LITTLE SUNSHINE’S PLAYHOUSE: Stormclouds, Franchise Lawsuits
March 30, 2010
Little Sunshine’s Playhouse & Preschool franchise website welcomes visitors with a fairy tale:
“Once upon a time there was a happy place where children played in a kingdom of creative encouragement. Where Little Sunshine, Riley B and all their friends across the land grew by leaps and bounds in their magical home away from home.”
However, the Little Sunshine’s Playhouse fairy tale franchise has turned into a nightmare for both the fledgling franchisor and its early franchisees. The franchisor alleges two of her first franchisees refused to pay royalties and renamed their day care centers, but continue to use her trade dress. She is suing them for trademark infringement.
The franchisees accuse the Little Sunshine’s Playhouse franchisor of not providing agreed services and abandoning them by moving to Hawaii.
Little Sunshine’s Enterprises Inc. complaint against its franchisees
In “Little Sunshine’s franchisees split off” the Missouri’s Springfield Business Journal reports:
Springfield daycare franchisor Little Sunshine’s Enterprises Inc. has filed federal trademark-infringement lawsuits against two former franchisees, and the defendants have responded with counterclaims.
Two suits in U.S. District Court for the Western District of Missouri name Springfield entities Paschke Enterprises LLC and Brodersen Wyrsch LLC as defendants, and seek a combined $200,000 for alleged trademark infringement by the franchisees, which have since dropped the Little Sunshine’s name by court order.
“They initiated a cooperative royalty strike,” said Little Sunshine’s Enterprises owner Rochette Dahler, claiming the franchisees in August stopped paying her company’s 6 percent royalty fee, which amounted to $2,500 to $4,500 per month.
Paschke Enterprises operates Storybook Children’s Academy in south Springfield, and Brodersen Wyrsch operates Pinnacle Children’s Academy in Rogers, Ark.
Rochette Dahler personally operates two Little Sunshine’s Playhouse centers and franchisee Joyce Harrington runs the third location. Dahler founded the concept in 2002 and began selling franchises in 2005.
Franchisees’ complaints against Little Sunshine’s Enterprises Inc. & Rochette Dahler
The counterclaim filed by Paschke Enterprises makes several claims against Dahler:
That “…Dahler was not available to assist with the operation of the facilities, that she moved to Hawaii and was not available to provide support, and that she made false representations regarding Paschke Enterprises’ Cardinal Street location.”
That Dahler “misrepresented the number of children that would be enrolled in both locations as 80, when in fact the maximum licensed capacity was 72.”
That Dahler “misrepresented income generated from certain government programs, including subsidies for low-income families, food reimbursements and grants, which were all unavailable at the Cardinal location.”
That Little Sunshine’s Enterprises “failed to live up to the franchise agreement terms by failing to send an experienced school administrator to the Cardinal location for a week before and two weeks after it opened; failing to assist with grant writing; and failing to make Little Sunshine’s corporate staff accessible.”
According to the Springfield Business Journal article, the counterclaim alleges that the Cardinal location “has never made profit and has experienced substantial losses since beginning operation.”
Ain’t no sunshine when she’s gone…
Franchisee Paschke claims to have invested $435,000 in the once-franchised daycare location and has eight years remaining on a $10,500 monthly lease. However, her ex-franchisor and bitter courtroom enemy Dahler said she has signed a contract to purchase the land and building occupied by Paschke Enterprise’s day care from the landlord Tillman.
Hell hath no fury like a preschool teacher – or franchisor – scorned.
ARE YOU FAMILIAR WITH THE LITTLE SUNSHINE’S PLAYHOUSE & PRESCHOOL FRANCHISE? SHARE A COMMENT BELOW!
Rochette Dahler here- CEO of Little Sunshine’s Enterprises. This article gave me a bit of a chuckle as it is pretty dramatized…props to the writer for some creativity on that!
I wanted to clear up a few items…I am an extremely active CEO and am immersed in daily operations at the LSP Schools via personal visits quarterly, Skpye communications with administrators, Kiddie Cams in classrooms, SharePoint and MS Exchange…although I do enjoy the beach view in Hawaii, and won’t apologize for that. My contractual obligations certainly don’t require that I reside in any specific location; in fact few franchisors reside in close proximity to their franchisees in operation.
I have not only the right but the obligation to protect the LSP brand by enforcing our franchise contract. I’m very much looking forward to sitting these individuals in front of a judge to account for their recent actions.
And just to set the record straight…all is GREAT at Little Sunshine’s Playhouse! I love my company and the work that our tremendous teachers and administrators carry out is something I’ll forever be proud of. LSP is truly such a blessing in my life and I thank God for giving me the strength to stand up for what is right and fair in regard to these two cases.
Let the cards fall where they may!
Rochette Dahler
Rochette:
Thanks for visiting and commenting.
Thanks also for the props, but this IS a pretty dramatic story… and one that’s unlikely to have a positive outcome for anyone involved (except the lawyers). It’s hard to imagine these two will succeed at building their businesses with one hand and fighting lawsuits with the other (especially when you become the landlord-from-hell for poor Paschke).
And even if you win (and inherit Paschke’s built-out space – a possibility?), you’ll not only bear the costs and distraction of this battle, you’ll have done some real damage to your reputation as well as that of the Little Sunshine’s franchise brand.
It appears that you’ve had only 3 franchisees and already racked up 4 lawsuits (your two, and the two counterclaims). Not only is that one for the record books (and the franchise disclosure document), but it would be enough to sour most new franchisors on franchising altogether. But it seems like you haven’t abandoned the idea of franchising, and you still seem to have plenty of fight in you. Are you still selling or planning to sell franchises?
What went wrong with these franchise relationships? Did you sign up the wrong franchisees? Did they have the wrong expectations? Should you have been more hands-on when things began to sour to keep it from getting this bad? Did you have bad advisors or brokers involved?
What are the lessons here… for prospective franchisees and young franchisors?
(By the way, I think having HQ in Hawaii is a definite plus for franchisees…)
I will be happy to comment on lessons once there’s an outcome. I know that positive can and will come of this (however, you’re right attorneys are doing well also). I maintain a very calming faith that all things happen for a reason. For me this is as much a matter of principal as anything else. There does not have to be a “winner” in order for me to sleep better at night. My focus is on doing the right thing, and my belief is that everything else will fall into place. If I turn out to be wrong, and they find a way to wiggle out of their contractual responsibilities, I will maintain that outlook in all respects in my life and have no regrets.
Not sure where the data is coming from…a couple facts are slightly off. We’ve granted 9 franchisees and have two lawsuits (both filed by me- and yes both franchisees filed counter claims- of course). We also have current franchisees and past franchisees (that were bought out) that are testifying in court on our behalf.
This is a matter of good ol’ contractual obligations; certainly having nothing to do with franchisee expectations, advisors, or brokers. Really it’s as simple as a young franchisor standing up and enforcing its contracts. That is sometimes not a very popular position…but it is healthy and vital for the company as a whole.
We announced in early 2009 our decision to discontinue selling franchises and grow the company in a more corporate manner. That operational decision pre-dated this litigation by many months. I do however believe this decision enticed this couple of franchisees to test whether or not we’d enforce our contract. It costs much more to enforce our contract (especially since we’re no longer franchising) than to just let them operate without paying royalties. That is the gamble they took.
I sure appreciate the conversation! And, I’m grateful to be allowed to comment. I will be happy to comment again once the hearings have completed.
Thank you very much!
Rochette Dahler
“For me this is as much a matter of principal as anything else.”
Are you sure you’re standing up for the right principal, though, Rochette?
It appears these individuals signed on as early franchise owners with the belief that you were going to grow a regional or national franchise system – and they were going to have the benefit of a network of fellow franchise owners, and a growing franchise advertising fund, and the increased name recognition, etc. that comes with franchised growth.
They took a chance on you and your vision of growing a franchise chain. Then you decided you didn’t want to franchise… you bought out or otherwise released all but 3 franchisees and they were left to be the only ones of their kind – the last unicorns. No more franchise meetings, no more franchise programs, etc…. an exclusive focus on corporate growth… If you were in that situation, wouldn’t you have the feeling that this is not what you signed up for? Wouldn’t you feel abandoned – or a victim of bait-and-switch?
I’m admittedly short on specific facts and am just surmising from your comments & the SBJ article. And it’s unlikely you were contractually obligated to continue franchising if you didn’t want to. However, wouldn’t giving the few remaining franchisees the choice to be released from their franchise agreements and obligations be the honorable – and principaled – thing to do?
Who said they were not given choices or alternatives?…many incorrect assumptions above. You do appear to be quite short on facts. I know your role is to play devils advocate and generate a dramatic storyline. Unforunatley this is not really that meaty and pretty straight forward. The cases will stand for themeselves.
Rochette:
I am not trying to play devil’s advocate (in this case), just trying to process what I’ve read and heard and have a discussion. Why not correct my mistaken assumptions – that’s the nature of a conversation, right?
Believe me, if I am making incorrect assumptions about you and the situation with your dispute, the other readers of the Springfield Business Journal article (or this post) are too.
I follow a lot of these cases. You say “The cases will stand for themselves.” In my experience, that’s incorrect. Settlements are rarely black & white, and terms are generally not made public. There’s no final bell, no referee raising the glove of the victor.
It’s ironic that people choose to sue to vindicate themselves, but they don’t want to discuss their principals during the case and don’t get the opportunity to after it. You are free to set the record straight here on anything being misconstrued.
why should franchisees pay franchise royalties when theres no franchise program? lots of real, legit franchisors charge the same royalty or less and provide a crapload of services, program and support. What are these franchisees supposed to be getting in return? The right to use an unknown brand and trademarked wallpaper?
look, if little miss sunshine was providing 6% or more of value or more these guys would still want to be franchisees and would gladly pay royalties. They wouldn’t have had to spend $$ to develop their own logos, websites, etc. too many franchisors she thinks her one-sided contract is a license to collect money without providing any value. legally she might be right but ethically… well, true colors have a way of shining pretty bright.
I agree with the ADMIN and Guest here. My child is enrolled in one of these facilities and this is extremely troubling. So much so, that I am seriously considering placing my child in a different facility to avoid this problem altogether.
It seems that no one is really considering the children or the parents in this scenario. We are the ones who must ultimately pay for this litigation and the needless “royalty fees” when franchisee assistance is not even provided. The kiddie cameras at our facility have never worked properly and that “perk” has ultimately been a huge disappointment. The “red carpet” treatment was also a disappointment. Several improvements to services have been implemented since the center my child attends separated from Little Sunshine’s Playhouse and I believe the camera system has now much improved.
It was pretty obvious as a parent that the center was not receiving the assistance they needed to best serve the children, both administrative and technical. Please keep in mind who is really paying the price for this ridiculous litigation. I believe that the best administrators are hands-on and don’t believe this can be done appropriately when the CEO of a company lives an ocean away. And yes, when you claim to manage your organization appropriately while the first hand evidence proves otherwise and you file ridiculous lawsuits just to gain undeserved royalty fees, you do need to apologize for living in Hawaii while the parents involved are working (without a beach front view) to support your lavish lifestyle. Shame on you.
I would agree that this litigation is not the extraordinarily dramatic case that this article makes it out to be. However, as a fellow small-operating franchisor, I was intrigued to learn more. Should anyone else be interested in more information, I was able to acquire the court documents on both of these cases online with the U.S. Court’s PACER Service Center at http://www.uscourts.gov/electaccrt.html.
It seems as though all the above commentators have easily sided with the franchisees, perhaps due to an inherent favoritism for who they perceive as the “little guy” in this lawsuit, or perhaps their decision was made based off a lack of knowledge about the case. Either way, what people simply don’t seem to grasp is the fact that not all franchises are huge corporations with money-grubbing CEOs/owners. In fact, many franchises are ran as small, entrepreneurial businesses and have just as much of a moral right to protect their business and profits as their their franchisees to do.
After reading up what I could on this litigation, it is pretty clear that this CEO is not doing anything malicious or even anything out of the ordinary for the world of franchising. When a franchisee breaks their contractual obligations in the various ways that these two franchisees have, franchisors have the entitlement to take the necessary action to defend their businesses. Actually, based off the largely significant breaches of contract on behalf of these franchisees, the CEO could have been much more severe and even began this lawsuit months earlier.
To address some of the above concerns that these franchisees did not receive adequate support, I will touch on the fact that before a person can become a franchisee of any corporation, they have to sign a contract that explains what is expected of them and what they can expect from the franchisor. This is done to protect the rights and privileges of BOTH parties involved, not just the franchisor. If the franchisees truly felt as though they were not being given the support they signed up for, there is proper protocol (specific to each franchise system) to solve that issue and uphold the contract. A royalty strike against a franchisor, while continuing to use the franchisor’s trademarks is clearly not the way to handle that (which is trademark infringement, a federal offense). In fact, participating in any federal offense would obviously not be the correct resolve. So, “shame on them” for breaking the law.
did little miss sunshine tell these franchisees that they were getting in on the ground floor a growing franchise system? if she did and then changed her mind i think that she sold them on false pretenses and should just let them go if they promise not to sue her.
somebody made a good point. if little miss sunshine was providing value, they would have been happy to pay the royalty. obviously she wasn’t providing value or they wouldn’t have gone and spent even more money doing everything on their own.
franchisors think that because they have a one-sided contract they don’t have to earn their money. why should someone pay to use a trademark that is now associated with a shrinking chain that failed at franchising?
“Little Sunshine’s Playhouse and Preschool maintains an identity and brand image of unrivaled distinction in childcare.”
The folks at Little Sunshine’s Playhouse seem to be suffering from delusions of grandeur. According to their website they only have 3 locations 2 in Springfield and 1 in Ozark MO.
They have just as many “on hold”: North KC, MO, Leawood & Overland Park, KS.
They’ve got 2 “coming soon” with no opening dates posted in Jenks, KS and Scottsdale AZ.
So, they sold 9 franchises, only have 3 open & 5 sitting there unfinished. This sounds more like a brand that has stalled out. Maybe that’s why most founders would make sure their businesses are successful and THEN move to Hawaii.
As a former teacher at one of the preschools that is being sued, I would like to offer further insight into this debate. Except for this article and the one published in SBJ, I do not have any information on the legal side of all of this; however, I do have some firsthand accounts that might clear up a few things.
I have worked for a couple of other childcare franchises, all of which had many more locations than Little Sunshine’s does. I can easily say that the support offered by Little Sunshine’s corporate office was equal to, if not greater than, the support given by the larger franchises. Everything about our operation was lined out and explained by the LSP. We had an Ops Manual that the Director referred to for day-to-day stuff, we had access to every kind of form we would possibly use and our monthly curriculum was even explained in three to five pages of detail. Also, during my employment at Little Sunshine’s, we frequently had visits from someone from the Little Sunshine’s corporate office.
Based off this support and the affection I felt for my co-workers, I would have to say that I overall enjoyed my experience working at Little Sunshine’s Playhouse and Preschool. My decision to leave came about from one primary reason; this particular owner was incredibly difficult to work for. So to the people who are commenting anything to the effect of “if Little Sunshine’s was providing the services they were supposed to, the franchisees would gladly pay the royalties”, you obviously have not met this person. To give you an idea of what kind business owner he is, a couple of the teachers still working at the school said that he actually had them chop the Little Sunshine’s logo off of many of the instructions, forms and notices that are still being used in the school. I don’t know much about the legalities of that, but I would say it would be considered plagiarism, at the very least.
Thanks to all commenters.
Does anyone have a copy of the complaints? Please email a copy to unhappyfranchisee[at]gmail.com. It would be interesting to see the actual allegations.
Admin,
“They took a chance on you and your vision of growing a franchise chain. Then you decided you didn’t want to franchise… you bought out or otherwise released all but 3 franchisees and they were left to be the only ones of their kind – the last unicorns. No more franchise meetings, no more franchise programs, etc…. an exclusive focus on corporate growth… If you were in that situation, wouldn’t you have the feeling that this is not what you signed up for? Wouldn’t you feel abandoned – or a victim of bait-and-switch?”
You hit the nail on the head on this one…
To my knowledge there are only 5 paid franchisee’s, 3 open centers,and 2 with nothing.
“Maybe that’s why most founders would make sure their businesses are successful and THEN move to Hawaii”–well said Guest, I agree
Well the sad part about all of this is that like the other guest said…the parents and children are the ones suffering. My hard earned money is going to pay for the attorneys to get this mess cleaned up! And the sad part about that is I would much rather my money go to pay for the attorneys rather than to pay any of the ridiculous franchise fees!!!
It is absurd that the fee is 6%…for what? What are you providing for these franchisees?? NOTHING! I have seen the manuals, I have seen the business proposal and after seeing that I am not really sure why anyone with any sense would sign a contract with this franchise anyway! But they did and now they are paying for it! Sad!
You claim to provide them with a vast knowledge of Childcare! Who are you kidding?? You haven’t worked inside a childcare center in years, and I know you can’t learn much from the mall, hair salon, or the driver seat of your mercedez…you provided these franchisees with false information…You made sure that your ducks were in a row as far as the paperwork and contracts were concerned (came in handy for you know) but as far as the teaching, compassion, the real life daycare part…you fooled them and that is sad. You also fooled them if you EVER told them that they would profit in the first year! It takes longer than that to profit in childcare and especially with a million dollar overhead!! Good luck ever getting ahead! The expectations were set so high for these people because of your “vision” and the sad part is that is not the reality of it at all, and now they are paying for it!
So is it getting tough to afford Hawaii now , is that the urge to sue? Or do you just need to feel the power of taking something away from someone cause “you can”? Either way I am glad you can sleep at night believing that you are doing the right thing for your business…The best thing would have been to cut these people loose let them go on with their business and realize that you got to big to fast and you just couldnt handle it! Its ok…Not everything is happily ever after, right?
I ran across this story saying that Rochette Dahler just won a $1000 scholarship to learn about franchising this past March.
http://franchise.org/Franchise-Insider-Main.aspx?id=49560
“Also honored were Little Sunshine’s Enterprises founder, President and CEO Rochette Dahler… The Lois Marshall Certified Franchise Executives Scholarship Award provides a $1,050 stipend… The scholarship was… awarded to a woman franchise executive recently enrolled in the Certified Franchise Executives program.”
Kind of odd that she’d be recently enrolled in a franchise exec program if she discontinued franchising.
When did Miss Sunshine stop selling franchises and what was the reason given?
Anyone know the outcome of the Apr. 14th court hearing? Just noticed that the 201 E. Cardinal location is now listed on the LSP website and shows as owned by Rochette.
Little Sunshine’s website now lists 201 E. Cardinal as their location owned by Matt & Rochette. But the Storybook Children’s Academy website is still live and has the same address posted.
http://www.storybookchildrensacademy.com/
Looks like the Storybook Children’s Facebook fan Page has been deleted. Did she simply buy the building and take over the business? Or buy them out?
Where did the cards fall, Rochette?
It’s now completely changed back to LSP. She won her little lawsuit and now has taken everything back over. The word on the street is that the occupancy is going from 10 to 20-23 per room now.
Good luck keeping a learning environment worth that ridiculous price tag.
From the beginning nothing was as promised. I take my dog to Camp Bow Wow when out of town and their camera system is leaps and bounds over what LSP has provided.
LSP will become your average run of the mill daycare, but still will charge one of the highest rates in town. If you want that level of care just take your kids to Goddard and actually GET what you PAY for.
The cards fell just as they should. This smart young woman
has built a caring learning enviroment for our
children which in the end is her main goal. So many people
jelous of your success. Most have no idea of the labor of love
for children that made it possible for you to live your dream.
They say do what you love and you will do it well. You have
proven that your desire to provide a safe loving enviroment for
children can be done. You deserve all the sucess that God has
given you !
God Bless You!!!
this is really old news but somehow just stumbled across it this afternoon while surfing the web. My comment is obviously completely irrelevant but couldnt resist the urge to share.
Reading this article and the comments, im anything but surprised. I knew Rochette fairly well when she was starting up her franchise and had plenty of insight into this maniacal woman along the way. Someone mentioned the term “money-grubbing CEO” in a previous comment, and that term is rather suiting. I dont think I have ever met a more selfish, narcissistic individual in my entire life. She lives for money and herself and nothing more, hence her hiatus to the beaches of Hawaii. The only “success” that has stuck is her daycare out in Ozark, which just so happens to be owned by her x mother in law. I think after things went smoothly with the opening of the Ozark location, her head got to big and felt it was time to go nation wide. Things go smoothly with the grandma of your children, who’da thunk? She then suckered two more franchisees into paying her $50,000 franchisee fee and thought she was on her way only for one of them to fail miserably rather quickly. (go figure, her operation manual was thrown together over a 2 week period on her laptop) On that note, her operation manual also calls for state regulations to be X amount of children allowed in each classroom, but Mrs Dahler found some extra income in overloading those classrooms by taking advantage of children allowed in the lobby/nurses room/exec office by state regulations. I even want to say that the location down in Rodegrs AR was deeply involved with her own mother and the location in AZ was franchiseed through her husbands parents as well. The bottom line is, there wasnt and is no real success here aside from the original Chestnut location. Sunshine Enterprises could have been incredibly successful with positive GRADUAL direction and a steadfast foundation for Franchisees (the ones not related to her of coarse) but then again, what do you expect from an egocentric, down right greedy CEO?
I guess I can’t blame you all for being jealous of Rochette Dahler. Many are eager to tear down successful businesswomen with no reason.
According to AZ Central Jul. 13, 2011
“$1,675,000 Matthew Dahler and his wife, Rochette, purchased a 5,241-square-foot home with pool originally built in 2006 on the southern side of the Country Club at DC Ranch in Scottsdale. The Dahlers are the principals of Little Sunshine’s Playhouse and Preschool. First started in 2002 in Missouri, it has expanded to locations in Arkansas and Scottsdale. The home was sold by Michael Ramsey, president and CEO of Ramsey International Inc. in Paradise Valley.”
She’s listed as owner of 4 of the 6 Little Sunshine’s Playhouse locations.
I plan on sending my child in the next few weeks. I was very impressed with what they have to offer, for what I am about to pay per week. Let’s just say I am not a parent who makes $100,000 plus a year. I only want the best for my kid. The down fall is there is no give if my kid is sick or out on vacation. I hope this works out. My kids has never been in a facility, so this will be the first time.