How Franchisors Should – And Shouldn’t – Respond to Internet Criticism

How Franchisors Should – And Shouldn’t – Respond to Internet Criticism by Sean Kelly, UnhappyFranchisee.Com

No company offering franchise opportunities enjoys having to publicly defend the image that they’ve carefully crafted through their marketing and public relations efforts.

No franchise company wants to air or discuss its dirty laundry in plain sight of customers, employees, shareholders, franchisees and prospective franchisees.

But now, thanks to the Internet, blogs like UnhappyFranchisee.Com and BlueMauMau.com, and social media sites like Facebook and Twitter, public discussion and scrutiny of franchise opportunities is a fact of life… and it’s not going away.

Here’s the story of two franchisors of fast-casual cafes that reacted very differently to similar complaints against them.

The first company reacted with anger, threats and legal action.

The second company reacted by taking the complaints seriously, by publicly addressing factual errors, and by acknowledging and taking steps to correct its shortcomings.

In the end, the way the franchisors chose to react to criticism will have a greater impact on their public images and ability to grow than either the original criticism or their well-crafted marketing/PR personas.

Guess which company is posting steady improvements and growth, and which is stalled out and attracting increasingly bad press?

Camille’s Sidewalk Café: Old School Bullying Backfires

In July, 2012 UnhappyFranchisee.Com posted that, according to a Small Business Administration report, Beautiful Brands International (BBI)’s Camille’s Sidewalk Café had a 58% SBA franchise loan default rate.

In the post CAMILLE’S SIDEWALK CAFE Franchise Complaints, we also published that, according to the company’s own disclosure document, the Camille’s U.S. franchise network has shrunk 60% since 2008.

The post attracted an outpouring of comments from a number of former Camille’s franchisees, who claimed that Camille’s and BBI CEO David Rutkauskas had misrepresented the opportunity, had failed to provide the necessary franchisee support, and was indifferent to whether they succeeded or failed once the initial check cleared.

Camille’s franchisees reported having lost as much as a million dollars, and many recounted the personal financial struggles, including bankruptcy, they endured as a result of investing in the Camille’s franchise.

UnhappyFranchisee.Com contacted David Rutkauskas, CEO of Beautiful Brands International, and offered to publish his response, clarification, or rebuttal to the allegations.  We told Mr. Rutkauskas that if there were merit to some of criticism, that we would be happy to report what steps he and Beautiful Brands have taken or were taking to address and correct these problems.

Instead of responding to numerous offers to join the conversation, David Rutkauskas had his attorney send threatening letters to the former franchisees who had shared their experiences and posted comments under their real names.

UnhappyFranchisee.Com did not take down the comments.  We once again offered Mr. Rutkauskas a chance to address the criticism.

Beautiful Brands then filed a lawsuit against me (then later dismissed it) for expressing my opinion on another website.

In subsequent interviews, David Rutkauskas tried to maintain the success-story façade he had created for his chain, and, when confronted with the unavoidable facts, he blamed the franchisees themselves, he blamed the economy, he blamed partners for backing out of deals, he blamed misrepresentations on writers printing “off-the-record” comments, and he blamed UnhappyFranchisee.Com for focusing on the 70+ Camille’s franchisees that failed instead of the 28 or so that have survived.

In frustration at not being able to control the story, David Rutkauskas posted dozens of fiery personal Twitter attacks on me that included vulgarities, profanity, threats, homophobic (though I’m not gay) and anti-semitic (though I’m not Jewish) insults and invitations to come to Tulsa to fight him (“settle this like men”).

Instead of expressing concern for the plight of the franchisees who failed, instead of taking some responsibility or at least addressing the concerns that were raised, Beautiful Brands and David Rutkauskas’ responded in such a way that reinforced the franchisees’ claims that BBI is indifferent to their struggles, and will use bullying, threats and intimidation to hide their shortcomings.

Tropical Smoothie Café:  Transparency, Concern & Action

Also in July, 2012 UnhappyFranchisee.Com posted that, according to a Small Business Administration report, Tropical Smoothie Cafe had a 23.58% SBA franchise loan default rate.

In the post TROPICAL SMOOTHIE CAFE Franchise Complaints, we also that the 300+ unit chain appeared to have a termination/reaquisition rate of about 18%.

While the Tropical Smoothie Café numbers were not nearly as disturbing as those of Camille’s Sidewalk Café, and while their post did not attract negative comments from franchisees, TSC did not attack us, sue us, or insult us on Twitter.

In contrast to Rutkauskas and BBI, Tropical Smoothie Cafe, LLC VP, Franchise Development Charles L. Watson sent us a report that indicated that they were aware of the problems, and had taken serious steps to reduce their franchise failures.

TSC had already hired franchise research firm FranData to do an analysis of their SBA loan default rate, and to assess the effectiveness of measures they had previously taken to reduce their franchise failure rates.

FranData reported that the SBA had overstated the TSC default rate, which is actually 15.54% (not 23.58%, as previously reported).

Furthermore, FranData reported that measures taken by Tropical Smoothie Café, including the raising of franchisee net worth requirements  and adjustments in site selection criteria, had resulted in a reduction of franchise failures every year since 2007.

Even though the SBA loan failure rate of Tropical Smoothie Café is lower than the average for similar franchises (according to FranData), Watson told us they consider it still too high, and that the company “is working hard to bring it down through continued focus on franchisee profitability and business practices.”

Additionally, Mr. Watson reported a number of systemwide improvements, including:

• The addition of protected territories for franchisees,
• A positive ownership change and improving financials,
• The hiring of additional experienced franchise professionals to help support franchisees and build the TSC brand,
• Steadily increasing Average Unit Volume (AUV) which is now over $500,000.

Rather than threatening us with lawsuits  and insults, Tropical Smoothie’s Charles Watson wrote to UnhappyFranchisee.Com:  “I thank you for your efforts on behalf of prospective franchisees, we use your site to help guide us on what we need to fix / alter / do better with our system – you are providing some great free consulting, for prospective franchisees and franchisors!”

Why Internet Criticism is Good for Good Franchisors… And Franchising

Here’s the difference between good franchisors and bad franchisors when it comes to franchise marketing and franchisee recruitment:

Bad franchisors are on a hunt for the naïve, the trusting, and the inexperienced.

Bad franchisors want prospective franchisees who believe that franchising will give them unlimited freedom and the chance to be their own boss, to call their own shots, to control their destiny.

Bad franchisors want prospective franchisees who believe the bogus statistics that 95% of all franchises are successful, and that the few who failed did so because they didn’t follow the system, or they killed the Success Fairy by asking too many questions and thinking negative thoughts.

Good franchisors want smarter franchisees who have done their homework and have realistic expectations.

Good franchisors want franchisees who understand that every new business venture comes with risk, whether its franchised or independent.

Good franchisors want franchisees who understand that their franchise is not a magic, guaranteed money-machine, and that they will provide the tools but the franchisee must build the business, that the franchisee’s success will depend not only on the brand, the system, and the franchisee’s hard work, but also external factors, such as location, market and competition, that may be out of their control.

Most of all, good franchisors want franchisees who aren’t looking for some mythical perfect franchise system or “hot new concept,” but are looking for an organization that is dedicated to supporting its franchisees, and growing through mutual success with their franchisees.

The truth is there ARE no perfect, complaint-free franchise companies and there ARE no magical short-cuts to small-business success.

Good franchise companies shouldn’t fear online criticism.

As long as they are earnestly working to improve their franchise system and support their franchisees, they should be transparent about the challenges they are facing, and share the steps they are taking to overcome them.

They might lose some franchise prospects who are searching for the magic carpet to guaranteed, effortless success, but they will gain those who have realistic expectations, who know what they are getting into and who are up for the fight.

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TAGS: Beautiful Brands, Camille’s Sidewalk Cafe, Tropical Smoothie Cafe, David Rutkauskas, Internet criticism, online criticism, online attacks, franchise public relations, franchise criticism, franchise marketing

BEAUTIFUL BRANDS: QSR Magazine Pulls BBI Articles

Responding to an UnhappyFranchisee.Com Media Alert for Beautiful Brands International (BBI), QSR magazine has taken more than a dozen news stories offline.

It’s not clear at this time whether the stories are being reviewed and/or edited, or whether they have been removed permanently.

The media alert issued by UnhappyFranchisee.Com was prompted by our concern that numerous potentially incorrect and/or misleading claims regarding BBI had been submitted via press release to media outlets, which had then been published by respected business and restaurant industry publications.

David Rutkauskas, CEO of Beautiful Brands International, claims his representations to the press are accurate:  BEAUTIFUL BRANDS’ David Rutkauskas Defends BBI’s PR Claims

 

Group Publisher Greg Sanders wrote to UnhappyFranchisee.Com:

Thank you for expressing your viewpoint.

It is the policy of QSR magazine to ensure the complete accuracy of all stories posted and not to post comments made off the record.

We are undergoing a review of stories posted to ensure these goals were met.

Best,

Greg Sanders

Group Publisher

Food News Media

QSR | FSR

We thank Greg Sanders for taking this matter seriously, and applaud QSR magazine for taking steps to ensure that its readers, who may be prospective franchisees or franchise services clients, receive accurate information on which to base their investment decisions.

It appears that QSR has taken more than a dozen BBI articles offline, including:
To Support Global Growth, BBI Opens Three New Offices  April 29, 2011 – QSR
BBI Breaks Records in 2011, Preps for Big 2012  November 1, 2011  – QSR
Beautiful Brands Reports Record-Breaking Q1  June 6, 2012 (QSR)
FreshBerry Breaks Sales Records with Store Openings  June 25, 2012  (QSR)
FreshBerry Launches its 20th Store in the Middle East   November 30, 2012 (QSR)
BBI Reports Record 2012   January 4, 2013 (QSR)
FreshBerry’s Market Share in Middle East Now 53 Percent  February 13, 2013 (QSR)

We believe that QSR and other publications that have recently investigated BBI claims (Tulsa World, Franchise Times) are sending a strong message to franchisors who provide questionable claims in their press materials: It might work short term, but it will likely come back to bite you in the end.

Also read:

BEAUTIFUL BRANDS INTERNATIONAL (BBI): Behind the Hype

BEAUTIFUL BRANDS Partner Program: Behind the Hype

ARE YOU FAMILIAR WITH BEAUTIFUL BRANDS INTERNATIONAL (BBI)?  SHARE A COMMENT BELOW.

Contact UnhappyFranchisee.com

tags: David Rutkauskas, Beautiful Brands International, BBI, Camille’s Sidewalk Cafe, Unhappy Franchisee, QSR, QSR magazine, Greg Sanders,

BEAUTIFUL BRANDS’ David Rutkauskas Defends BBI’s PR Claims

Beautiful Brands International (BBI) and its CEO, David Rutkauskas, have faced criticism from UnhappyFranchisee.com for providing what we believe to be inaccurate and misleading representations to the media in recent years.

In our opinion, BBI has been able to create a public perception of robust growth and unfettered success, while hiding such challenges as widespread franchise closures, unsuccessful concept launches, and the apparently high defection rate of its franchise services clients (“brand partners”).

With each post we published, we invited Mr. Rutkauskas and BBI to provide rebuttals, clarifications, or corrections to our opinions, as it is our goal to provide both sides of the issue and let our readers decide.

We are pleased that David Rutkauskas has begun to publicly respond and engage in a dialogue over these important issues.

This post includes Mr. Rutkauskas’ justifications of BBI’s media representations as published in two posts on his blog (Facing the Lies of UNHAPPY FRANCHISEE, and My Response: Crushing the Distortions).

 

Criticism #1: That Beautiful Brands International (BBI) exaggerates the number of its franchise locations

UnhappyFranchisee.com believes that BBI misrepresents the size and growth of its company, in part by counting its clients’ locations as its own.  So while the websites of BBI franchise brands Camille’s Sidewalk Cafe, FreshBerry, and Rex’s Chicken only list a total of only 71 locations open around the world, Rutkauskas claims “BBI has 297 locations open around the world…” (QSR, 3/12/13).

BBI’s Justification: BBI CEO David Rutkauskas states “As long as any brand is under our consulting umbrella it is counted as a Beautiful Brand… If you do business with us, then you are a Beautiful Brand.”¹

Why this matters:  Potential BBI franchisees and clients should be provided with undistorted information regarding the size and growth of the franchisor.  If BBI signs up a 200-unit company for brokerage services, it is deceptive to claim that BBI has grown by 200 units that day.  This practice is like a local sign shop claiming it has 30,000 locations worldwide because it makes banners for Subway.

Our recommendation:  To avoid misleading its franchise & partner prospects, we recommend that BBI clearly differentiate between the number of locations under its own brands and the number of units its clients control… and never combine the two.

 

Criticism #2: That BBI promotes unsubstantiated/deceptive growth projections

UnhappyFranchisee.Com has criticized BBI for having made many unrealistic and misleading representations regarding its future growth, such as the 2007 claim that it “holds franchise agreements for another 900 Camille’s to open over the next five years.”  Six years later, BBI apparently oversees only 28 Camille’s restaurants.  An analysis of the company’s disclosure documents from the time the claim was made did not turn up any evidence that there were ever franchise agreements signed for 900 Camille’s locations.

BBI’s Justification: Mr. Rutkauskas states “I’ll be the first to admit that the economy has smacked us hard. Just like many companies, we anticipated a solid upward trajectory in regards to our brand growth, only to come face to face with the economic realities of the last six years.”¹

Why this matters:  Distracting readers with optimistic growth projections and plans can be an effective way of misdirecting attention from the much more sobering reality reflected in the company’s Franchise Disclosure Documents (FDD).  The FTC requires certain disclosures be provided to franchisees; franchisors should not use the press to end-run FTC protections.

Our recommendation:  As Mr. Rutkauskas acknowledges that he does not know what will happen in the coming months or years, we recommend that he stick to promoting what he has accomplished, and report only franchises that actually open, rather than promoting the number he intends to open.  Further, we recommend that BBI representations to the media regarding franchises sold, franchises “sold but not open,” and projected store openings match the information disclosed by BBI in Item 20 of its Franchise Disclosure Documents (FDD).

 

Criticism #3: That BBI & David Rutkauskas disseminate unsupported/prohibited earnings claims

The Federal Trade Commission (FTC) prohibits franchise sellers from providing sales or profitability claims to franchise prospects unless those claims are properly documented in the company’s required disclosure documents.  We have pointed out that BBI has made numerous earning representations in the press, including that Camille’s Sidewalk Café franchises average $700,000 to $800,000 in annual sales, and that a Freshberry unit is projected to have $400,00 in sales, and that the now-defunct Coney Beach franchise would average an impressive $1M in unit sales, with a $9.00 average purchase and an exceptionally low 21% food cost.

BBI’s Justification: According to Mr. Rutkauskas, the numerous published earnings claims were the fault of writers printing “off-the-record” comments. Says Rutkauskas: “It is not our policy to publish or document earnings claims. Any past off the record comment was meant to be a personal opinion based off of previous assessments and not meant to be a published fact on behalf of BBI.”¹

Why this matters:  The FTC prohibits unsubstantiated financial representations because, historically, many franchisees have been hoodwinked by unethical and/or unrealistically optimistic franchise sellers.  It’s irresponsible to end-run FTC safeguards and provide unsupported, misleading earnings representations.

Our recommendation:  Mr. Rutkauskas and BBI should refrain from providing earnings information or financial representations to the press, either on or off the record.

 

Criticism #4: BBI claims it makes “brand partners” successful, but former partners are prohibited from sharing their experiences or honest opinions

More than 20 brands have been touted as receiving the franchise development, marketing & sales support of the BBI “partnership” program.  All but a very few seem to have severed ties with BBI before the end of their contract terms; those that remain don’t appear to have added franchise units. In fact, we haven’t been able to find a single BBI partner that credits BBI with making them “bigger and better.”

BBI’s Justification: Mr. Rutkauskas insists “BBI has a history of making brands better and securing growth for companies.” He cites a former brand partner he claims to have “generated $884,000” for and “laid the foundations” for their 10 franchise units¹. When we contacted BBI brand partners (including the aforementioned partner), most said they weren’t allowed to discuss their experience with BBI because of a gag order type clause in their separation agreements. In fact, those who severed ties are either prohibited from sharing their experiences due to gag orders required by David Rutkauskas and BBI, or because they fear retaliation from BBI. BBI appears to be free to make representations about its former clients, but their former clients are prohibited from refuting those claims.

Why this matters:  BBI “partner brands” are small companies who reportedly pay BBI $50,000 up-front, plus a percentage of future franchise fees and royalties.  This can be a substantial loss of time and money if they  do not get the promised results.  Shouldn’t prospective partners be able to hear the experiences and opinions of former brand partners?  Prohibiting customers from expressing their opinions is a troubling practice and a potential red flag.

Our recommendation:  BBI should nullify the “gag orders” on their clients’ separation agreements and allow former “partner brands” to candidly share their experiences and opinions without fear of repercussions from BBI & David Rutkauskas.

 

Criticism #5: That BBI misrepresents both its track record and investment appeal

Since at least 2007, David Rutkauskas has regularly claimed that BBI is generating unprecedented growth and breaking its previous sales records.

Despite dozens of excited announcements of new partnerships and huge development deals, BBI’s actual track record does not appear, in our opinion, to be a success story for its franchisees:

• Roughly three times more Camille’s Sidewalk Café franchise owners lost their investments and shuttered their cafes than managed to stay in business.
• The Small Business Administration reports a SBA loan default rate of 58% for Camille’s Sidewalk Café franchises, one of the worst in the nation.
• The highly touted BBI Coney Beach franchise chain folded shortly after its debut, and the Rex’s Chicken concept has failed to grow past a single unit.
• Despite a nationwide frozen yogurt boom and claims of development deals for hundreds of units, FreshBerry appears to have fewer than 20 domestic locations and less than 50 total units worldwide.
• Despite 20+ “partner” brands having entrusted their marketing and sales to BBI, not a single one has credited BBI with successfully recruiting franchisees on their behalf.

BBI’s Justification: David Rutkauskas complains that UnhappyFranchisee.com doesn’t acknowledge BBI’s successes and “doesn’t find having over 28 Camille’s Sidewalk Cafes open around the globe, over 50 FreshBerry’s open and thriving and selling multiple franchises for different brands around the world as being successful.”¹

Why this matters:  Prospective franchisees are being asked to make significant financial investments, ranging from up to $386,000 for a FreshBerry franchise to more than $600,000 for a Camille’s Sidewalk Café franchise.  We believe they deserve to have a realistic idea of the risks involved, and how the franchise brands and concepts performed in the past.

Our recommendation:  Beautiful Brands should be transparent about the challenges they’ve faced, the losses they’ve suffered, and the specific programs and practices they’ve implemented to combat their franchise failure rate.  Having better-informed franchisees with a realistic understanding of the risks involved will be better for BBI in the long run.

 

Criticism #6: That BBI bullies and threatens its former franchisees and critics to keep silent

Former Camille’s franchise owners who shared their experiences on UnhappyFranchisee.Com received threatening letters from BBI’s law firm.  A female brand partner critical of BBI received a vulgar, insulting  email from Mr. Rutkauskas promising to sue her after she expressed her opinions.  BBI sued UnhappyFranchisee.com’s Sean Kelly (then dropped the suit), and continues to harrass him by Tweeting profanity-laced insults and invitations to fight (yes, fist-fight) for expressing his opinions.

[Image, left: one of numerous bullying tweets directed at UnhappyFranchisee.com's Sean Kelly, who tweets as @FranchisePick.  Click to enlarge.  Warning:  contains profanity]

BBI’s Justification: David Rutkauskas often characterizes opinions he disagrees with as “lies” intended solely to hurt him and his business.  He states: “Just like you can’t go into a crowded movie theater and yell ‘fire,’ without cause, you cannot injure someone’s livelihood with baseless lies meant only to destroy his or her reputation.”

Why this matters:  The First Amendment protects Americans’ right to express their opinions about BBI or any other company. It protects our right to make statements of fact as long as we can reasonably substantiate the truth of those statements. BBI and David Rutkauskas want their many critics to believe they can successfully sue them for speaking their opinions or the truth. They can’t. That’s why the suit was dismissed against UnhappyFranchisee.Com’s Sean Kelly and why Camille’s franchisee’s negative opinions still remain on UnhappyFranchisee.Com.

UnhappyFranchisee.Com’s intention is not to destroy anyone’s reputation, but to ensure that individuals and their families have solid, factual information on which to base the most important investment decisions of their lives. We are not yelling “fire” inside a crowded theater; we are alerting prospective moviegoers about the smoke coming out of the back door. If they still want to enter the theater, at least they’ve made an informed choice.

Our recommendation:  Beautiful Brands and David Rutkauskas should cease all bullying tactics, if only because their bullying and harrassment does much more damage to their reputations than the original criticism.  We recommend that Mr. Rutkauskas put that same energy into supporting current franchisees and partners and making them successful.  Nothing will offset criticism more effectively than testimonials from successful franchisees and clients.  So far, not a single one has spoken out in support of BBI.

¹ David Rutkauskas’ rebuttal comments are from his blog post “My Response: Crushing the Distortions,” April 28, 2013 at http://davidrutkauskas.com/index.cfm?id=1&blogId=140. #

Also read:

BEAUTIFUL BRANDS INTERNATIONAL (BBI): Behind the Hype

BEAUTIFUL BRANDS Partner Program: Behind the Hype

ARE YOU FAMILIAR WITH BEAUTIFUL BRANDS INTERNATIONAL OR DAVID RUTKAUSKAS?  SHARE A COMMENT BELOW.

Contact UnhappyFranchisee.com

tags: David Rutkauskas, Beautiful Brands International, BBI, Camille’s Sidewalk Cafe, Unhappy Franchisee, Sean Kelly, franchise opportunities, franchise bullying

BEAUTIFUL BRANDS: UnhappyFranchisee.Com Letter to The Journal Record

UnhappyFranchisee.Com asked The Journal Record (in February of this year) to stop putting the public relations agenda of Beautiful Brands International (BBI) ahead of the welfare of its readers and the credibility and reputation of its own publication. 

We specifically asked Mary Melon and TJR to print corrections to the inflated BBI franchise sales and units counts that it has been printing at BBI’s behest for several years.

Instead of breaking with their role as BBI propagandist, The Journal Record chose to highlight the inane, silly lawsuit BBI filed to try to intimidate its Internet critics, and included the statement that BBI has ““297 locations around the world,” which they know to be false.

We sent this letter to The Journal Record President & Publisher Mary Melon:

April 22, 2013

VIA Email & Registered Mail

Mary Mélon

President & Publisher

The Journal Record Publishing Co.

101 N. Robinson Ave. Suite 101

Oklahoma City, OK 73102

Dear Ms. Melon:

My name is Sean Kelly. I have 24 years of experience in the franchise industry, having been VP of an international franchise consulting firm, an executive with a successful franchise company, founder and President of a franchise advertising agency, an expert witness in franchise litigation, and, currently, as publisher of UnhappyFranchisee.Com. I am frequently quoted in national publications on franchise matters, and am a contributor to trade and industry publications.

On February 13, 2013, I sent you a detailed email (attached) alerting you to what I believe are a large number of inaccurate and misleading statements about Beautiful Brands International (BBI) published by The Journal Record. I pointed out that these misleading statements could be potentially damaging to your readers, some of whom may rely on your articles to make significant franchise investment or partnership decisions.

In my opinion:

• For several years, The Journal Record has consistently misled its readers as to the success of Beautiful Brands International by overstating the number of franchise locations BBI has open.
• For several years, The Journal Record has consistently misled its readers as to the success of Beautiful Brands International by overstating the number of franchise locations BBI has “in development.”
• For several years, The Journal Record published “earnings claims” that franchisors are prohibited from disclosing, bypassing protections put in place by the Federal Trade Commission.
• For several years, The Journal Record has consistently misled its readers as to the success of Beautiful Brands International by printing only positive stories and self-serving announcements provided by the company, and turning a blind eye to the lawsuits, widespread franchise closures, skyrocketing SBA franchise loan default rates and the near-complete failure of the BBI partnership program.

In my email of February 13, 2013, I cited specific examples of inaccuracies and requested that you, at the very least, print corrections or clarifications to ensure that your readers receive accurate information. I copied your senior editorial staff, your business editor, and writer D. Ray Tuttle on the email. You responded by instructing Mr. Tuttle to look into these allegations and to keep you informed as to what he found. Mr. Tuttle sent me an email, saying “Thank you for alerting me to BBI, these practices and the projections. You raise good points and something that needs attention.”

Not only did neither you nor your writer ever follow up with me on this matter, The Journal Record continued its tradition of faithfully serving the public relations interests of BBI by publishing the story “Beautiful Brands sues anonymous Internet critic” on March 12, 2013.

The unfounded lawsuit against the “Internet critic” (me) is, in my humble opinion, BBI’s cynical & transparent attempt to send a public warning to discourage whistleblowers from sharing their experiences with and opinions of Beautiful Brands International. Beautiful Brands International, CEO David Rutkauskas, and/or their attorney Robert Sartin of Barrow & Grimm, obviously hand-fed Ray Tuttle the lawsuit and their quotes.

It seems quite telling that, over the years, The Journal Record did not consider a sexual harassment lawsuit against Camille’s Franchise System, Inc. involving Mr. Rutkauskas (2007), a lawsuit filed by an international Camille’s franchisee (2010), a lawsuit filed by a local Camille’s Sidewalk Café franchisee (2010), or a lawsuit from an international master franchisee (2012) against BBI to be newsworthy, yet considers a frivolous, bullying lawsuit designed to silence a critic of BBI to be priority news. Ray Tuttle’s “Internet Critic” story appeared days after the lawsuit was filed, complete with polished quotes from attorney Sartin and details regarding the potential financial penalties for expressing negative opinions toward BBI.

Remarkably, Mr. Tuttle not only continued to describe the troubled and embattled BBI as if it were a success story, he repeated the false claim that “BBI has 297 locations around the world, including franchised units for CherryBerry Self-Serve Yogurt Bar, Camille’s Sidewalk Café, Rex’s Chicken and FreshBerry Frozen Yogurt Cafe.”

Having read my email, Mr. Tuttle knows that BBI does not have “297 locations around the world” and that BBI has no ownership stake in CherryBerry Self-Serve Yogurt Bar (CherryBerry principals recently told Franchise Times that they only use BBI for “legal work.”) Mr. Tuttle and The Journal Record continue to mislead readers by inflating BBI’s franchise sales and unit counts, and deceptively attributing locations that belong to other companies to BBI.

The Journal Record is not the only publication that has helped to create the illusion that BBI is an international franchise powerhouse with the Midas touch. However, The Journal Record is the only publication that has continued to intentionally deceive its readers about Beautiful Brands International after being informed of the truth. After your counterparts at Tulsa World and Franchise Times read my reporting on BBI at UnhappyFranchisee.Com, they each published excellent articles (Kyle Arnold’s "Camille’s empire copes with setbacks" and Julie Bennett’s "Reality Check," respectively) that provided reality-based overviews of BBI’s recent track record.

Ms. Melon, I hope this letter will help motivate you to accept my offer of assistance in helping you and your writers correct the misinformation and inaccurate impressions you have communicated regarding both the track record and current performance of the Beautiful Brands International franchise ventures and partnership programs. If The Journal Record chooses instead to continue to serve as an unfiltered public relations propagandist for David Rutkauskas, Beautiful Brands and their attorneys, I will continue to do your fact-checking for you and publicly debunk the BBI fairy tale you seem so intent (at least to this point) on communicating.

All the best,

Sean Kelly

President, Relentless, Inc.

Publisher, UnhappyFranchisee.Com

UnhappyFranchisee[at]gmail.com

Attachment: Emails dated February 13, 2013

Also read:

BEAUTIFUL BRANDS: UnhappyFranchisee.Com Email to The Journal Record

BEAUTIFUL BRANDS INTERNATIONAL (BBI): Behind the Hype

BEAUTIFUL BRANDS Partner Program: Behind the Hype

ARE YOU FAMILIAR WITH THE JOURNAL RECORD, THE DOLAN COMPANY OR BEAUTIFUL BRANDS INTERNATIONAL?  SHARE A COMMENT BELOW.

Contact UnhappyFranchisee.com

Tags: The Journal Record, The Dolan Company, Mary Melon, Ray Tuttle, Kirby Lee Davis, Beautiful Brands International, BBI, David Rutkauskas, Robert Sartin, Barrow & Grimm

BEAUTIFUL BRANDS: UnhappyFranchisee.Com Email to The Journal Record

For the past several years, Beautiful Brands International (BBI) persuaded several media outlets to portray it as a vibrant, growing international “franchise powerhouse,” even as it became increasingly obvious that BBI’s franchise efforts and franchise partner program are anything but an entrepreneurial success story.

Once they were confronted with the truth by UnhappyFranchisee.Com, both Tulsa World and Franchise Times reported on BBI’s woes.  However, The Journal Record continues to communicate misleading information on BBI despite having had the truth delivered to them on a silver platter.

UnhappyFranchisee.Com sent a detailed email to The Journal Record President & Publisher Mary Melon on February 13, 2013 (see below).

Melon instructed TJR writer Ray Tuttle (author of some of the most gushing BBI fiction) to look into the allegations.

Mr. Tuttle emailed UnhappyFranchisee.Com:  “Thank you for alerting me to BBI, these practices and the projections. You raise good points and something that needs attention. After reviewing the website,  I’d be interested in speaking with you.”

Not only did Ray Tuttle not get in touch with UnhappyFranchisee.Com, he demonstrated his dedication to faithfully serving the public relations interests of BBI by publishing some of the same false statements in “Beautiful Brands sues anonymous Internet critic” even after we informed him of their inaccuracy.

For example,  Tuttle he repeated the false claim that “BBI has 297 locations around the world, including franchised units for CherryBerry Self-Serve Yogurt Bar, Camille’s Sidewalk Café, Rex’s Chicken and FreshBerry Frozen Yogurt Cafe.”

Having read my email, Mr. Tuttle knows that BBI does not have “297 locations around the world” and that BBI has no ownership stake in CherryBerry Self-Serve Yogurt Bar.   Mr. Tuttle  and The Journal Record continue to mislead readers by inflating BBI’s franchise sales and unit counts, and deceptively attributing locations that belong to other companies to BBI.

Here’s the email that we sent to The Journal Record, which Mary Melon and Ray Tuttle apparently have chosen to disregard.

Date: Wed, Feb 13, 2013 at 11:50 AM

Subject: Your coverage of Beautiful Brands, corrections and criticism

To: mary.melon@journalrecord.com

Cc: ted.streuli@journalrecord.com, kirby.davis@journalrecord.com, ray.tuttle@journalrecord.com

Ms. Melon:

Since 2007, The Journal Record has published approximately 67 positive articles and news items about Beautiful Brands International (BBI) and its CEO David Rutkauskas.  Over time, this one-sided portrayal of BBI has likely communicated to your readers that BBI is both an inspirational success story, and a company that they can feel comfortable investing with either as a franchise owners or as one of their “partner” brands.

In recent investigations, I have found a wide disparity between the facts about Beautiful Brands International, and the statements made in your numerous articles and news items.  I believe that The Journal Record may have been provided with inaccurate and misleading information regarding BBI, which you have then passed along to your readers as verified fact.  I believe that BBI may, in turn, use the reprints of your articles as a 3^rd party endorsement and a way to obfuscate the troubled and, IMHO, possibly dubious nature of their enterprise.

I believe TJR’s coverage of Beautiful Brands does damage to your publication’s credibility and journalistic ethics, and may even be creating legal liability.  I am writing to request not that you take my word for it, but that you have your executive or editorial staff look into this matter and decide for yourselves, that you issue corrections and clarifications for your most recent story, and that, in the future, you provide more balanced and accurate coverage of BBI and the purported “success story” of David Rutkauskas.

Here are a few examples of misleading and/or downright incorrect representations made about BBI in your recent article “It’s a Beautiful Brands world: Franchiser crossing borders and breaking records” by Heidi Brandes:

1/21/13, The Journal Record reported:  “Beautiful Brands has 297 locations in Arizona, Arkansas, California, Kansas, Florida, North Carolina, Minnesota, Colorado, Missouri, Texas, South Carolina, Nebraska, Iowa and Oklahoma.”

Beautiful Brands “has” three franchise brands:  Camille’s Sidewalk Café (29 US locations), FreshBerry frozen yogurt (16 US locations), and Rex’s Chicken (2 US locations).  If you add the U.S. locations on the three websites,  you will see that BBI has 47 domestic locations, not 297 as you claim.

1/21/13, The Journal Record reported: “In 2012 alone, BBI opened 114 stores and has 79 new stores under construction. It has a total of 297 locations around the world, including franchised units for CherryBerry Self-Serve Yogurt Bar, Camille’s Sidewalk Café, Rex’s Chicken, and FreshBerry Frozen Yogurt Cafe.”

BBI does not own CherryBerry.  The CherryBerry Franchise Disclosure Document (FDD) prospectus does not have any mention of any ownership by BBI, and does not list Rutkauskas among its management team.  It seems that BBI is solely a service-provider to CherryBerry, a vendor of sales-support services, a franchise broker.  It would be inaccurate and misleading for a franchise broker to refer to its client’s locations as part of his/her company.

As far as I can tell, Camille’s is a chain in decline (only 137 or so ever opened and most of those have closed), FreshBerry’s domestic growth is flat, and Rex’s Chicken has gone nowhere.  Adding in a growing outside company to the mix might give the illusion that the company is growing, but is not accurate.  Additionally, Ms. Brandes uses the same number for global locations as domestic locations (297).

“Now 12 brands and growing…”

I don’t believe BBI  “has” 12 brands.  August 30, 2012, The Journal Record stated:  “Beautiful Brands International’s franchised brands also includes Camille’s Sidewalk Cafe, FreshBerry Frozen Yogurt Cafe, Rex’s Chicken, Caz’s Chowhouse, Dixie Cream Donut Co., Ludger’s Bavarian Cakery, Sushi Freak, Top That! Pizza, Roxberry Juice Co., Smallcakes A Cupcakery, MyCamille’s and Fresco Wood Fired Italian Kitchen.”

Of those 12 brands, half are no longer BBI partners (Caz’s Chowhouse, Dixie Cream Donut Co., Ludger’s Bavarian Cakery, Sushi Freak, Top That! Pizza, Smallcakes A Cupcakery) and two appear to be concepts that were never developed (MyCamille’s, Fresco Wood Fired Italian Kitchen).

Why does The Journal Record keep publishing BBI “projections” and promoting the BBI success story?

Last March, Ray Tuttle elevated David Rutkauskas to business legend status, portraying Mr. Rutkauskas as a sports hero who went on to build BBI into a global powerhouse.  But Mr. Tuttle’s hero worship was based (again, my opinion) on misleading and/or incorrect information.

Ray Tuttle’s article in March 2012 borders on idol-worship, and contains many misleading statements.  He claims that BBI employs “20 people at each location, for a total of 4,160 employees.”  He is counting employees from companies that BBI does not own.  Yet the impression is that BBI employs 4.000+ people worldwide.

Ray Tuttle praises David Rutkauskas’ social media savvy and enormous Twitter following, yet there is strong evidence that Rutkauskas’ purported 500,000+ Twitter followers are fake (See http://www.unhappyfranchisee.com/david-rutkauskas-twitter-followers-fakes/)

What is most mind-boggling is Mr. Tuttle’s acceptance of David Rutkauskas record-breaking sales figures and his projections of BBI having 500 franchises in the next few when the BBI projections previously reported by TJR have not proven accurate.

All Mr. Tuttle and his editors need to do is look back in the Journal Record archives to see that your publication has been promoting projections that never happened, partnerships that soon failed, and the signing of thousands of franchises that would never open.

As a somewhat random example, here are claims TJR made in the article “Franchisee opens five Camille’s in Middle East” January 23, 2009:

1/23/09, The Journal Record reported:  “…That brought Camille’s to 137 units at the end of 2008, up six from 2007. BBI President and Chief Executive David Rutkauskas said his Tulsa firm has more than 900 locations in development.”

There are currently 29 Camille’s locations listed on the Camille’s website.  What happened to the 108 cafes that are no longer open?  Did 108 franchisees lose the hundreds of thousands of dollars they invested in Camille’s franchises?

What of the franchisees who paid BBI franchise fees for the 900+ cafes that never opened?  Did they also lose their money?

Why does Ray Tuttle tell the story of the Camille’s franchise as a success story, when it appears that well over 1000 franchise investors may have lost money, and only 29 stores have survived?

1/23/09, The Journal Record reported:  “The gourmet hamburger and hot dog concept Coney Beach added its first franchised unit last year, a November opening in El Paso by Milap Maniar.

Rutkauskas said BBI has more than 30 Coney Beach restaurants in development across the country and portions of the Middle East.”

Coney Beach appears to have been  a dismal failure.  The original franchise closed and it doesn’t appear that the 30 Rutkauskas said were in development ever opened.

1/23/09, The Journal Record reported:  “Last year BBI opened its first FreshBerry Frozen Yogurt Café, a company-owned shop placed alongside the original Coney Beach in Bixby.  Lee and Vanessa Kellough and Anthony and Jacqueline Taylor opened the first franchised FreshBerry last week in Houston.

“We have six cafes opening by the end of the first quarter,” said Rutkauskas. “FreshBerry will continue to be a major growth vehicle for BBI, with over 200 projected FreshBerry cafes open in 36 months.”

There is no longer a Coney Beach in Bixby and no FreshBerry listed in Houston.  The 200 projected FreshBerry’s never happened and, four years later, there are only 42 FreshBerry locations worldwide. Yet TJR continues to publish BBI “projections” as credible.

1/23/09, The Journal Record reported:  “Rutkauskas, who would not provide revenue figures, expressed targets for two other concepts yet to debut. He projects 15 Rex’s Chicken restaurants will open by 2010, while Dixie Cream Donuts franchisees open 300 of those pastry shops by 2012.”

There are currently 2 Rex’s Chicken locations (co-branded) listed on the website and it doesn’t look like BBI got ANY of the 300 Dixie Cream Donuts franchises open it said it would have by 2012.  In fact, Rutkauskas, BBI & Dixie Cream are being sued by their Middle East master franchisee EABG.

You can learn much more about BBI here:

http://www.unhappyfranchisee.com/beautiful-brands-ugly-shams/

I hope that you will look into these matters, print corrections as you deem appropriate, provide more balanced reporting on BBI with more thorough due diligence in the future.

Thanks for your consideration,

ADMIN

UnhappyFranchisee.Com

Also read:

BEAUTIFUL BRANDS INTERNATIONAL (BBI): Behind the Hype

BEAUTIFUL BRANDS Partner Program: Behind the Hype

ARE YOU FAMILIAR WITH THE JOURNAL RECORD, THE DOLAN COMPANY OR BEAUTIFUL BRANDS INTERNATIONAL?  SHARE A COMMENT BELOW.

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Tags: The Journal Record, The Dolan Company, Mary Melon, Ray Tuttle, Kirby Lee Davis, Beautiful Brands International, BBI, David Rutkauskas, Robert Sartin, Barrow & Grimm

BEAUTIFUL BRANDS: THE SOUP KITCHEN Franchise Warning

The Soup Kitchen, a three-unit quickservice concept based in Tennessee, is the latest “partner brand” to be hyped by Beautiful Brands International (BBI) as the next potential international franchise phenomenon.

Three red flags indicate that this franchise might not be as souper a deal as the hype suggests.

by Sean Kelly

The Soup Kitchen, a TN mom & pop soup restaurant chain that has opened 3 units in 30 years, is the latest “partner brand” to be hyped by Beautiful Brands International (BBI) as the next potential international franchise phenomenon.

BBI CEO David Rutkauskas is quoted on QSRmagazine.com expressing his customary excitement:  “There’s really nothing like it in the industry today. I believe The Soup Kitchen concept is ready to explode in the U.S., and we’re fully poised and prepared to make sure it does.”

According to Fast Casual, The Soup Kitchen is “fast tracking development of its restaurant with a worldwide franchise deal with Beautiful Brands International to market and franchise the concept on a global scale…  As part of the agreement, BBI will take the lead in marketing The Soup Kitchen brand and selling its franchises.”

As I read the news items, online reviews and the The Soup Kitchen website, three red flags flapped furiously.

Red Flag #1:  Beautiful Brands

The first is The Soup Kitchen’s reliance on Beautiful Brands.  I have read numerous dramatic announcements of Beautiful Brands adding a new “partner brand” to its portfolio in recent years.

The stories usually include the pronouncement that a small pizza, salad, BBQ or bakery concept is going international through a BBI partnership.

The announcements are accompanied by bold quotes from BBI CEO David Rutkauskas about how wonderful the concept and the founders are, and how unlimited the potential is for this soon-to-be global brand.

The partner brands I’ve followed were included in the BBI list of brands in subsequent partnership announcements, then seem to quietly disappear from the BBI portfolio without explanation or any apparent franchise growth.  (See BEAUTIFUL BRANDS Partner Program: Behind the Hype).

I hope The Soup Kitchen and other recent addition The Big Salad are exceptions to this pattern.

Red Flag #2:  Global Focus

The second red flag is the apparent rush to become a global brand when The Soup Kitchen hasn’t even established a track record as a statewide or regional, much less a national, franchise brand.

Online reviews give The Soup Kitchen high marks for the quality of its soups, but so-so ratings for décor and service.  There’s a big difference between being able to make good soup and being able to train, support and supervise franchise owners in remote markets.   Failed franchisees of Beautiful Brands’ Camille’s Sidewalk Café have cited lack of infrastructure, product distribution, support and quality control in remote markets as important factors in the failure of nearly three-quarters of that chains franchise locations.

Should The Soup Kitchen even be considering international expansion when they haven’t even expanded more than a couple hundred miles from home?

Shouldn’t The Soup Kitchen be focused on expanding to, say, Nashville before considering Saudi Arabia or Bahrain?

Red Flag #3:  Earnings Representations

The third, and most serious, red flag (in my humble, non-lawyer opinion) is what I believe is the improper earnings claim (also known as a Financial Performance Representation) being used in the marketing of The Soup Kitchen franchise opportunity.

The Federal Trade Commission (FTC) prohibits franchisors from making any financial performance representation unless it is done so in a specifically designated and substantiated format, and is included in Item 19 of the company’s Franchise Disclosure Document (FDD).

The FTC website states:

It is an unfair or deceptive act or practice in violation of Section 5 of the Federal Trade Commission Act for any franchise seller [to]… Disseminate any financial performance representations to prospective franchisees unless the franchisor has a reasonable basis and written substantiation for the representation at the time the representation is made, and the representation is included in Item 19 (§ 436.5(s)) of the franchisor’s disclosure document. In conjunction with any such financial performance representation, the franchise seller shall also…Include a clear and conspicuous admonition that a new franchisee’s individual financial results may differ from the result stated in the financial performance representation.

At the time of this writing, The Soup Kitchen franchise page refers to some vague, undated and unnamed Entrepreneur magazine article about the famous guy who was the inspiration for the Soup Nazi character on the Seinfeld TV show, and the sales his franchisees supposedly believe they will achieve at some unnamed point in time (no, I’m not kidding).

The implication seems to be that prospective The Soup Kitchen franchisees can expect sales of $500,000 to $1.4 million because an article about a famous competitor mentions those sales amounts.  The Soup Kitchen franchise page states:

That’s why our franchise agreement can make it very attractive for you to join our family. And, according to the magazine, one owner’s five eateries are expected to hit the $7 million mark, and another owner projects its four restaurants should gross between $500,000 and $1 million each.

Yes, quickly. Because The Soup Kitchen, established in 1980, is now one of a growing number of soup kitchen chains. What Bob and Jean Bardorf began, we want to see grow into a national dining tradition.

For Franchise Information contact:

Roger Burnett

Sr. VP of Global Development

918-605-9331

roger@beautifulbrands.net

I have not seen the FDD from The Soup Kitchen (I have requested a copy from Roger Burnett, Sr. VP of Global Development of BBI), but would be surprised if its Item 19 Financial Performance Representations section discloses the actual sales of its “Three very prosperous owners of The Soup Kitchen locations.”

It is more likely that The Soup Kitchen uses the generic disclaimer that BBI employs in its FDDs:  “We do not make any representations about a franchisee’s future financial performance or the past financial performance of company-owned or franchised outlets. We also do not authorize our employees or representatives to make any such representations either orally or in writing.”

Beware of Illegal Franchise Earnings Claims

When prospective franchisees encounter improper “earnings claims” in the franchise marketing or sales process, whether they appear on a cocktail napkin or on the pages of a website, they should ask themselves:

Is this franchisor ignorant of FTC franchise regulations (in which case they are clueless)?

Or

Do they know the franchise laws, and choose to break them anyway (in which case they are dishonest)?

In any case, any time prospective franchisees are told they should gamble their financial futures based on what sales some unnamed franchisees of a competitor projected they might achieve at some undetermined point in time, those prospective franchisees would be well advised to place their hands on their checkbooks and back slowly toward the exit.

Also read:

BEAUTIFUL BRANDS INTERNATIONAL (BBI): Behind the Hype

BEAUTIFUL BRANDS Partner Program: Behind the Hype

ARE YOU FAMILIAR WITH THE SOUP KITCHEN OR BEAUTIFUL BRANDS INTERNATIONAL?  SHARE A COMMENT BELOW.

Contact UnhappyFranchisee.com

Tags: The Soup Kitchen, The Soup Kitchen franchise, soup franchise, Bob Bardorf, Jean Bardorf, Rick Ford, Roger Burnett, David Rutkauskas, Beautiful Brands International, BBI, franchise earnings claims, franchise financial performance representations, franchise item 19, FDD item 19

BEAUTIFUL BRANDS: Why Franchise Bullying Backfires

David Rutkauskas, CEO of Tulsa-based Beautiful Brands International (BBI), publicly unleashed a string of insults and expletives on me that would have been shocking coming from a 7th grade boy, much less the founder of an international franchise company.

On his Twitter page, right next to the picture of his wife Camille and their two children, Mr. Rutkauskas (without the use of asterisks) called me a “#@!* face,” “fat ugly #!@* face,” and “ugly mother #!@*.”

(I have withheld the screenshot of the attack for the moment, but may include it in a future post).

What specifically set Mr. Rutkauskas off was Julie Bennett’s unflattering Franchise Times article  (Reality Check), which had been prompted by my reporting about BBI on UnhappyFranchisee.Com.

But the deeper source of David Rutkauskas’ rage, in my humble opinion, is that his attempts to bully writers, his former franchisees, employees, service providers and partners is backfiring, big time.

Mr. Rutkauskas and his attorney, Robert Sartin of Barrows & Grimm P.C., haven’t caught on that bullying, in the Internet age, will do much, much greater damage to their reputations than the original criticism.

Old School Bullying Backfire #1

Last July, UnhappyFranchisee.Com published a post on the high SBA franchise loan default rate (58%) of Beautiful Brands’ Camille’s Sidewalk Café (CAMILLE’S SIDEWALK CAFE Franchise Complaints).  The posting prompted numerous former Camille’s franchisees to share their experiences and their complaints alleging deceptive franchise sales tactics, lack of support, and overall indifference to their success on the part of BBI and Rutkauskas.

Franchisees who posted with their real names almost immediately received threatening letters demanding they retract their comments.  UnhappyFranchisee.Com removed the franchisees’ names, but refused to take down the comments.

In fact, the bullying of the franchisees by Beautiful Brands & Sartin prompted several more posts, and encouraged UnhappyFranchisee.Com to look deeper into what else BBI was so intent on hiding.

Bullying Backfire #1.

Twitter Threats & Libelous Attacks

In addition to its own franchise brands (Camille’s, Freshberry, Rex’s Chicken), BBI provides franchise development and outsourced sales services to “partner brands.”

After UnhappyFranchisee.com reported on the seemingly high attrition and low success rates of BBI “partner brands,” (BEAUTIFUL BRANDS Partner Program: Behind the Hype) two anonymous Twitter accounts (@MissTroothbeTold, @FuckOffLiars) posted threats, insults and libelous comments about several former BBI partner brands, the former President of BBI, a former franchise sales service provider to BBI, and me.

These Twitter attacks falsely alleged that one former BBI partner’s stores were closing and its founder had been ousted, and another partner brand was being sued for food poisoning.

@FuckOffLiars threatened me directly using both my real name and Twitter name: “…We are watching u and your lies… we know where you live.&.HaHa…#GunsareLegal.”

I reported the threat to the FBI with my suspicion* that it could possibly be David Rutkauskas or a close associate.  Bullying Backfire #2.

David Rutkauskas and Robert Sartin have reached the moment that every bully dreads:  when that one crazy kid doesn’t run, even when his nose is bloodied and his jeans are torn.

The truth is, in America we have this thing called the 1st Amendment.  We have the right to state facts, as long as they are true.  We have the right to express our opinions, as long as they are clearly stated to be our opinions.

BBI Files Suit Against “John Doe” (aka Me)

BBI’s hometown paper, Tulsa World, published an article (Camille’s empire copes with setbacks) on the decline of Beautiful Brands which included a scathing commentary on Camille’s franchise support by a franchisee who lost everything, including his marriage, in the ordeal.  Posting as Unhappy Franchisee, I left four pretty innocuous comments on the article.  Many of the other 29 comments left on the article were less innocuous.

BBI attorney Robert Sartin filed suit against “Unhappy Franchisee” (as “John Doe) and subpoened Tulsa World and Google demanding my identity.  It’s no big secret that I run UnhappyFranchisee.Com, so I believe the real motive was to send a bullying threat to those who dare express their opinions about BBI, even anonymously.  A story and the suit itself appeared in the Tulsa Journal Record (along with the obligatory deception that BBI has “297 locations around the world,” when their websites list 72 locations) the day after the complaint was filed .

Attorney Jonathan Fortman, of St. Louis-based Fortman Law, has agreed to defend me against the bullying tactics of David Rutkauskas, BBI and Robert Sartin.  I waived my anonymity, as I am not afraid to defend my views and actions out in the open.  I hope David Rutkauskas is ready to do the same.  I expect the discovery process will prove to be Bullying Backfire #3.. (and more).

Why Franchise Bullying Backfires

On UnhappyFranchisee.Com, I expressed my opinion that David Rutkauskas and Beautiful Brands International have used four publications in particular (Tulsa World, The Journal Record, QSR, Fast Casual) to promote the illusion that BBI is a thriving, successful, growing franchise company when, in fact, more BBI-owned franchises have closed than are successful and many of its “partner brands” have parted ways without selling a single franchise.

David Rutkauskas responded with tactics that have worked, to a limited degree, in the past:  bullying and legal threats.

But David Rutkauskas and Robert Sartin have reached the moment that every bully dreads:  when that one crazy kid doesn’t run, even when his nose is bloodied and his jeans are torn.

The truth is, in America we have this thing called the 1st Amendment.  We have the right to state facts, as long as they are true.  We have the right to express our opinions, as long as they are clearly stated to be our opinions.

In my opinion, none of the fact-based criticisms that I have expressed come close to impuning the reputation of Beautiful Brands and David Rutkauskas as do their remarkable personal and unprofessional Twitter attacks (Bullying Backfire #4) and their attempts to use the legal system to strip good people (the former franchisees and partners who bought Rutkauskas his house and Mercedes, and who provided the funds for Sartin’s invoices) of their 1st Amendment right to free speech.

Potential franchisors would do well to watch how well bullying works out for David Rutkauskas and Beautiful Brands International.

As is so often the case, the attempted cover-up will, IMHO, prove to be much more damaging than the initial allegations.

* I don’t have proof that Mr. Rutkauskas posted these threats directly.  I hope to find out the identity of the Tweeter via subpoena if our lawsuit advances.

Also read:

BEAUTIFUL BRANDS: Standing Up to Corporate Bullies

BEAUTIFUL BRANDS INTERNATIONAL (BBI): Behind the Hype

DAVID RUTKAUSKAS Are His 500,000 Twitter Followers Fakes?

 

ARE YOU FAMILIAR WITH DAVID RUTKAUSKAS, BEAUTIFUL BRANDS OR THE 1ST AMENDMENT?  SHARE A COMMENT BELOW.

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TAGS: Beautiful Brands, BBI, Beautiful Brands International, David Rutkauskas, FreshBerry, Camille’s Sidewalk Cafe, Rex’s Chicken, Robert Sartin, Jon Fortman, Sean Kelly, franchise opportunities, franchise hype

BEAUTIFUL BRANDS David Rutkauskas Admits to Franchise Failures

David Rutkauskas, Founder and CEO of Beautiful Brands International (BBI), admitted to his system’s franchise failures in a revealing interview with Tulsa World.

UnhappyFranchisee.Com has been harshly critical, both publicly and privately, of Tulsa World and other media outlets for their publication of (in our estimation) of misleading, corporate-supplied propaganda portraying Beautiful Brands as a vibrant, dynamic success story.

It’s our opinion that BBI and its CEO David Rutkauskas have effectively manipulated the media to regularly report misleading sales growth figures without reporting that the vast majority of the franchises BBI sold either never opened or opened and failed, and that the vast majority of “partner” brands severed their relationship with BBI after seeing little-to-no results.

In past posts, we were especially hard on Beautiful Brands’ hometown publication Tulsa World:

TULSA WORLD: Intentionally Deceptive or Exceedingly Lazy?

Letter to Tulsa World Writer Kyle Arnold

Franchisee Questions for David Rutkauskas

On Sunday, February 17, 2013, Tulsa World responded to our request and published an unprecedentedly forthright article that brought their local franchise success story crashing down from its pedestal.

In Camille’s empire copes with setbacks, reporter Kyle Arnold documented how Rukauskas’ firm managed to sell and open 106 Camille’s Sidewalk Café franchises, most of which subsequently closed.

Arnold recounted the experience of a franchisee who ended up divorced and in bankruptcy after buying a Camille’s franchise, and alluded to the dozens of angry franchisees who blame Rutkauskas and his firm for their financial devastation.

Arnold’s interviews with franchisees revealed the common complaint of lack of franchise support and general neglect of franchise owners by Beautiful Brands (“Once that check had cleared, I couldn’t get anyone to take my calls.”).

And, importantly, Arnold got David Rutkauskas to acknowledge Beautiful Brands’ franchise failures and to even accept a little of the blame for the personal and professional losses that followed.

Camille’s Sidewalk Café is NO Success Story

The Tulsa World article contained information that we have reported all along.  (Read:  BEAUTIFUL BRANDS INTERNATIONAL (BBI): Behind the Hype)

Still, it is significant that it is now being reported in the hometown publication that inadvertently helped perpetuate the myth of Beautiful Brands’ success for so long.

Tulsa World wrote of Camille’s Sidewalk Cafe:

…nearly two-thirds of the chain’s locations have been shuttered since 2008, leaving just 36 nationwide after a high-water mark of 107 in 2009.

Those closures left a string of angry franchisees, many of whom sunk their life savings into a location.

Some former franchise owners have taken to the Internet to air various complaints, blaming Rutkauskas and BBl for the lack of success. Those allegations range from questions about how Rutkauskas represented the financial viability of his restaurant brands to charges that he painted a rosy picture to prospects while other franchise owners were going out of business.

It would not be a BBI story if it didn’t contain some number-fudging.  While Rutkauskas claims there are 36 Camille’s, the website only lists 29.

In addition, Tulsa World neglected to mention that Rutkauskas had reported selling – and collecting money for – more than 1000 Camille’s franchises that never opened.

In addition to the Camille’s closures, Tulsa World also exposed the failure of BBI’s expansion of other brands, and its consulting for companies it call referred to as “partner brands”:

…Rutkauskas began acquiring and creating other concepts, such as the failed Coney Beach restaurant, FreshBerry Frozen Yogurt and Dixie Cream Donuts, a partnership with Tulsa’s Daylight Donuts Co…

Most of the companies that once partnered with BBI have since parted ways, however, including Dixie Cream Donuts, In the Raw Sushi and Ludger’s Bavarian Cakery.

In addition to Dixie Cream Donut Co., In The Raw Sushi, and Ludger’s Bavarian Cakery, other BBI “partner” brands no longer associated with the company include The Crusty Croissant, Greenz Salads, Caz’s Chowhouse, Sonny Bryan’s BBQ, Café Ole, The Bread & Butter Bistro, St. Michael’s Alley, Le Beau Rouleau Crepes and Croissants, Top That Pizza,  Blazing Onion Burger Company, Smallcakes A Cupcakery, and Sushi Freak.

“…It’s just the way that business goes sometimes.”  David Rutkauskas on Camille’s Franchisee Closures

As we reported in BEAUTIFUL BRANDS Franchise Complaints, dozens of Camille’s franchisees lost their savings, their retirement accounts, went bankrupt or saw their marriages crumble under the stress of the traumatic business failures.

The Small Business Administration reports that 58% of the SBA-backed loans ended in default… leaving the American taxpayers to pick up the tab and repay the banks.

To a limited extent, David Rutkauskas does acknowledge that he failed his franchisees:

Rutkauskas said he may have oversold the Camille’s franchise…

Rutkauskas takes some blame for the closure of many of the locations. He said the company should have done more to make sure that potential franchisees were prepared to run a restaurant.

Rutkauskas also blames the economy, the banks, and the franchisees themselves.

Despite the fact that significantly more of his franchises met with financial ruin than success, Rutkauskas (who reportedly lives in a $1M mansion and drives a new $100K Mercedes), is unapologetic.

Says Rutkauskas:

“Those restaurants that didn’t make it are just looking for someone to blame.”

ARE YOU FAMILIAR WITH CAMILLE’S SIDEWALK CAFE OR OTHER BEAUTIFUL BRANDS VENTURES?  SHARE A COMMENT BELOW.

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TAGS: Beautiful Brands, BBI, Beautiful Brands International, David Rutkauskas, FreshBerry, Camille’s Sidewalk Cafe, Rex’s Chicken, franchise scam, franchise fraud, Tulsa World, franchise failures, Kyle Arnold, John Stancavage

BEAUTIFUL BRANDS INTERNATIONAL (BBI): Behind the Hype

BEAUTIFUL BRANDS INTERNATIONAL (BBI): Behind the Hype Read more

David Rutkauskas, Beautiful Brands Sued by Master Franchisee

David Rutkauskas, founder and CEO of Beautiful Brands International (BBI), is being sued by Emirates Associated Business Group (EABG), an Abu Dhabi Corporation.

Also named in the suit are:

-  Beautiful Brands International, LLC

-  Dixie Cream Donuts Franchise Systems, LLC

-  Daylight Donut Flour Company, LLC

-  Freshberry Franchise Systems, LLC

-  Camille’s Franchise System, LLC

-  Blazing Onion Franchising, LLC

The suit was filed September 28, 2012 in the Superior Court of Washington for Snohomish County by Howard Morrill & James Jackson of Simburg,  Ketter, Sheppard & Purdy, LLP, the attorneys for the Plaintiff.

The lawsuit alleges that on or about December 27, 2010, EABG entered in a Master Franchise agreement for the United Arab Emirates (UAE), Qatar, Iraq, Jordan, Turkey, Bahrain, Lebanon and Syria.

EABG alleges it paid an initial fee of $500,000 for the right to develop Dixie Cream Donuts and other BBI-owned and BBI partner brand franchises in the Middle East.

The complaint against David Rutkauskas and BBI states “the Agreement explicitly conveys the rights to develop eight additional “Dixie Cream Donuts/Beautiful Brands International franchise brands.”

Those brands include:

• Rex’s Chicken
• FreshBerry
• Greenz Salads
• In The Raw Sushi
• Le Beau Rouleau
• Camille’s Sidewalk Café
• Blazing Onion Burger Company
• Top That Pizza

The suit alleges that EABG was not provided with a Uniform Franchise Offering Circular (UFOC) or a Franchise Disclosure Document (FDD) in connection with its purchase of the franchise rights of the named brands.

The lawsuit against Mr. Rutkauskas & BBI states:

EABG has learned that a third party has been sold franchise rights by Beautiful Brands that conflict with rights purportedly conveyed to EABG under the Agreement.

Beautiful Brands has disavowed material terms of the Agreement and has demanded additional compensation as a condition of fulfilling its obligations…

The foregoing acts and omissions of Dixie Cream, Beautiful Brands and Mr. Rutkauskas constitute actual or anticipatory breaches of the Agreement…

The foregoing acts and omissions constitute violations of the Oklahoma Business Opportunity Sales Act, the Washington Franchise Investment Protection Act and/or the Federal Trade Commission Franchise Rule…

The EABG lawsuit seeks rescission of the master franchise agreement, an award of EABG’s damages, an award of EABG’s costs and attorneys’ fees, and “additional relief as the Court deems just and equitable.”

Read the complaint here (PDF):  EABG v. David Rutkauskas, Beautiful Brands et al

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