CUPPY’S COFFEE: Ochsenreiter Sues Medina & FranSynergy for $132M
October 10, 2008
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(FranchisePick.Com)- 7 months ago Ochsenreiter was excited about all that Medina had accomplished, all it was going to accomplish, and its contribution to the local business economy.
A lot sure can change in 7 months.
In that amount of time, Medina was purchased by Dale Nabors’ Fransynergy, Ochsenreiter was reportedly let go, the staff was cut, the company is beseiged with lawsuits, and Medina’s final contribution to the local economy was renting the trucks to move the Home Office to Muscle Shoals, AL.
Oh, and Donald Ochsenreiter sued Medina & FranSynergy for $132,306,000.
Today, jd reports:
Well, it looks like a new lawsuit has been filed in federal court, this time with Medina and Fransynergy named as defendants:
http://dockets.justia.com/docket/court-flndce/case_no-3:2008cv00457/case_id-51868/
Doing a quick search on the name, it appears that this is the former CFO and Exec VP of the company. Also looks like he is demanding quite a bit of money. No documents have been filed at this time.
Looks like troubles continue to mount for Medina & its owner Fransynergy:
OCHSENREITER v. MEDINA ENTERPRISES, INC. et al
Plaintiff: DONALD C. OCHSENREITER
Defendant: MEDINA ENTERPRISES, INC. and FRANSYNERGY, INC.
Case Number: 3:2008cv00457
Filed: October 9, 2008
Court: Florida Northern District Court
Office: Pensacola Office [ Court Info ]
County: Okaloosa
Nature of Suit: Contract - Other Contract
Cause: 28:1332 Diversity-Breach of Contract
Amount Demanded: $132,306,000.00
The details of the suit are not yet clear, but one thing is: you can never anticipate the next twist or turn in the ongoing saga of Cuppy’s Coffee.
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Photo credit: FranBest.com used by permission
CUPPY’S COFFEE: An Interview With Franchisee David Morgan
October 6, 2008
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David Morgan, a disabled Vietnam veteran and a former policeman, and his wife Lisa dreamed of owning a business in Pensacola to help fund their retirement years. After researching on the Internet and visiting their home office, they cashed in an annuity and gave Elite Manufacturing a $37,500 refundable deposit toward a Cuppy’s Coffee franchise. They were told that in the highly unlikely event their funding did not come through, their downpayment would be returned to them. Unfortunately, their dream of cafe ownership turned into a nightmare as Elite failed to secure them financing, and has refused to return their $37,500 or even return their calls. The Morgans have been told that their money is gone.
UF: What’s your background, David? What were you doing prior to getting involved with Cuppy’s Coffee?
David: I am a Vietnam veteran working part time as a substitute teacher. A car accident ended my career as a police officer, leaving me 100% disabled. Prior to that, I was in restaurant management. My wife works for a local company.
UF: When did you decide you wanted to own your own business? Describe the process you went through to determine which franchise to buy.
David: My wife and I thought it would be a good retirement investment. We looked at several possibilities, made some phone calls, and Cuppy’s sounded like the best one.
UF: What did you find appealing about this type of business?
David: Coffee shops were going up all over our city and seemed to be doing very well. There is no Cuppy’s in Pensacola, so we thought it would be nice to bring in something new and different.
UF: How did you first hear about your specific franchise? What attracted you to the company?
David: We found the company through a franchise website on the Internet. It was a local company and the people you talked with made it sound like a new, but fast growing business.
UF: Describe the company’s sales process and your interaction prior to becoming a franchisee/ depositor
David: In the beginning, they couldn’t have been more helpful. We went to Ft Walton Beach and were given a tour of the business and everyone was so upbeat and excited about us being there. We were told that they had a “special” going on with Elite and if we gave them $37,500.00 before the end of October, we would not have to pay the franchise fee. We asked what would happen if we couldn’t be financed and were told that the contract we would be signing had a clause that stated we would get our money back if financing was a problem. We went through their pre-approval for a loan and were told that we would have no problem getting a loan. So we gave them the money.
UF: What marketing and promotional guidance, programs & support were provided? Were they effective? Why or why not?
David: We were told that once we gave them the money, we would be contacted by every department within the company. We were not. When we asked why no one was calling, we were told that they would not be in contact with us until after we got our financing, which never happened.
UF: When did things start to go wrong? What was it that made you an unhappy franchisee?
David: Things started going wrong the minute we couldn’t get the financing. Every time we called to talk to them, they were unavailable. We would leave messages or e-mail them. Occasionally, we would get a response, but it would just be another lie.
UF: Have you tried to resolve your issues with the franchisor? What was the outcome?
David: I have been trying to resolve the issue since January 2008. I sent in all the requested paper to prove that I had done everything possible to get financed and failed. I talked to Danny Jones and at first he was trying to say I couldn’t get my money back. After many heated phone calls, he said the company did not have the money, but if I signed a contract, they would pay me back in installments for 3 years. I consulted an attorney and was told that I should sign it. In doing so, I was not allowed to discuss the matter with anyone. I am 100% disabled and cashed in an insurance annuity to give them the down payment so I felt like I had no choice if I wanted to get my money back. The payments were to begin on May 1st. On or around May 15th I received a payment. There was no payment in June, but I did get one in July. I have not received any payments since then and all my calls and e-mails are being ignored. They were the ones to breech the contract on the very first payment, it was late. Since we needed the money back, we played their game hoping for our refund. This didn’t happen. At this time, I have sent in complaints to several government agencies that are investigating the company.
UF: What is your current situation? What would you like to see happen at this point?
David: My family and I are not doing very well financially. We are struggling every month to pay the bills. I would like for the company to admit their wrong doings and give back the money that they owe to myself and the other people that trusted them.
UF: Do you think that the franchise concept is a viable? Under what conditions?
David: I think that if you do a lot of research and have money to invest without putting yourself in financial trouble, there are some companies out there that are worth the investment. Cuppy’s Coffee is not one of them.
UF: What were the positive aspects of your experience?
David: There were NO positive aspects.
UF: What mistakes did you make? Looking back, what would you have done differently?
David: I guess believing in people was our first mistake. They made you feel like “part of the family” until they got your money. After that, nothing mattered to them. It didn’t matter if you called and told them you are losing your home or filing bankruptcy, they ignored your calls or e-mails. If they did answer, you were told another lie. I never thought to look on the Internet and research the company. I had no idea that I was not the only one that had thousands of dollars taken from them by this company.
UF: How has your franchise investment decision affected your life?
David: As I said earlier, I am 100% disabled and I gave these people my life savings to start a business. I have no desire or the funding to try to start another business.
UF: What advice would you give to prospective franchise owners? What questions should they ask? What warning signs should they look for?
David: Do a lot of research. Just because a company can flash a trophy from some place like the AAFD, doesn’t make it a good company. Don’t let them pressure you into giving them any money up front. Take your time. If it is a legitimate company, they’ll wait.
UF: Thanks for sharing your story
David: Thank you.
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CUPPY’S COFFEE: Interview with Franchise Owner Joshua Miranda
October 5, 2008
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Interview with Cuppy’s Coffee Franchise Owner Joshua Miranda
October 3, 2008
Kindergarten teacher Joshua Miranda and his wife, nurse Clara Miranda, dreamed of opening a Cuppy’s Coffee cafe and operating a Cuppy’s Coffee mobile unit in Apple Valley, CA. They sent refundable deposits totalling $42,000 to Cuppy’s Coffee affiliate Elite Manufacturing and to Advantage Leasing for the mobil unit. After their financing did not pan out, they were unable to get their refundable deposits returned. Elite Manufacturing has defaulted on their refund agreement, and Advantage Leasing, who is suing Elite, refuses to return the Miranda’s $6,000 until they can get payment from Elite Manufacturing.
Joshua Miranda shares his story with UnhappyFranchisee.com, and offers advice to would-be franchise owners.
UF: What’s your background, Joshua? What were you doing prior to seeking your Cuppy’s Coffee franchise?
Joshua: I’m a kindergarten teacher. Clara, my wife, is a nurse at a convalescent hospital. We are leaders at our jobs and were convinced that as leaders we had the skills to hire managers and run a café business while maintaining our current professions.
UF: When did you decide you wanted to own your own business? Describe the process you went through to determine which franchise to buy.
Joshua: We started with the idea of investing to make extra money. The idea was to use the bank’s money and invest it. So, we opened an equity loan to start investing. We had made a previous real estate investment that went bad; we lost money. We started searching on the Internet and came across the Franchise Gator. Franchise Gator showed all this great opportunities to start a business.
We also had read an article that most rich people were business owners. I made inquiries to several franchises. They all called back including Cuppy’s Coffee. However, Cuppy’s made the most promises and made it sound so easy that I went with them. I didn’t bother to check them out because they were members of the Better Business Bureau, had the seal of the AAFD with the highest score ever achieved for fair franchising standards and were recommended by Franchise Gator, an internet service with guidance and information to franchise seekers. I also took the time to visit a Cuppy’s Coffee store. The owner gave me all the encouragement to go with the business franchise.
UF: How did you first learn about the general concept? What did you find appealing about this type of business?
Joshua: Coffee business here in California was booming. Other coffee businesses were making so much profit, so, we decided to sell it too.
UF: How did you first hear about your specific franchise? What attracted you to the company?
Joshua: The Franchise Gator recommended and introduced us to Cuppy’s Coffee. Cuppy’s was a member of the Better Business Bureau and had the seal of the AAFD with the highest score ever achieved for fair franchising standards. I also took the time to visit a Cuppy’s Coffee store. The owner gave me all the encouragement to go with the businesses. What was also attractive to us is that they stated that they did not charge royalty fees: a very appealing offer to a starting franchisee with limited assets.
UF: Describe the company’s sales process and your interaction prior to becoming a franchisee.
Joshua: A contact person got in touch with me. He answered all my questions very politely and was very encouraging. Every time we talked, I ended up with the feeling that I was going to do great and that things were going to be so easy because the franchise will be with me 100%. They stated that my profits will run from $1,500.00 to $5000.00 per day.
UF: How much have you invested with Cuppy’s Coffee & Elite Manufacturing?
Joshua: We have $42,400.00 invested, total. $37,900.00 toward the Cafe, $6,000.00 toward the Mobil Unit and $1,500.00 Credit.
We applied for the Café Franchise in August 2007. We signed a purchase order in September, 2007 and sent $37,900.00 to Elite. We also signed a lease agreement in October 10, 2007 with Elite and Advantage Leasing Company for the Cuppy’s Coffee Mobil Unit. We were going to operate a Café and a Mobil Unit. We had to send Advantage $6,000.00 as a down payment for the Mobil Unit. Advantage in turn sent Elite $28,327.00 to start building the unit.
UF: How was the company’s training and pre-opening support. Was it a positive experience?
Joshua: I never got into training. As soon as they got my down payment, the calls to me stopped. They became very hard to reach, and when I was able to talk to someone, they were rude.
UF: What marketing and promotional guidance, programs & support were provided? Were they effective? Why or why not?
Joshua: They stated that my financial pre-qualification by them looked very good and was directed to start looking for a business location. They directed me to get contact names and numbers from the prospect business locations that were qualifiers by a ranking sheet they provided me through e-mail. They did not call them as they had promised. I started calling them myself and was able to narrow down a location that I was interested in. The owner provided me with a lease. I e-mailed it to Cuppy’s. They in turn, told me that a lawyer had to review it. They introduced me to a lawyer stating that the lawyer was going to charge to prepare the lease. I made a consultation with the lawyer over the phone but there was never a lease prepared. Now, the lawyer is charging me $1,500.00. I turn to Cuppy’s for answers and never returned my calls.
UF: How was your grand opening and your first year as a franchisee?
Joshua: The grand opening was all a promise and a dream that never came true. I was promised that my grand opening was going to be done in time for the Christmas holiday. They promised that at the grand opening they were going to send the Cuppy’s Mascot. They promised that Cuppy’s trainers were going to help me run the business for at least two weeks making sure everything was going smoothly. They stated that my profits will run from $1,500.00 to $5000.00 per day. They promised me to honor my request to schedule the training during a week of October when I had a week off from teaching. They promised me to accommodate all my family and that it was okay to bring them over. My wife requested her vacation at that time.
And when it was near the time for the training, nobody had talked to me. So, I began to inquire again about it. Phone calls and e-mails were not replied. I finally talked to someone who directed me to the Cuppy’s College director who did not know anything about me. She got upset that I was requesting a date for the training. I explained that those dates were promised to me. She yelled at me accusing me of trying to get ahead of the line. She yelled that it wasn’t fair that I should get ahead of others that were in front of me. Then, she stated that she was going to make contact with me when she had a date for my training. I replied that I was a school teacher and that I couldn’t just leave my class to attend the training on any date. I also told her that my wife had already requested her vacation per instructions from the person who introduced us to Cuppy’s so that she could also attend the training. She didn’t care and referred to me as a person of a retarded mind.
UF: When did things start to go wrong? What was it that made you an unhappy franchisee?
Joshua: I felt I was pressured by Elite to give them money. I still had questions about the company and she wanted the money that same day before 4 p.m. her time. I’m in the Pacific Time which is three hours earlier. They had offered a $3000.00 towards Cuppy’s College traveling expenses but only if I sent them the money that same day. My wife had to request to get off work early for us to wire the money. As soon as I gave them my money, they stopped talking to me. What makes me unhappy is that they are not only stealing hard earned money from good honest people, but robbing them of the American dream: The dream to make it and be successful in the land of opportunity.
UF: Have you tried to resolve your issues with the franchisor? What was the outcome?
Joshua: We have been waiting for a refund since December 2007 when we notified them that the the bank turned down our application. It was until June 9, 2008, six months after begging for our refund, when Elite stated that they will refund us the money in payments. We accepted out of desperation and signed a settlement. They sent their first payment of $1,500.00 in July 2008. Payments of $1,500.00 were due every month after that. We have not received anymore payments. It looks that they are not going to send anymore payments according to a conversation we had with the legal aid in Elite’s office.
The Mobil Unit was not included in the above mentioned settlement. Elite never built the Mobil Unit. So, we ordered a cancellation to Elite and Advantage Leasing. Elite did not return the $28,327.00 to Advantage. Advantage has filed law suit against Elite and charging me interest for the $28,327.00 ($1,617.00 so far). Advantage will not return my $6,000.00 until it recovers it from Elite.
UF: What is your current situation? What would you like to see happen at this point?
Joshua: What they owe me came from an equity loan. I’m making payments on it with interest. I would like to get my money back so that I can pay off this loan and go on with my life. I am willing to help in whatever I can to resolve this situation and the situation of other franchisees.
UF: Do you think that the franchise concept is a viable? Under what conditions?
Joshua: It is viable for the rich who are the only ones who can invest in the good and expensive franchises. The rich could hire expensive lawyers to make sure they don’t get ripped off. For us, who could only rely on good credit, to invest in small unknown franchises through a bank loan, are vulnerable to fraud. It is viable as long as franchises have the seal of the AAFD with the highest score ever achieved for fair franchising standards. Wait a minute!!! Cuppy’s Coffee had that seal!!! How? Why? I think we should make the AAFD responsible for all the damage as well.
UF: What mistakes did you make? Looking back, what would you have done differently?
Joshua: I should have checked this company throughout like the way I’m doing it now and not pay any attention to the fact that they belong to the AAFD and BBB.
UF: How has your franchise investment decision affected your life?
Joshua: I’m broke with my wife and 3 children to support. My paycheck comes and goes and my bank account is going in red numbers.
UF: What advice would you give to prospective franchise owners? What questions should they ask? What warning signs should they look for?
Joshua: Do your research and check the company throughout even if they are affiliated with the Better Business Bureau and other affiliations. If you are financing the business, make sure you are qualified by the loan institution before you do anything. I was qualified by Cuppy’s and they assured me that I had no problems in getting a loan from a bank. It turned out that I didn’t qualify. All the phone calls, money, and time spent was for nothing. A bank should qualify a franchisee before anything else.
UF: Thanks for sharing your story, Joshua.
Joshua: Thank you.
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CUPPY’S COFFEE: Interview with Franchisee Daniel Suarez & Jaime Schneider
October 5, 2008
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Interview with Franchisee Daniel Suarez & Jaime Schneider
October 3, 2008
Overview: In September, 2007 partners Daniel Suarez & Jaime Schneider filled out the applications to become a Cuppy’s franchisee, and sent a $35,900.00 refundable downpayment to Cuppy’s construction affilate (Elite Manufacturing). Suarez & Schneider claim their application was initially approved and were told to begin searching for a location; shortly thereafter they were told, no, they were not eligible for financing (and were “unapproved”). They were told that Elite Manufacturing had spent their downpayment, but would pay them a partial refund of $35,000 over 10 months. After receiving 3 payments totalling $10,500, the payments stopped and their calls were not returned. According to Suarez & Schneider, Elite Manufacturing still owes them $24,500.00
In this interview with UnhappyFranchisee.com, partner Daniel Suarez shares his story and his due diligence advice for prospective franchisees.
UF: Thanks for your time, Daniel. What’s your background? What were you doing prior to seeking a franchise?
Daniel: I have a computer science background, attended New Jersey Institute of Technology. The last 8 years I have worked in Sales. Currently working for Wachovia soon to be Wells Fargo.
Jaime: Prior to researching potential franchises, Daniel and I both worked in the automotive industry. We both decided it was time for a change and thought it would be nice to be our own boss.
UF: When did you decide you wanted to own your own business?
Daniel: I decided I wanted a franchise after leaving one job and not being happy working for my then present employer. We did lots of research into different industries and come to the conclusion that a Coffee franchise would be with in our budget and would have high probability of success.
Jaime: We did a lot of research. We decided coffee was the way to go with it being such a popular commodity. After seeing all the accreditations Cuppy’s received we decided to proceed with them. We were impressed by the awards and accreditations Cuppy’s obtained. They were considered the fairest franchise.
UF: How did you first learn about the general concept? What did you find appealing about this type of business?
Daniel: I find the concept of owning a franchise appealing because the difficult part of establishing relationships with distributors, establishing a brand/name recognition, having the startup process established, and having the initial franchise gone though making initial mistakes all done is very appealing. These headaches are a non issue.
UF: How did you first hear about your specific franchise? What attracted you to Cuppy’s Coffee?
Daniel: After lots of research and online comparison we selected Cuppy’s because it appeared to have an attractive system that worked. I spoke to present owners and they had good things to say. They advertise awards received. Their prices and cost of ownership were in line with others and the deciding factor was when one of their ‘partners’ (Elite) paid the initial $25,000.00 franchise fee for us if we made an almost immediate commitment.
UF: Describe the company’s sales process and your interaction prior to becoming a franchisee.
Daniel: Sales process was smooth and professional. Prompt interaction and great communication. When searching for a franchise location their real state team was very helpful in following thru but sometimes lacking in coming up with locations of their so we did 90% of the searching. No issues with us doing our own looking.
Jaime: At the beginning Cuppy’s and Elite Manufacturing employees were polite, helpful and energetic. They helped to walk us through each process. After 5 months of working with them, the daily phone calls stopped and when we reached out to them we were told that our financing did not go through after we were already told that we were approved. At that point, we were no longer assisted in any way. They did not care to help us with the refund of our deposit. It was impossible to get a hold of them by phone or email. We went from being the people they spoke to everyday to the people they could not even respond to with an email.
UF: When did things start to go wrong?
Daniel: Here is our story in a nutshell: September of 2007 we filled out the applications to become a Cuppy’s franchisee. We were told we were approved and that we could begin our search for a location. After 4 months into the process we received a call stating that for some reason we were no longer eligible for financing.
At that time we requested a refund from Elite Manufacturing in the amount of $35,900.00 which was the amount we gave as a deposit for our Cuppy’s drive thru unit. We were told that the process would take anywhere from 4 to 6 weeks. After the six weeks with no response we again inquired about our refund through Mr. Danny Jones at Elite.
We were offered a payment schedule over a 24 month period to get our money back. We refused the offer and sought legal advice. We tried again to make an agreement with Elite and finally decided to sign an agreement that stated we would receive $35,000.00 over a 10 month period. We did receive 3 payments for a total refund of $10,500.00. Then the money just stopped coming in.
We made several phone calls to Danny Jones and sent several emails. I was told by Mr. Jones that they just did not have the money because they were behind with other debts owed. It has now been 4 months without a payment or response from Elite. We are still owed $24,500.00. Now when we try to contact them there is only a recording you get and no one returns the call.
Jaime: They were very helpful and positive in the beginning but once they had our money it was as if we did not exist to them.
UF: What is your current situation? What would you like to see happen at this point?
Jaime: I would like to see the money that is owed to me returned. Daniel and I are out $24,500.00.
UF: Do you think that the franchise concept is a viable? Under what conditions?
Daniel: Sure. You need to find the right franchise and ask the right questions. Do a lot of research. It is always a risk but I’m sure with the right franchise it will pay off.
UF: What mistakes did you make? Looking back, what would you have done differently?
Daniel: We did a lot of research so I think we did the right thing it that aspect. When doing the research we did fine one (1) posting that was negative about Cuppy’s when it was Java Jo’z. But it was one posting that now has multiplied to scary numbers.
Jaime: I guess our downfall was not contacting or visiting actual open and running Cuppy’s. We spoke to the references given to us by Cuppy’s…that was pretty silly of us looking back now.
UF: How has your franchise investment decision affected your life?
Daniel: Jaime used her entire savings! I took out a 48 month personal loan and refinanced my home prematurely and paid about $6,000.00 (I was only 12 months away from the premature date to expire) in doing so. I am now paying off my loan plus interest and increased my mortgage payment. I know have a ~$700 monthly bill that is towards nothing.
Jaime: Our lives are affected everyday. My savings of my hard earned money went toward this investment and Daniel took out a loan for the money which he is still paying back. It is unfortunate that Cuppy’s and Elite have gotten away with this. I know that we are not the only ones out there suffering and I just hope that there is a resolution in the future.
UF: What advice would you give to prospective franchise owners?
Daniel: Research, research, research! Although, I really do feel that Jaime and I did that and we were still misled. When you read about a franchise receiving awards and accreditations you assume it is a reputable company. That was not the case with Cuppy’s and Elite. I guess you can never be sure but I would definitely tell others to go to the headquarters as well as visit as many of the actual up and running stores and ask questions.
Also, I would strongly suggest a franchise lawyer. We decided not to hire one because our budget was tight. I look back now and highly regret that. However, I also think that a lawyer would have looked over the franchise agreement, taking a look at their reputation as we had done, and given us the go ahead. So, who’s to know what the lawyer would have said.
Jaime: When you read about a Franchise receiving awards and accreditations you assume it is a reputable company. That was not the case with Cuppy’s and Elite. I guess you can never be sure but I would definitely tell others to go to the headquarters as well as visit as many of the actual up and running stores and ask questions.
UF: Thanks for sharing your story, Daniel & Jaime.
Daniel: Thank you.
Jaime: Thanks for the opportunity.
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CUPPY’S COFFEE: Dale Nabors’ Private Conference Call
October 4, 2008
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Friday, October 3rd, Dale Nabors held short, invitation-only conference calls with two groups: unhappy Cuppy’s Coffee franchisees who have opened, and unhappy Cuppy’s Coffee franchisees who have not yet opened. There was no conference call for the third group: unhappy franchise depositers whose $35K - $100K+ refundable deposits Cuppy’s Coffee/Elite Manufacturing felt free to spend on other things.
Reportedly, Dale’s bold action plan includes actually talking to the franchisees whose financial futures are teetering on disaster. According to Jim: “The Cuppy’s corp office will be in touch early next week to begin scheduling calls.”
Of course, Dale reportedly blamed the “negative blogging,” in part, for the current situation (perhaps signaling a new Fransynergy motto: Believe, Shut your Pie Hole, and Succeed). Attendees immediately heeded his plea with negative blogging.
Jim writes:
It lasted about 15 mins. He said he felt like he failed particularly in the area of communication. (Really? nah…) He and the corporate team (team?) are going to work at responding to calls and emails on a more timely basis.
I think I heard that Dale said he is working with their banks and the franchisee banks to attempt to restore confidence in the brand. He requested a stoppage of negative blogging to give them some time to move past where we are today.
He hopes to announce that the SBT suit is resolved sometime next week. He intends to meet with each franchisee re: where they are in the process and what they need to get back on track to opening the store.
The Cuppy’s corp office will be in touch early next week to begin scheduling calls.
And then a bunch of stuff about how we need to work together to make this the best specialty coffee brand in the US.
Oh - and have a great weekend.
Good luck to him and the Cuppy’s “family.”
He left out believe and succeed…hmm
guest writes:
We just heard Dale on the conference call & all I have to say is… WHAT BULLSHIT! DALE HAS BEEN MEETING WITH MORG.
jd writes:
As I stated elsewhere, where was this six months ago?
He’s asking people to stop the negative blogging, but people have heard that before when they signed their ‘refund’ agreements, and things quieted down until they stopped getting paid.
Current and prior management has brought this onslaught on themselves. People that haven’t opened their stores yet need to look at the economics of the situations. You could take the $40k loss on your current investment and open independently, and you would probably save $50k on the buildout. Your $10k ahead already.
Quit letting Dale blow smoke up your ***
David writes:
…I will not stop the negative blogging or trying everything within my power to see that they get what they deserve for taking money from people and not feeling like they need to give it back.
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POSITIVE ASPECTS OF YOUR CUPPY’S COFFEE FRANCHISE EXPERIENCE!
123 FIT: Franchisees Debate Viability of Franchise, 30 Minute Fitness Biz
October 2, 2008
(Franchise Pick) Related reading:
Will the 1-2-3 Fit Franchise be the Quiznos of Health Clubs? Is That a Good Thing?
9,509,657 Reasons to Read Disclosure Documents Before Investing
"Quiznos of Fitness" 1-2-3 Fit in Financial Trouble
"They Lie": 1-2-3 Fit Franchise Owners Sound Off
The 123 FIT organization and franchise concept has taken some heat from commenters on this blog - in part because it is owned and operated by the much maligned (in franchise circles) executives of Quiznos. But 123 FIT is not an isolated target for criticism; the very viability of the women’s 30-Minute circuit training club as a sustainable business model has been called into question. Industry critics and failed franchisees alike complain of high recruitment costs, low retention rates, oversaturation of the market and profit centers that are too limited and too small.
Over at Franchise Pick, commenter Pete (anon) claims to be a successful 123 FIT franchise owner. He contends that the 123 Fit company have been given a bad rap, that the 123 Fit concept is sound and, contrary to what many would have you believe, women’s circuit training is "hot."
Read his defense of 123 Fit and the 30 Minute Circuit Training concept here:
123 FIT: Franchisees Debate Viability of Franchise, 30 Minute Fitness Biz
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BUTTERFLY LIFE: Interview With Franchisee Matt Wilson
September 30, 2008
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After attending a well-orchestrated sales seminar, Atlanta-area franchise owner Matt Wilson and his wife joined Butterfly Life with the dream of being their own boss, helping women improve their health, and getting a good return on their investment. Once they opened their club, they claim they received no help or support in overcoming their branding and marketing challenges. Their club closed in less than a year.
UnhappyFranchisee.com asked Matt to share the lessons of his experience, and his advice for prospective franchise owners.
UF: Matt, what was your background prior to joining Butterfly Life? Did you have industry experience?
MATT: My wife, who owned and operated our BFL franchise, has in excess of 20 years experience in a variety of customer service positions including 10 years with a major cellular communications company. For several years prior to our investment in a BFL franchise she was the office manager for a successful salon. For myself, I have 20 years experience working in a variety of sales, marketing, educational, technical and business management roles. Neither of us had experience in the women’s fitness industry, however, my wife has been a patron of competing club’s and national diet programs having lost 40 lbs as a result.
UF: When did you decide to join Butterfly Life? Describe the process.
MATT: After attending a franchise seminar in August 2006 in Atlanta, GA, conducted by Taylor Golob, Cheryl Hoke and via video conference, Mark Golob. Around the time of the seminar we were actively investigating a Curves franchise and saw a BFL seminar commercial on television. That led us to check out the company web site and sign up for the seminar. Taylor and Cheryl put on a first class, well rehearsed and choreographed sales seminar. Towards the end they incorporated connecting to Mark Golob via video conference, who delivered a rehearsed speech underscoring the points made by Taylor and Cheryl. When all was said and done it appeared the investment was a low risk, high return venture. Especially given that Atlanta was a burgeoning market for the brand and BFL appeared committed to developing the market for the long run.
The appeal for us and we believe with many investors, was with the prospect of being able to help women improve their health while being your own boss. The bonus was there was what seemed to be a good return on the investment. Reality was much different.
UF: How was the company’s training and pre-opening support? Was it a positive experience?
MATT: The short answer is it served its purpose. That is it did a good job to reinforce the sales pitch we had bought into. It did little to prepare the new franchisee for what was in store. Training focused on sales and marketing your club and ways to increase membership, particularly prior to opening. Overall it was a positive experience and left us with the impression that corporate was there to help us in any way all we had to do was ask. That changed very shortly after our first royalty payment.
UF: What marketing and promotional guidance, programs & support were provided? Were they effective? Why or why not?
MATT: Beyond the training conducted at corporate there was a regular direct mail piece published to all clubs and little else. The materials provided by BFL were ineffective at best. Given my background with sales and marketing I conducted a detailed review of our marketplace, competitors, ads, programs and promotions. In one particular case, BFL ran a promotion of “no enrollment fee” and another with three months free. Competing clubs in the area had no enrollment fees, ever and were offering lower monthly rates and more months free. Maybe these were “new” concepts in California, but they were tired ones in Atlanta. As a result we developed marketing pieces that would fit our area better and attempted to have these approved by BFL corporate.
During University training at BFL they had told us getting our own marketing materials approved was not difficult as long as it maintained the brand image. Again reality was much different. BFL consistently stated their materials and programs were working everywhere, except for us, so we must be doing something wrong. They consequently never approved our materials so we were stuck with their tired pieces.
UF: How was your grand opening and your first year as a franchisee?
MATT: Grand opening and that month were great. Signed up 30 members and it looked like we were on our way. Member sales went down from there and the club didn’t last the year.
UF: Was the ongoing support what you expected?
MATT: No. We submitted reports to BFL corporate on a monthly basis reporting on our progress. Marketing efforts, promotions and more importantly new member sales. BFL receives this from all clubs. The fact our membership number were plummeting was in black and white. BFL informed us the clubs around us were doing great and they didn’t know what our problem was. Their district sales manager came to our club on two occasions in our early days of opening to fulfill the obligation of BFL to provide on site support for three days. While she talked a good game, we signed zero new members as a result of her “support”. Ten months after we closed our club, all Georgia clubs (6-8 at peak) are now closed.
UF: Have you tried to resolve your issues with the franchisor? What was the outcome?
MATT: Corporate was unresponsive to input regarding regional marketing programs or materials. Otherwise the “issue” with Butterfly Life was their complete failure to effectively build the brand and ensure the success of the franchise network. Resolving this seemed unlikely.
UF: How has your franchise investment decision affected your life? What is your current situation?
MATT: Strained marriage, emotional distress, depression and financial ruin to name a few. This single decision and the year and a half we were a part of it will take tenfold to recover from. Currently we are pursuing compensation from BFL through our support of the AAFD Butterfly Life Chapter and their arbitration case.
UF: Do you think that the franchise concept is viable? Under what conditions?
MATT: Yes, clearly there are some franchise concepts that are successful. The key is to have a franchisor that is genuinely committed to the success of the concept and franchise network. That requires more that a fancy web site and polished sales pitch. It requires focus on controlled growth and not losing sight of what got the brand to that point.
UF: What mistakes did you make? Looking back, what would you have done differently?
MATT: Not adequate research and due diligence investigating the company, executives and industry. We performed what we felt was a thorough look into the company and employed various business consultants to help guide us along the way, but that did not turn up anything overly alarming.
UF: What advice would you give to prospective franchise owners?
MATT: Do your due diligence on the franchisor and their management, if you see any red flags, dig deeper. Hire an attorney and use him/her on every decision, signature, document, contract and aspect of your start in the franchise world. Don’t give into the hype. If the opportunity really is as good as it sounds, it will still be there next week, month and year. If it isn’t, do you really want to get into it now? Some signs to look for: too fast growth, rapid expansion of area representative network and lots of new staff at corporate.
UF: Was there a positive aspect of your experience?
MATT: To be completely honest, I can’t think of one.
UF: Thanks for sharing your story, Matt.
MATT: Thank you.
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CUPPY’S COFFEE: Interview with Franchisee Mike Herber
September 22, 2008
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Name: Mike Herber
Location: Richland, WA
Franchise: Cuppy’s Coffee & More
Summary: Mike Heber decided to open a Cuppy’s Coffee franchise in Richland, WA. He paid a $32,000 refundable deposit to Elite Manufacturing (the construction affiliate of Cuppy’s Coffee). The deposit was to be returned if Elite’s lenders were not able to secure financing for the rest of the investment. When Heber was unable to obtain funding, Elite refused to return $15,000 saying they had paid the $15K franchise fee to sister company Cuppy’s Coffee. Elite agreed to pay $1690 per month for 10 months, but made fewer than half the payments before cutting off communication with Heber.
In this interview with Unhappy Franchisee, Mike Heber describes the process he went through in investing with Cuppy’s Coffee and the unfortunate outcome of that decision. Mike Heber also offers advice to help prospective franchise owners avoid the same mistakes he made.
Unhappy Franchisee: What’s your background, Mike? What were you doing prior to owning your franchise?
Mike Heber: Prior to this mistake, I worked in retail for 25 years as an Operations/Expense/HR regional manager.
Unhappy Franchisee: When did you decide you wanted to own your own business? How’d you learn about the Cuppy’s Coffee franchise?
Mike Heber: I’ve always thought about having my own business. My father’s family was in business for themselves and it always was attractive to me. I was just waiting for the right time and opportunity. I looked at several different opportunities after I got out of retail. Many were so expensive though.
I believe I found out about the opportunity from an ad I saw in a franchise information site. It listed all types of franchises and their investment, etc. I was immediately drawn in by their attentiveness toward my contact them, promptly returned calls, VERY friendly staff and fellow franchise holders, lots of information from corporate. Cuppy’s seemed like a more reasonable investment. They were just getting off the ground, so it seemed that the time was right.
Unhappy Franchisee: What really sold you on Cuppy’s Coffee?
Mike Heber: I was attracted by their openness and willingness to communicate and pass along information. Everyone was very friendly and went out of their way to help and answer questions. I began talking with a tenured franchisee who was very nice. Welcomed my questions and had a very favorable answer to every inquiry. I talked with Theresa St. Claire at Elite several times as well; again very nice…at first.
They seemed very approachable and helpful; all this BEFORE they got my money. Everything changed after that.
Unhappy Franchisee: So when - and how much - did you pay them?
Mike Heber: I paid $32,000 in October 2006; this was stated to be an advance deposit for my Elite build-out of a Cuppy’s Café. By making this deposit, my $15,000 franchise fee would be "waived" and paid for by Elite.
Unhappy Franchisee: Did things change once they had your deposit?
Mike Heber: Everything was positive, until my project went to Funding Solutions for credit approval. Soon after I sent in my deposit and my project went to Funding Solutions things started to go downhill. No calls returned, no information, things slowed way down, more “problems” and “challenges” appeared.
My credit and funds available never changed from the time I first started communications with Elite/Cuppy’s. Soon however, they wanted more down than my P.O. stated and it went downhill from there. They admitted mistakes were made in my paperwork, and things just unraveled.
Unhappy Franchisee: So then you asked for you "refundable" deposit to be refunded, as agreed?
Mike Heber: Yes. Originally, Elite had said that with that the $15,000 Cuppy’s franchise fee would be "waived" and paid for me by Elite. However, when my “deal” fell through, they said $15,000 of the $32,000 was paid to Cuppy’s as the franchise fee and was not refundable under any conditions. Beginning in May 2007, they agreed to pay me $1690 a month for 10 months.
As part of that agreement, I had to agree not to say or write anything negative about Cuppy’s Coffee, Elite Manufacturing, or any of the people involved.
Unhappy Franchisee: Did Elite Manufacturing honor their agreement?
Mike Heber: It has now been 16 months and I have only received a little under half my money back.
Unhappy Franchisee: What is your current situation? What would you like to see happen at this point?
Mike Heber: I want the rest of my money back; this, as with many other investors, was my life’s savings. All I want at this point is to get my money and for the business to dissolve.
Unhappy Franchisee: How has your franchise investment decision affected your life?
Mike Heber: I’m frustrated, very angry, and now totally disillusioned with the American Dream, government’s ability to protect innocent people from these scams and what a contract means (basically nothing, if from a business). I never expected to get ripped off and taken advantage of such as I did with Elite. Why they have been able to continue this scam and deceit is beyond me.
Unlike some, I haven’t lost my home. I have however suffered a separation and divorce through the ordeal and my son has been unable to go to college because the balance has not been returned to me. The decision to join the Cuppy’s/Elite family has only had negative consequences on my life.
Unhappy Franchisee: What mistakes did you make? Looking back, what would you have done differently?
Mike Heber: I did some on-line inquiries, but at that time, Fall 2006, not much negative had happened that I could find. I even visited a franchise owner in Arizona. Everything seemed too good and I should have followed my instincts to maybe walk away from this opportunity that seemed too good to be true.
Unhappy Franchisee: What advice would you give to prospective franchise owners?
Mike Heber: Research, Research, Research. Then more research. Do your homework. Travel and look at several different locations and franchisees. Scrutinize paperwork and documents for any inconsistencies. Ask for franchisee references and question exhaustively.
Unhappy Franchisee: Thanks for your time and your insights, Mike.
Mike Heber: Thank you.
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SMC Specialty Merchandise Corporation: Start a Business for $25?
September 19, 2008
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Have you had any experience with the heavily hyped and infomercialed SMC Specialty Merchandise Corporation business opportunity? The infomercial stars pitchman huckster Tom Bosley, who was the father on Happy Days. They boast that you can start a business for only $25 and make thousands your first week or even day.
What do you think? Leave a comment below.
Here’re a few comments from unhappy SMC investors:
I also fell prey. To this very well orginized scam! This is what they pulled on Me. First SMC withheld the starter kit. Till My electronic check cleared, The transaction was complete and posted in My bank. The follwoing day. I received My kit 27 days later. Called to let them know and schedule thier appointment. Three days later they called. Two days after the scheduled date. Then the following day. Smc took another $39.95 out of My account. So I called them they said, ‘Don’t worry we didn’t set Your start date yet’. I was lied to again right then, They did start it The day they cashed the check!. So even when I did cancel My membership. They called My house to inform Me. I still owe them $400.00. I don’t think so. They aren not getting another penny from Me. Stay away from this scam company!!!!!!. John Round Lake Beach, IL
The 30-day trial is a scam. They start the trial on the date that the ship the membership kit. By the time you get the kit, and finally get your ‘business coach’ on the phone, you already lost 15 days of your trial time. Then if you want to cancel before the trial is up, they make it a TOTAL NIGHTMARE. You even have to send back the promotional literature, and the catalog. They tell you that your free ‘gift card redemption’ site will be automatically cancelled but thats not true either. You have to call up eMerchantClub and cancel it manually because they will contiue to charge you $29.95 a month for the stupid, free cookie-cutter site they give you when you sign up.
SMC’s entire deal is about selling you a $1,500.00 website that only sells to people who either buy gift card from you, or register on the site and receive a ‘free’ $10.00 gift card, that of course you have to buy in advance. Either way, you pay. The kicker is that they refuse to give permission for you to build your own website and host it yourself, because they want to charge you $29.95 a month to host the useless $1,500.00 website.
SMC’s product line is some of the worst junk I’ve seen in any mail order catalog. Its all stuff no one wants. If anyone wanted this crap, SMC wouldn’t have warehouses full of it.
The testimonials on their website are obviously fake. They actually have different people with the exact, same word-for-word testimonials, bragging about the exact same amount of money they supposedly made over the exact, same period of time. Its like they take the same testimonial, paste it all over the page, and just change the picture.
Our coach was annoying and rude. As soon as she realized we weren’t stupid enough to go for the $1,500.00 website, she shut up and wouldn’t go any further with us, even after we told her we wanted to do other, non-internet programs that they offer. She actually tried to have us set up another appointment to talk to her a week later, so that our trial period would expire, and we’d be locked into paying the membership for a year. We began the cancellation process immediately.
If you want to make some money drop shipping on the internet, there are lots of drop-ship suplliers out there. All you have to do is some research, and stay away from the ones that offer you a website. Eb, New York, New York
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CORK & OLIVE: Ex-Employee Has no Sympathy for Franchisees
September 19, 2008
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Responding to the post Cork & Olive’s Probst Abandons Franchisees, Cork & Olive ex-employee "H" states that it is karma, not failed franchisor Michael Probst, that’s to blame for the woes of Cork & Olive franchisees.
"H" contends that the very idea of the Cork & Olive wine store is a sham designed to use upscale decor and salesmanship to trick vino newbies into overpaying for cheap wine. "H" claims that Cork & Olive franchisees are hypocrites who pirate copyrighted music and hoodwink unsophisticated customers, yet are morally outraged to find that they’ve been bamboozled. What do you think?
Writes "H":
As a former store-level employee, I have a hard time feeling bad for the franchisees. Sure, you were ripped off in the worst of ways, but I’d have to say that the responsibility for not spotting a fraud falls on you. Working in the store, I knew things weren’t kosher from the very beginning when I noticed that our official store play list included original Beatles recordings. Nobody can afford the licensing for that, not even major motion pictures like ‘I Am Sam.’
Our markup was astronomical, completely unprecedented, and basically unfounded. Our pricing was entirely random, based solely upon Stephanie’s opinions of what people would pay. Stephanie, a woman with literally no knowledge of wine, has no business guessing such things. The average cost to the company was $3 - $4 per bottle. We sold some bottles for $9, most for about $15, and some for $30 or more. This was absolutely inexplicable. There was no standard percentage for the markup, just whatever we thought we could get.
How one $3 bottle of wine seems worth $32 while another is worth only $8 is beyond me, but it should have raised serious concerns among people considering the $300,000 price tag for one of these stores. With a little research, you would have found that the average wine shop shoots for around a 33% profit margin per bottle while we were aiming for 70% or more on AVERAGE!
This might have seemed like a really great way to make a lot of money, but if you weren’t buying a business you knew nothing about, you would have realized that it actually equates to selling a low quality product at the price point of a high quality product. In other words, you’re hoping to prey on the average consumer’s lack of knowledge about the difference between cheap wine and fine wine. You made them feel like they were purchasing a quality product by showing them a pretty store with a neat layout and free samples, but now you’re mad that Michael and his goons swindled you with a similar set of smoke and mirrors. Excuse me if I’m not overwhelmed with sympathy, but it seems an awful lot like karma to me.
I know nothing about cars, so I’m not going to go into business as a mechanic. I don’t understand the stock market, so I’m not going to set up shop as a financial advisor. Wine novices have no business running wine shops, and if they choose to do so, they shouldn’t be mad when things go poorly.
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