Pizzamarketplace.com reports that a former Papa John's franchisee in Chicago has recently changed the name of his 30 units to "Papa Tony's." The franchisee claimed that the franchise relationship was not working out. Papa John's, which apparently terminates franchise contracts on rare occasions, would not comment on the pending litigation between the parties. At least part of the claim appears to focus on Papa Tony's new name -- the Northern District of Illinois granted a temporary restraining order against the defendant yesterday.
In the wake of a franchising IPO explosion -- that may be too strong -- Domino's Pizza has announced that it plans to set its initial public offering at $24.1 million with shares priced at $15 to $17. Domino's operates and franchises more than 7,400 restaurants in the U.S. and other countries. Under tthe terms of the IPO set forth in an amended offering filed with the SEC, Domino's IPO could raise more that $150 million in proceeds and $250 million from shareholders.
Blockbuster announced yesterday that it acquired American Satellite and Video, Inc., the owner and operator of the Rhino Games retain chain out of Gainesville, Florida. Despite several newstories speculating on Viacom's interest in selling or spinning off its Blockbuster subsidiary (see blog entries 2/11/2004 and 1/28/2004), Blockbuster announced that this purchase would help it to build important business areas. Viacom appears to be prepared to spin-off the movie rental giant this summer. The terms of Blockbuster's acquisition of American Satellite were not disclosed.
In the Middle District of North Carolina, a Connecticut law firm has filed a complaint seeking class action status on behalf of Krispy Kreme investors from August 21, 2001 through May 7, 2004. The suit alleges that Krispy Kreme misled investors by failing to disclose that the low-carb, low-fat trends negatively affected store performance and that new store sales dropped off dramatically after the grand opening. The suit also claimed that Krispy Kreme's strategy of shipping product to supermarkets failed because it saturated the market and cannibalized store sales.
After months of an informal inquiry into Cardinal Health's accounting treatment of settlement proceeds, the SEC has launched a formal investigation into the matter. The issue arises from certain settlement proceeds received by Cardinal Health, the parent company of franchisor Medicine Shoppe International, and the company's booking of the proceeds. Cardinal Health received settlement funds from the resolution of price-fixing litigation against several vitamin manufacturers. Before the case settled, however, the company booked $22 million as settlement amounts. The company claims that it estimated the amount of the settlement proceeds (which ultimately amounted to more than $120 million) and that its accounting firm Arthur Andersen approved of the treatment.
On Friday, Sylvan filed an initial public offering seeking a maximum of $288 million in proceeds. The IPO was filed by Sylvan's parent, Educate Inc. Sylvan offers tutoring services for children from kindergarten through twelfth grade. According to this article from Investors.com, Educate Inc.'s IPO coincides with an expected two million student increase in enrollment in U.S. elementary and secondary schools between 2003 and 2013.
Little Caesars Sues Franchisees for Breach of Contract. Little Caesars Enterprises filed a lawsuit in the U.S. District Court for the Eastern District of Michigan alleging that a number of its franchisees had breached their contracts and committed trademark infringement by using unapproved products. Little Caesars wants these franchisees to use only approved pepperoni, cheese, and pizza sauce and is also seeking damages. Little Caesars owns a product distributor, Blue Line, but in a 2001 settlement of a franchisee lawsuit, franchisees were permitted to form their own cooperative to purchase ingredients from other sources. Sources previously reported that approximately 300 franchisees joined the new cooperative and were planning to cease purchasing products from Blue Line.
Possible Settlement in Shakey's Pizza Lawsuit. We have previously reported on the class-action lawsuit by Shakey’s Pizza franchisees against their franchisor, Shakey’s Inc. The trial of this case, which was scheduled to start on May 12, has been stayed for 60 days to give the parties an opportunity to continue settlement discussions. Shakey’s Inc. attorney Glenn Plattner said the stay was granted because the parties believed there was a “high likelihood that the case could be settled and that time was needed to work that out.” The Shakey’s franchisee class spokesperson, Chuck Wilburn, confirmed that negotiations were occurring, but said only the franchisees were “open to anything that will resolve the issues.”
As previously reported in the blog, this stay follows the April 2004 grant of summary judgment in favor of Shakey’s Inc. on the plaintiffs’ fraud and negligent misrepresentation counts.
Previous stories:
- Class Action Against Shakey's Rises
- Court Denies Shakey's CEO's Application for Bond
- Shakey's Lawsuit from the Franchisor's Point of View
- Shakey's Facing Disgruntled Franchisees and Uncertain Future
- Mounting debts, costly lawsuits
McDonald’s brand new CEO, Charlie Bell, who recently replaced the deceased Jim Catalupo, said that McDonald’s strategy to continue to deliver significant and growing cash flow is working. Bell said that “things have bounced back” across much of Europe after a sales slump in March.
At their general conference in Pittsburgh, the United Methodists stated that they will join a boycott against Taco Bell over the working conditions of migrant tomato pickers in Florida. The Committee on Church Society recommended the boycott, which will be taken up by the General Conference. The petition states that tomato pickers for Taco Bell’s major supplier in Immokalee, Florida makes an average of $.40 for a 32 pound bucket and have not had a pay raise in 20 years. The petition also states that some workers are held against their will in slavery-like conditions. Taco Bell’s website states that its parent company, Yum! Brands, has a supplier code of conduct which requires suppliers to ensure that their employees have safe and healthy working conditions, reasonable daily and weekly work schedules and that suppliers should not perform work or produce goods using labor under any form of indentured servitude, threats or abuse.
The University of Notre Dame postponed the renewal of its Taco Bell sponsorship contract, pending the receipt of information about Taco Bell’s labor standards. A number of Notre Dame student activists have fasted to protest pay scales and working conditions for farm workers in Florida, where Taco Bell purchases some of the tomatoes used its restaurants. Notre Dame has asked Taco Bell to provide more information about its policies. Taco Bell apparently responded with a letter, but Notre Dame said that not all of its concerns were resolved. Taco Bell issued a statement saying, “We believe the efforts of the Coalition of Immokalee Workers are misdirected at our company as these farm workers do not work for Taco Bell, they work for the Florida farm growers. We have met with the CIW on several occasions to listen to their concerns and share our point of view on this issue. The CIW is seeking higher wages for the farm workers and wants to put pressure on the growers, but we buy so few tomatoes from them that we are not in a position to influence their decisions.” Taco Bell also said it requires its suppliers to adhere to a strict code of conduct including compliance with all wage and hour laws and guidelines governing labor conditions.
A deaf Mansfield, Ohio man sued Ohio-based Wendy’s International, Inc. after its Westborough. MA franchisee allegedly refused his written order at a drive through window. The suit alleges that, “Deaf or mute individuals cannot use Wendy’s drive through.” Howard Kaplan alleges that he tried to write down his order for a hamburger and drink but could not be served. Kaplan further alleges that the franchise manager threatened to call police after Kaplan passed his finger across his throat, which the suit says is sign language for “you’re fired.”