After a four-year battle, Red Roof Inns lost an $11,8 million jury verdict to its former Baton Rouge franchisee who claimed that the franchisor deliberately delayed a franchised hotel opening for its own financial gain. The franchisee claimed that Red Roof Inns had an interest in delaying the opening because it had another hotel in the market and its parent company had three motels nearby. The Dallas jury found that Red Roof Inns breached the franchise agreement by not allowing the franchisee to raise the Red Roof Inn flag after the franchisee spent $2 million renovating the hotel. Red Roof Inns recently announced its intention to appeal the verdict.
Aside from the trademark dispute discussed below, some analysts are speculating that the company may explore some sale options in the near future. The predictions follow Krispy Kreme's third quarter earnings statement that showed a $3 million loss for the quarter (or 5 cents per share). This time last year, Krispy Kreme reported a $14.5 million profit.
Although the fragile numbers cause rumors to stir, this article in the Charlotte Observer suggests that the market has not yet given up on Krispy Kreme. It is, after all, a 60+ year-old company with a history of comebacks. For the moment, however, the company's plummeting stock price is on everybody's mind -- it has dropped more than 75% from its 52-week high of $41.73 last December. After the announcement of third quarter earnings, the price dropped to $9.30.
The fourth competitor for Oregon-based Hollywood Video, billionaire Carl Icahn, recently bought 5.1 million shares, an 8.4% stake in the chain. Among the other companies bidding to take over the chain are Blockbuster Video -- recently spun-off from Viacom after much lamenting over stagnating sales and competition from on-demand cable and pay per-view -- and Movie Gallery, Inc. As each new bid comes in, Hollywood's stock price rises. It closed on Friday at $12.88, up from $9.80 before the Blockbuster bid on November 11.
The Pennsylvania couple that bought an ice cream stand called Krispy Kream (no real explanation for why ice cream would be crispy) is getting worried now that the publicly-traded doughnut giant, Krispy Kreme, will sue them for trademark infringement. The couple has raised some fairly weak arguments -- like the names are spelled differently and Krispy Kream does not sell doughnuts, and it seems unlikely that the little ice cream stand in Belsano, PA will be allowed to continue using the name unfettered.
Mark Knopfler, former lead singer for Dire Straits and a prolific solo artist, recently released a new CD called Shangri-La. In a single called "Boom Like That," Knopfler pays tribute (in a way) to the franchising giant Ray Kroc, founder of McDonald's Corporation. It goes a little something like this: You gentlemen ought to expand/ You're going to need a helping hand, now/ So, gentlemen well, what about me?/ We'll make a little business history, now/ * * * Or my name's not Kroc/ That's Kroc with a K/ Like 'crocodile'/ But not spelled that way, now/ Kroc-style /Boom, like that. To hear clips from the song, click here. To review the lyrics, click here.
Just seven months after his appointment as McDonald's CEO, Charlie Bell has resigned to continue his battle with colorectal cancer, the Wall Street Journal reports (subscription required). Mr. Bell took over the leadership at the burger franchise company immediately after the sudden death of CEO Jim Cantalupo. Bell, 44, was diagnosed shortly after he assumed the role of CEO; he maintained his position while getting treatments. McDonald's did not comment on Bell's health when it announced his resignation last night after a board meeting in Chicago. McDonald's vice chairman, Jim Skinner, 60, will succeed Bell.
Forbes magazine reports today that Cendant will spin-off its Wright Express unit for potential revenue of $1 billion. This move comes as Cendant focuses its business on its core travel and real estate markets. Last year, the company presented an IPO for Jackson Hewitt, the franchisor of tax preparation service businesses. Wright Express offers business and marketing services for commerical and government automotive fleets. The New York Times said that this divestiture would likely end the company's efforts to shed its assets as it streamlines its services.
NPR radio aired an interesting story today about wine makers' reluctance to discuss the role of technology in the winemaking process. Because winemaking is viewed as an old world art, vintners often eschew any connection with modern technology, but most wineries make good use of advanced processes available. In the midst of this cloaked technology, however, comes a wine retailer that uses technology to market itself and its wines. VinoVenue is a San Francisco lounge/retailer that offers wine tasting through self-serve wine bars and the use of smartcards. The bar offers wine-tastings in one-ounce portions and in a variety of prices and qualities and uses the self-dispensing technology to offer customers an opportunity to "try before you buy." One more reason to want to live in San Francisco -- although the company's founders may explore a national roll-out of the concept based upon their success in San Francisco.
Ending a hard-fought battle over a trademark, Nestle S.A. announced that it will stop using the name "Skillet Sensations" as part of its frozen food offerings. After the parties first began disputing ownership of the "Skillet Sensation" trademark, the U.S. Patent and Trademark Office ruled in Applebee's favor in September 2003 saying that Applebee's had prior rights to the name, having used it for a year before Nestle's subsidiary. Applebee's then filed its lawsuit against Nestle in federal court in Missouri. Last week, Nestle's subsidiary Stouffer's agreed to rename the products "Stouffer's Skillets" and "Lean Cuisine Skillets" beginning in the spring of 2005. Based on this agreement, the parties filed a joint motion to dismiss the case and the court granted the motion.
With the low-carb wave receding, Hardee's has unveiled a new burger on the block that combines both carbs and fat -- the Monster Thickburger. Beginning with the ingredients -- which include four pieces of bacon, three slices of cheese, two-thirds of a pound of ground beef, mayonnaise, butter and a bun, the burger offers what Hardee's calls a "monument to decadence." With 1,420 calories and 107 grams of fat, the Monster Thickburger does not appear to be the panacea for obesity we'd all hoped for. The Center for Science in the Public Interest called the original Thickburger "Food Porn" and referred to the Thickburger family of products "prehistoric," bringing a much-needed Flintstones visual to the Hardee's experience. In its original Thickburger statement, a CSPI executive director said "A good rule of thumb is that if a burger needs a comma in its calorie count, it’s virtually impossible to fit into a healthy diet." CSPI's most recent pronouncement called the new product the "food equivalent of a snuff film."
The hot coffee lawsuit was so good, the U.S. just couldn't keep it to itself. Even in Russia, people are prepared to say that they did not understand the dangers of hot beverages. This article from the Russian News & Information Agency reports that the woman claimed she suffered permanent scarring from her burns from a spilled cup of McDonald's coffee. Plaintiff demands 100,000 rubles for "moral damages" and 400 rubles for damage to her health. If you think that doesn't sound like a lot, you're a good converter of rubles to dollars -- one dollar equals 28.68 rubles. Using this conversion rate, the Russian plaintiff seeks the U.S. dollar equivalent of about $3,500 in moral damages and $14 for damage to her health.
This lawsuit is unprecedented in Russia and there is significant debate over whether it can proceed. McDonald's denies any liability.
Despite the rumors of its demise, Blockbuster Inc. is willing to put more money into the video rental enterprise. Blockbuster said on November 11 that it expressed its interest in the number 2 rental chain, Hollywood Video. The deal was worth about $700 million. There have been no talks yet, however, because Hollywood is currently involved in a deal to let its chairman and CEO take the company private.
Blockbuster considered buying Hollywood Video in 1999, but the FTC would not allow the name change of the Hollywood Video stores to Blockbuster. Because the video rental business has expanded into DVD and game rentals and sales, some say the conversion of Hollywood's 1,920 movie rental stores and 600 Game Crazy shops may be better received this time around. Blockbuster currently has approximately 9,000 stores operating in the worldwide.
Roark Capital announced Thursday that its subsidiary, Focus Brands Inc., completed its acquisition Cinnabon and Seattle's Best Coffee International from AFC Enterprises, Inc. for $21 million in cash. These brands now combine with Carvel Corporation to form Focus Brands, Inc., which will hold Roark's franchise brands.
This transaction is a key part of the AFC strategy to reduce its focus to one brand. Late in 2003, Starbucks purchased Seattle's Best Coffee's U.S. franchise rights for $70 million, and AFC recently announced the sale of Church's Chicken to Crescent Capital Investments, Inc. for $383 million in cash and $7 million on a promissory note. After these divestitures, AFC will be left with only one franchise brand -- Popeye's Chicken & Biscuits.
After CKE Enterprises rejected a consultant's offer to hire him for $25,000/month for a year, the consultant, a financial analyst, issued a negative report about the company (the parent company of Hardee's, Carl's Jr.'s and LaSalsa), causing the company to lose $160 million in market value. News-leader.com reports that the consultant, C. Clive Munro, was arrested by the FBI in Cheyenne, Wyoming, in October and was indicted on Thursday on four federal felony counts, including extortion, wire fraud and securities fraud. Mr. Munro, who is out on bail, faces a possible sentence of 49 years in prison if he's convicted.
Following in the footsteps of many others, Burger King's new CEO is looking for new ways to turn the chain around. After years of declining sales, Burger King has introduced menu items like the veggie burger and salads to compete in a marketplace of would-be healthy eaters. This article in Businessweek Online details Gregory Brenneman's efforts to increase sales, as well as employee and franchisee morale.
As a follow up to the blog's October 13, 2004 article, the Business Journal reports that Krispy Kreme Doughnuts Inc. has given a wide range of powers to the special committee charged with examining the issues behind a regulatory probe and shareholders' lawsuit. The committee members have also become permanent fixtures within the company's board of directors.
Michael Sutton, a former chief accountant with the SEC, and Lizanne Thomas, a partner at the Atlanta law firm Jones Day, have the authority to hire outside attorneys, accountants and other advisers at the company's expense. Their decisions can also supersede any conflicting views from Krispy Kreme's board of directors. Sutton and Day also have the authority to initiate, supervise and take legal action against any director, officer or employee if their investigation finds that people acted improperly.
Forbes.com reports the sale agreement between AFC Enterprises, Inc. and Crescent Capital Investment, Inc. of the Church's Chicken franchise system. The sale price has been reported at $390 million and the sale will close by the end of the year.
According to the St. Petersburg Times, former Hooters President Lynn Stewart was convicted on Friday of two counts of tax evasion and two counts of filing a false tax return. The case is apparently part of a nationwide crackdown on the use of offshore accounts to avoid payment of income taxes. Stewart faces a maximum sentence of five years imprisonment for each tax evasion count and three years for each false tax return count.
Nobody's doing any favors for our nation's beginning readers. Reaching out to another cleverly misspelled business, Krispy Kreme recently sent a cease and desist letter to the "Krispy Kream" ice cream stand owners in Belsano, Pennsylvania. As the letter's moniker suggests, the North Carolina doughnut shop franchisor asked the Krispy Kream operators to cease using its name in the operation of their ice cream stand. The ice cream stand owners claim that the name Krispy Kream has been used at the stand since 1961. Krispy Kreme, however, registered its federal trademark in 1951.