich chain induces franchisees into the system by misrepresenting the facts, it further takes advantage of the store operators by saturating geographic areas with more restaurants than can reasonably be supported….

The second component of the lawsuit accuses Quiznos of exploiting the overwhelming economic power it holds over its franchisees by creating a captive artificial consumer market, comprised of all of its franchisees, for products and services that it requires to start and continue a franchise business. While concealing its own relationship with its vendors, Quiznos also uses exclusive control over the franchise system, forcing franchisees to purchase unneeded products at unreasonable prices, and to accept coupons from customers for free or highly discounted products.

QUIZNOS OVERVIEW & DISCUSSION

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THE UPS STORE: Overview

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ENTREE VOUS: Broomfield, CO Franchise "Adventure" to Close

Entrée Vous, 1140 Highway 287, Broomfield, CO will close on July 31.  Our condolences go out to franchise owners Debbie and Andy Jacobs, who called their meal prep kitchen franchise "a wonderful adventure."

Source:  Daily Camera

Entrée Vous, a nationwide meal preparation franchise with several Denver-metro area locations announced this week that its Broomfield kitchen will cease operations at month’s end.

"This has been a wonderful adventure for us and we’ve enjoyed helping you put dinner on your family’s table," franchise owners Debbie and Andy Jacobs stated in an e-mail notifying customers of the pending closure.

The reasons for the closing haven’t been disclosed. Speculation includes the tough economy isn’t allowing customers the luxury of a make-and-take-style restaurant….

The Entrée Vous was concept was to make cooking convenient for those short on time, and to provide an opportunity to socialize while preparing a meal.

The trend of easy meal preparation has become popular, with more than 1,400 make-and-take outlets nationwide. The restaurants generally offer dishes, either prepared in the store or available for pick-up, that serve a four- to six-member family.

Entrée Vous’ main easy meal preparation rival within Broomfield is Supper Solutions, 1480 W. Midway Blvd.

Meal prep kitchens are closing nationwide faster than they opened, yet the media reports "The trend of easy meal preparation has become popular, with more than 1,400 make-and-take outlets nationwide…"

Don’t believe what you read in the papers…

Tip of the hat:  Joel Libava, The Franchise King

 

WHAT DO YOU THINK?  YOUR COMMENTS WELCOME.

BROOKE INSURANCE: Nasdaq Threatens to Delist Brooke

Source: Kansas City Star

Brooke Corp. said Monday that it had been warned by Nasdaq that its stock might be delisted if the company did not raise its share prices to at least $1 by Jan. 12.

Shares in the Overland Park insurance agency franchiser and financial services company closed at 52 cents a share, down 2 cents, before Brooke disclosed the warning in a regulatory filing. Brooke was trading above $13 a share a year ago.

Brooke and its two largest publicly held subsidiaries have been shutting down its once high-flying franchising operations and cutting its work force since January to slash expenses while the enterprise sorts out complex credit arrangements with banks and other lenders.

Robert Orr, Brooke chairman, said in a statement Monday that he expected the company’s share price to meet Nasdaq’s listing standards and close above $1 for 10 consecutive sessions by the January deadline.

“The company is focused on generating additional revenues from our asset base while also considering all strategic operations regarding those assets,” the statement said.

In another cost-cutting move, Brooke Capital Corp., the company’s franchising subsidiary, disclosed it was leaving leased space at the companies’ one-time corporate headquarters at 10950 Grandview in Corporate Woods and moving to a smaller, company-owned building at 8500 College Blvd.

The company also said Monday that it expects to report profits in the third quarter.

A return to profits would follow a difficult second quarter in which Brooke Capital significantly cut costs to redirect its operations.

The company runs the insurance agency franchising operations of Brooke Corp., which owns 81 percent of Brooke Capital’s publicly traded shares.

Brooke Capital said it spent the second quarter gearing down from a growing franchise seller to a “no-growth insurance agency franchisor that is positioned to survive the credit crunch.”

It continues to help lenders seek buyers for underperforming franchisees. After those changes, it will still provide basic franchisor services — commission allocations, document management and advertising assistance — to its existing 875 franchisees.

Carl Baranowski, general counsel of Brooke Corp., said Brooke Capital still sells franchises but far fewer than previously, which significantly reduces franchise fee income. The existing franchises still produce revenues for Brooke Capital.

Brooke Capital had posted $2.9 million in net losses during the first quarter, which added to losses at Brooke Corp.

Both companies, and a related third credit company called Aleritas Capital Corp., plan to report second-quarter results on Aug. 11. Brooke Corp. owns 62 percent of Aleritas’ publicly traded shares.

Brooke Capital expects to report a profit in the third quarter.

Brooke Capital stock dropped 50 cents to $1.40, its lowest level in 52 weeks. Aleritas shares lost 11 cents, closing at 33 cents.

CORK & OLIVE: The Probst Method of Guilt Avoidance

A key skill for CEOs of imploded franchise companies is denial, accompanied by a ninja-like avoidance of any admission of responsibility. Unsurprisingly, that same trait usually helped them get in that situation in the first place.

Cork & Olive’s Michael Probst demonstrated his prowess in another hardhitting interview with Tampa Bay Online: Cork & Olive Owner Hopes To Reopen Stores Here are a few of the implicit questions asked, and the answers given.

Q. Why is the Northwoods Cork & Olive store closed?
A. “Repairs”
This lie is a non-issue for both Probst and the writer, who refers to the dishonesty of the “Closed for repairs” sign as a “euphemism.”

Q. Why did Cork & Olive parent Probst’s Estate Wine Group file for chapter 11 bankruptcy protection?
A. “a key investor backed out of a deal”
Well done. It was the fault of a “key investor.” No one will point out that if he did not invest, he was not an investor. And if he was not an investor, how was he “key”?

Q. Did Probst leave franchisees high and dry?
A. Not at all. He “set them free.”
Brilliant! Bravo! Franchisees each paid you $60,000 franchise fees only to be uncaged and set free like little songbirds!

Q. Will the store open
A. Shortly. “We are waiting on an investment group to step in and take over”
Not the masterful subtlety. A “key” investor group would have been overkill. He doesn’t say there is one, just that they’re waiting. Of course, the reason he originally gave for the investor backing out was his unwillingness to let them “take over.” But that was weeks ago.

Q. Why did the Cork & Olive franchise company fail?
A. “‘I really think that, looking back, it grew too fast,’ Probst said.”
That darn company! How many times did he tell it to slow down? But you know companies… got a minds of their own. Spending like drunken vintners. Running up millions in debt.

It’s a good thing for Michael Probst set the franchisees free and got out of there when he did! Think of what that darn Cork & Olive might have done to his good name!

WEEKENDERS: Email from Lia to Coordinators / Managers

Here’s the longwinded email sent out to managers / coordinators of Weekenders regarding their abrupt closing. To some, it’s the smoking gun that indicates she knew darn well that they’d be closing, and things weren’t as sudden as she otherwise claimed:

Dear Managers,

Thank you for taking the time to speak with me, I appreciate and value your time.
The purpose of our call today is to help you understand what happened at Weekenders and to tell you what I am up to, because as I have always said when I tell my story “When God closes a door closes, she opens a window.” And I am here today to tell you about what could be a huge window of opportunity for you. Before I get into the details, I want to tell you once again, what an honour and privilege it has been for me for the past 15 years to allow me to be your leader. You are an amazing group of women who I respect, admire and believe in.

So let’s start with what happened at Weekenders. As you know Weekenders has been struggling for some time and was on the brink of bankruptcy when Jan and Emilio took it over. Jan and Emilio invested millions of personal money and the money of investors to keep it going. Unfortunately, the sales just weren’t there and we fell further and further behind in paying our suppliers, everyone from the manufacturers, to the button people, to Canada post and our customs brokers. The load was so huge that on Monday June 9th they decided to cease operations as they prepare to declare bankruptcy in the next few weeks.

All of us have lost money all staff world wide, including myself, and the other heads of countries, our suppliers, the owners, the investors and of course you, our Coordinators and our Customers.

Due to the way I was told about the closure and since I was not in the office at the time the decision was made, the communication of the closure was done extremely poorly.

For example, I first understood we were bankrupt and then they changed the term to “cease operations”. I was under the understanding that all orders up to and including June 9 were picked and shipped, and in actual fact, this is true….what I was not told was that the boxes are in limbo with shipping companies they had not paid and with customs brokers they had not paid, the goods were stopped in transit.

I gave you the most accurate information I had at the time. I wanted to communicate to you quickly before my Weekenders e-mail was shut down, which it has been since Weekenders ceased operations.

All of us were treated poorly; I like to think not maliciously or with intent, but by lack of experience and lack of true understanding of our business. I am trying very hard and I encourage you also not to take what happened personally and to try to put this behind you.
treated
That is what I am doing, I am forever grateful for what Bob, George, Jan and Emilio have done for us as an organization and as individuals, we had some great times, made lots of money, spent lots of money and now it is time for new beginnings.

From June the 9 to June 13 I had my own little personal breakdown. (Yes I am human) Heartbroken does adequately describe how I felt, yes I was out of commission for 5 days and my darling husband whisked me away for a romantic de-stress weekend in PEI…lobster cures everything.

When I got back from PEI on Monday I had not one but two amazing world class companies wanting me to create a brand new direct sales company in fashion for them.

There is one opportunity that I am very excited about and I have been in negotiations with this company all week. We are well past the initial phase and the investors in this company want to proceed and a preliminary plan has been submitted to the board of Directors for approval.

The founding of this new company is very close to being final and here are some of the highlights of what this company will offer you. This company will have no association with any of the former Weekenders owners or founders; the opportunity is with totally different people who currently have a multi billion dollar high fashion manufacturing operation.

This is a multi billion dollar fashion manufacturer with the financial stability to make this new venture successful, with over 30 years in business. This company currently exports to the UK, Europe, Canada and Australia for major retailers.

They own 10 factories producing garments, for leading companies such as Anne Klein, Banana Republic, Polo, Anne Taylor and Talbot’s, just to name a few. They also produce jewelry, handbags and accessories. They now want to get into the direct sales business and have chosen us to do that.

While our marketing plan is in the approval process here is what I can tell you now and I look forward to presenting our final marketing plan in the next two weeks.

Highlights:

Here are just some of the highlights of what we will be offering our Fashion Consultants, subject to finalization and approval by the Board of Directors.:

The Fall/Winter collection is small only 15 garments in four colours, this is just the start up collection to get us up and running. The basic concept of mix and match wardrobing stays intact.

The sizes will range from extra small to extra large; easy to invest, easy to carry and easy to show.

The collection includes:

8 basic garments that mix and match in four colours of VS knit
4 high fashion garments that mix with the basics
3 “active wear” garments Jacket, top and pant

This offers a seamless transition of your existing customer base to the new company.

The fall shows that are already booked would hold.

Weekenders Sales Manager genealogy stays intact offering a seamless transition with your unit.

The marketing plan is still being approved however, I want to assure you we are very aware of what other companies are offering and we will be just as competitive.

We are also aware of the issues that de-motivated our former sales force and we want to address those issues as follows:

Company pays hostess credits.

No Visa/Master card merchant fees.

All orders will be direct ship to the customer via Canada Post (customer pays shipping fee) from our warehouse in Toronto.

No deliveries or exchanges handled by the Fashion Consultant

Fast Start includes free product for sales and sponsoring

Kits go on sale in July with a deep discount for former Weekenders Sales Managers. (upon sign up)

Our desire is to have Managers kits in your hands mid August.

Mini fashion previews in August in the major cities.

We understand how difficult it has been these past weeks not being able to honour your client’s orders. Our new company will offer any former Weekenders customer who did not get her order a 75% discount on her first item purchased from our new Fall/Winter collection.

I know you have lots of questions and I will be happy to call you directly over the next few days. Please e-mail me at liakeeping@live.com I will be returning your calls starting on Monday June 23.

I would love the opportunity to start something fresh and new and totally ground floor with you. I know the potential this company has and the opportunity we have ahead of us and I encourage you to wait a few weeks for us to get you the final details. This our opportunity to be pioneers all over again, because Canada is their first country of operation.

I am so excited!! This is just the beginning! We are already investigating the eco-basic kit concept with the organic cotton and bamboo knit fabric, which I know you love.

This company approached me directly because, ladies, they have watched our track record as a team and we are the best there is. The investors want our team to stay together as much as possible, and I know some will and some won’t and that’s ok too. I wish each and every one of you nothing but health, happiness and prosperity, no matter what it is you decide to do in the future.

I want to sincerely thank each and every one of you for your kindness, your love and support over the past 10 days and the past 15 years as your President.

I appreciate what you have gone through and are going through, we went through it together as always. I want to sincerely thank you for being on our call today and I will be forever grateful and appreciative of each and every one of you. I admire you, for your strength, your courage, your empathy and your belief in not only me but also the belief you have in yourselves and each other.
“Today is the tomorrow we worried about yesterday.”

I always wanted to give you a future to live into and I believe this is it.
With love and respect,

WHAT DO YOU THINK? SHARE A COMMENT.

WEEKENDERS: Dumps Distributors Without Pay or Warning

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