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CUPPY’S COFFEE & Funding Solutions LLC

On a discussion thread on Blue Mau Mau, Attorney Paul Steinberg posted this disturbing comment:

[Regarding Elite & Cuppy’s]…there are unanswered questions which are indicative of fraud:

  • There are persons who claim to have obtained funding from various sources, including loans brokered by Funding Solutions LLC .
  • According to their website, that company placed over 90 loans at an average of $300,000.
  • That equals $27,000,000 of loans, most if not all of that being government-guaranteed.
  • Normally, build-out loans are disbursed as the work progresses, and the contractor tenders invoices evidencing progress.
  • The contractor so tendering appears to have been Elite.
  • Some borrowers allege that their bank fully disbursed the loan monies, but the work was not performed by Elite and/or SBT.
  • All of a sudden, Funding Solutions removed any mention of Cuppy’s from their website after a certain Canadian attorney and a certain Pennsylvania bank began asking uncomfortable questions.
  • Any person who borrowed money to fund their Cuppy’s should find out if all of the money was disbursed yet, and if the money was all disbursed but the construction not completed, the borrower should have their attorney get involved immediately.

“Wait and see” has not worked.
With the prospect of a investigation of Funding Solutions LLC and Cuppy’s Coffee by the Inspector General of the cognizant federal agency, certain people may be working overtime burning out the motor in the paper shredders even as they counsel others to “wait and see.”


11 thoughts on “CUPPY’S COFFEE & Funding Solutions LLC

  • guest

    When it was time to get a loan Cuppy’s wanted you to use funding solutions. So I got in touch with them about getting a loan. Right away I remember they wanted $4800 to get started. I went to my bank and asked what their fee was and they told me they didn’t have one. I told the bank about the fee funding solutions wanted to charge and the bank asked what was that for. Then when it was time to get a lawyer to look at the lease for me Cuppy’s told me that they had a good lawyer to do it. His fee was $1800. My lawyer did it for $500. Cuppy’s was out to get every dollar you had.

  • prozac is kicking in, maybe

    Guest – Where was your lawyer based? The one they recommended to me was in NYC, charged more than $500. Where I live, partners charge $400 a hour, associates about $250.

  • Carol Cross

    I think that soon the banks and the lenders will run out of funding solutions for Cuppy’s if they don’t somehow take care of those people who have been cheated out of their deposits ——Maybe Dale Nabors could borrow some money on his home or his other business and take care of this. Maybe he owes this to the franchisees who are now standing in HIS system.

    It is because franchisors don’t generally have to post PERSONAL GUARANTEES to borrow money to franchise their ideas that they are sometime so cavalier with the money of their franchisees. They know, too, that that airtight franchise agreement is like money in the bank and that once that franchisee has put his signature to the contract and built that little business to wear the brand name that those royalties will continue for the franchisor as long as the franchisee can stand and pour coffee or mix a latte. Of course, Dale hopes that all of his franchisees will be successful and that all prospective franchisees can get loans but this is already a problem for him.

    But, why should Cuppy’s be on the SBA Franchise Registry and eligible for a government guaranteed loan if this loan money has been diverted. Where is law enforcement?

    The ABA is a self-regulated association that doesn’t violate the law in setting prices for their services? —-(Read about “credence good” product in Franchise Fool, Les Stewart, on Word Press) We have to “trust” the experts who are the only ones who can “value” their produced service because the consumer doesn’t have the expertise to set the value, , and doesn’t have a government license to set the value or to bargain for the value of the services. The ABA loves franchising.

    The Funding Solutions people will make sure that the personal collateral and the personal guarantees of the prospective franchisees will make them attractive to the lenders? Do they have a connection with the IFA? Can the lenders sue them if they “fix” the applications. Will the fact that Home Equity will not be so easily used to finance the purchase of a franchise tend to make it more difficult for prospective franchisees to get loans and will the lenders want PG’s and proof of everything the prospective franchisee owns as collateral for the loan.

    Times are changing!

  • Kelly

    Paul Steinberg said:
    ■According to their website, that company placed over 90 loans at an average of $300,000.
    ■That equals $27,000,000 of loans, most if not all of that being government-guaranteed.

    I’m neither an attorney or an accoutant-Question: What about all of the people from Meal Prep Industry who have taken out SBA loans for their buildouts to the tune of @250-300K? All gov’t backed of which (a conservative guess) 500 people have defaulted on? These loans were not obtained through a Franchisors sanctioned financal institution, but still required a personal guarantee to obtain-so isn’t the net effect is the same? But in our cases (meal prep franchisees) there is no “one” person to go after because we all used different institutions to obtain our personally guaranteed SBA loan. But we (franchisees across the board) all ended up in the same place-defaulted SBA loans, bankrupcties for franchisees, while the Franchisors skip to my Lu with the money they recieved in royalties (part of the capitol borrowed with personal guarantees).
    They are still selling franchises, making money, carrying on business as usual, while the taxpayer picks up the bill….seems like everyone loses here but the Franchisor, who win BIG. While Franchisors are selling their companies to the highest bidder, charging current franshisees the “option” to buy ou their remaining contract for tens of thousands of addtional dollars & sign a paper to agree not to sue, store owners are still losing hundreds of thousands of dollars. I’m not picking any one particular Meal Assembly/Prep company, my opionion is they are all to blame.
    I think the total in cost of defaulted SBA loans for the failed concept of Meal Prep will be in the HUNDREDS of MILLIONS before this is all over…
    Here’s the best part- people are still willing to step -up and pay (and pay and pay) for that chance at the american “dream”…

  • Carol Cross

    Kelly! The great subsidy of franchisors by the SBA is a government secret.

    You got it! But! remember there are even more franchisees from all franchise systems who don’t SHOW up on the DEFAULT lists of the SBA or the banks and lending instritutions because they continue to pay on the loans when they CAN to avoid losing the collateral of their house that was posted for the loan.

    The problem is much greater than we can imagine. Do you think that your government isn’t complicit, Kelly?

    The SBA default list for franchises is not correct, of course, in terms of the failure of first owners of the franchises because it doesn’t pick up the loans on home equities that have been granted by the banks and lenders —-and it doesn’t, of course, pick up on those failed franchisees who are still paying on startup debt to avoid default and bankruptcy, etc….and to save their homes. Obviously, the banks are going to eat some franchise loans if the value of houses continues to fall and franchisees continue to fail in the failing economy.

    Recently, FranData, who manages the SBA Franchise Registry for the SBA indicated in an Internet Interview that the software programs of the SBA that identify franchise loans and that identify defaults do not work very well together and said that the banks shouldn’t depend on them. Wouldn’t you know?

    When the federal government, the FTC, determined that they would take franchisors out from under state laws that govern common law fraud, and take franchisors out from under Truth in Advertising Laws, they set the stage for the ugly status quo we have today. When franchisors are protected from charges of fraud, it is not surprising that they feel free to indulge in fraud, that has been redefined as not being “legal” fraud in 30 years of case law.

    The constructive fraud of the disclosure document, the UFOC, packaged together with the binding adhesory contract, wherein buyers of franchises sign away their due process rights, does its job. Prospective buyers looking for a job and income think that a franchise has very little risk and is a perfect solution to their problems of producing income. This, obviously, in the intent of regulation that doesn’t require franchisors to disclose the unit financial performance stratistics of their systems in a TIMELY manner to new buyers. Prospective buyers of franchises do not get MATERIAL information concerning the risk of the investment.

    Sure! They are out there today selling the American Dream of as “franchise of your own” and the SBA is targeting VETS and their families. The IFA and the other special interests have their way with the Congress because they produce statistics that indicate that franchising increases during rescessions and helps to bring the economy out of the rescession. The cost of this in terms of franchisees who stand to lose everything in a year, or in three, four, or five years appears to be a cost the government is willing to pay.

  • Kelly

    ■All of a sudden, Funding Solutions removed any mention of Cuppy’s from their website after a certain Canadian attorney and a certain Pennsylvania bank began asking uncomfortable questions.

    I would like to ask the “Canadian Attorney” for a job as a paralegal in his office once he has set-up shop and is licensed to practice in the US. SERIOUSLY! Admin can you get me contact info so I can send my resume?
    This is a man I want to learn the legal ropes from…..

    I find it interesting no USA Attorney is involved in this?
    Carol, do I think the gov’t is complicit? I think broken systems are to blame, I think bureaucratic entrenchement it to blame, and I think the willingness of the American Public to “accept” a 31% fraud margin in Government programs is to blame. I think political apathy is to blame and I think that the Politicians have forgotten that it is “WE THE PEOPLE” who hold the power, we have just lent it to them for a while. But like an indulged and spoiled child we have left our valuables laying around and someone came behind, picked them up and started playing with them.
    I LOVE America, I LOVE capitalism and I LOVE a country where nothing stands in the way of success, BUT we have lost something along the way and until we find it again, we are in deep, deep shit.

  • Carol Cross

    Deep shit is right, Kelly! I, too, love my country and I want to make things better for my kids and my grandkids and I hate it that so many innocents are getting hurt by the “legalized” fraud of franchising. If franchising can’t stand under true disclosure to new buyers of the actual risks as known to the franchisor, the seller of the franchise, maybe franchising shouldn’t be growing in our economy. Do you understand that they use the “growth” of franchising and the “job numbers” with the Congress so that the Congress will ignore the bleeding that goes on?

    Franchising has helped to obscure the real loss of good jobs in this country and for this reason alone, the true nature of what goes on should be exposed —-because if government keeps depending on franchising to take us out of rescessions, the deep shit only gets deeper. There will be some change anyway because the banks and the lenders will return to the more traditional risk assessment practices of thirty years ago, and banks and lenders will not want to loan to those franchisors who have more than a 10% rate of failure of first owners —-and it may become more difficult for franchisors to hide the failure rate of first owners because of people like you and I.

    I think it was the BUBBLE of the housing sector and the securitization of mortgages, franchises, leases, etc. these past thirty years . that has produced the scenario we have today. The price to paid for this is just starting to be realized —.

    Interesting that Cuppy’s was taken off of Funding Solution’s List. Funding Solutions is probably an arm of the IFA that is crucial now to finding lending parties and instituions that will finance franchisees for the franchisors. How could we find out more about them.

    If the Canadian Attorney is Michael Webster —I’m not surprised. Michael is honest and spends a lot of his time on his Biz Op Site exposing fraud in both Canada and the United States.

    Doesn’t it scare you that both parties talk about how Small Business is going to save the country and a good portion of the small business loans floated by the SBA are for franchises! The SBA actually subsidizes the franchisors, big and small alike.

    I think our Congress, as a whole, aren’t even aware of the dirty little secrets of franchising and only the Committees and the attorneys in the Committees know what is really going on and the IFA lobbyists have their own way with the Congress and the FTC.

  • Carol Cross

    Because my computer is blocked from accessing Blue Mau Mau or Franchise Pundit, I can’t access this article on Blue Mau Mau. I’m sure you didn’t vote to have me removed from Blue Mau Mau and Franchise Pundit, Paul, or indulge on any of the unkind attacks on me and my weak bladder and my “old” brain.

    I still read “Beguiling Heresy” and continue to be informed because of your excellent research on the relationship of the franchisor and the franchisee and the favorable treatment the franchisors get in our courts.

  • Paul Steinberg

    Carol: I don’t read Franchise Pundit that frequently, and while an occasional barb is one thing, from what little I have read on FP I think the level of discourse was destroyed on that board.

    As to BMM, there was no “vote” about anything. The webmaster made a decision, and that is a matter to take up with him.

    As a general observation, I would note that blogs vary widely in terms of the target demographic. In the case of BMM in particular, the webmaster was (and remains) concerned about maintaining a balance between entertainment and substantive discussion.

    One of the problems with a website such as BMM is that there are people who feel the need to opine on every thread. That is fine if you are some genius polymath, but few of us are. I certainly am not, which is why I post on some topics but not on others.

    The problem for a webmaster becomes when a particular person or persons rehashes the same comment on every thread; even if it were relevant to each thread (which is not the case on BMM or FP) it still annoys the general readership and causes a decline in traffic.

  • Carol Cross

    Thanks, Paul!

    I understand! But, from my perspective, all of the talk and chat about franchising doesn’t work to protect all of the new marks out there who will become victims of franchising, From my viewpoint, there is no solution except that franchisors be mandated by government to provide some “proof” of the viability of the franchise that they are selling to the public.

    I work hard with the hope that my comments will be picked up and displayed in Google Searches and act as a warning to those who use the search engines to research franchising.

    I know you wrote “Beguiling Heresy” with the hope that the law students who would read it would perhaps bring new voices for fairer and better regulation of franchising when they get out in the real world.

    I respect you for your efforts and I know you come from a good place. You and your book have informed me.

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