As reported in CNW Group, Subway opened its 2,000th restaurant in Canada. Subway continues to grow even as the health panic wave begins to gently recede and the world population returns to its steady diet of carbs and fat. Subway is the largest sub sandwich franchise with more than 22,500 locations in 80 countries.
In a surprising ruling (at least to me), the Second Circuit Court of Appeals reversed part of Judge Sweet's dismissal of the obesity case filed by two overweight teenagers in New York against McDonald's. Although several states have passed Common Sense Consumption Acts (prohibiting lawsuits against big food) in the wake of this litigation, this case will continue on a deceptive advertising claim. Leaving most of the court's dismissal order untouched, the Second Circuit held that New York's general business law did not require plaintiffs to show a link between their health problems and McDonald's food (a defect identified by Judge Sweet); it only required plaintiffs to show that deceptive advertising was misleading and that plaintiffs suffered injuries as a result.
As reported on FortWayne.com, thanks to Donald Trump, reality TV has become reailty advertising. The latest example is Burger King's product placement/product rollout as the first competition on Trump's reality series, The Apprentice. As the first task on the third season of The Apprentice, the teams were required to choose a new Burger King product, create a marketing campaign and operate a Burger King franchise for a day -- with the winning team selling the most of its selected new product. Burger King's new burger, the Western Angus, was selected by The Apprentice's winning team for the week, Networth, and was introduced to the public on January 21, 2005, shortly after the show aired.
The New York Post reports that Triarc Cos. is in negotiations to merge the Arby's chain with RTM Restaurant Group. RTM is Arby's largest franchisee, operating more than 700 Arby's restaurants. In the transaction, Arby's would acquire RTM for an expected $200 million in cash, but RTM would continue to own a 25% stake in the company. Though the parties are still in the beginning stages of negotiations, the expectation is that along with the finalization of the merger, Triarc will file registration papers for Arby's IPO as early as next month.
After being Krispy Kreme Doughnuts, Inc.'s CEO for the past 6 years and working for the company since 1977, Scott Livengood is being replaced by Stephen Cooper, the specialist who led Enron and Laidlaw out of bankruptcy. Bloomberg.com reports that Livengood has decided to retire after the SEC lauched its federal investigation into the company's financial practices (see Blog entries of 12/17/2004 and 12/28/2004) and the company's stock price fell 76%. Fund managers speculate that Livingood failed because he had little experience in running a public company or because he expanded Krispy Kreme too quickly. Others, including plaintiffs in a shareholder class action, accuse Livengood and other officers of the company of knowingly filing false financial reports.
In any event, investors hope that the introduction of new management will be enough to turn the troubled company around.
Apparently, there's no rules for a fair fight in a slaughterhouse. After PETA submitted a videotape showing Pilgrim's Pride slaughterhouse workers in Moorefield, West Virginia stomping, kicking and slamming chickens against a wall, it thought the workers would at least be fined for the misdemeanor of violating animal cruelty laws. Others were certainly appalled. KFC issued a statement after the release of the tape indicating that it would not purchase chickens from Pilgrim's Pride until the supplier promised that the abuse had stopped.
On Tuesday, the West Virginia prosecutor said that the workers' conduct, while disturbing, did not rise to the level of criminal conduct because it occurred in a slaughterhouse. The prosecutor suggested that the supervision of these workers fell more within a regulatory framework than a criminal one. In their defense, the workers told the prosecutors that they were required to kill 28 to 33 chickens per minute, and that sometimes it was just faster to throw them against the wall than to wring their necks. That's some pressure.
When the Wall Street Journal created a list of the best and worst jobs in 2002, slaughterhouse worker did not even make into the top ten worst jobs. Based on lack of job security, pay and danger, lumberjack was ranked the worst job in America.
China Daily reports that McDonald's has been ramping up to expand in China. With KFC as its largest competitor (1,000 units), McDonald's intends to increase its presence in China by 400 units by 2008. McDonald's now has just over 600 units in China.
Because China recently made strides to open its borders to franchisors (without requiring corporate partnerships with Chinese companies), more franchise companies have focused their expansion plans on the Far East.
Moe's Southwestern Grill, one of 2004's hot concepts from Nation's Restaurant News, has been sued by an unlikely plaintiff, Jerry Garcia's estate. Moe's name is apparently an acronym for Musicians, Outlaws and Entertainers, and its restaurants feature dishes named after dead celebrities, including Jim Morrison, Janis Joplin and Elvis. The Alfredo Garcia, a fajita dish, is a Moe's staple. According to a lawsuit filed on December 8, Jerry Garcia's estate says that paintings of the late Grateful Dead star have been hung in 130 franchises and that Moe's used Jerry Garcia's image in advertising without the estate's permission. The suit also alleges that Moe's changed the words to "Casey Jones" resulting in "Trouble ahead, Trouble behind/Just have my taco ready on time," and posts the words under the Garcia likenesses.
The estate's complaint, filed in the Northern District of Georgia, said, "The idea that a sizable corporation would use his name and image without permission to sell burritos (and, more to the point, make money) is obscene; it turns Jerry into a little more than a taco huckster." The battle appears to be heating up already as Moe's VP of Finance countered (in a rather non-settlement oriented way) that Garcia's estate is only "about the money."
Garcia's name and likeness have been officially licensed to companies in connection with a line of neckties, wine and Ben & Jerry's ice cream. As the estate sees it (and many courts see it), Moe's unauthorized use of the name and image of Jerry Garcia and the words to a Grateful Dead song, affects the authorized licensees of the Garcia name by diminishing the value of their investment.
A copy of the complaint filed by Jerry Garcia's estate can be accessed here: Garcia Complaint
Moe's is required to file an answer on January 17.
According to this article from Reuters, Hollywood Video has accepted a purchase bid from a smaller video company, Movie Gallery, Inc., for $850 million. For weeks now, Hollywood has faced the threat of a hostile takeover bid from its rival Blockbuster if Hollywood accepted a lower bid for its assets. Movie Gallery, Inc.'s recent bid provides Hollywood shareholders $13.25 per share (1.5% over the NASDAQ price) and assumes $350 million in Hollywood debt. Blockbuster's threatened bid would only pay stockholders $11.50 per share.
The Palm Beach Post reports that a jury awarded a Palm Beach businessman, Frederick Keitel, $5.1 million in his case against Wendy's for tortious interference with his business deal. The case involved the purchase of 27 Wendy's restaurants in Palm Beach and Broward counties from a creditor-in-possession, Citicorp. In 1991, Wendy's attempted to purchase the restaurants for a low bid, which was rejected. A year later, Mr. Keitel was awarded the right to buy the restaurants based on his bid.
Mr. Keitel alleges that Wendy's then sought to kill his deal. When one of Wendy's board members expressed an interest in partnering with Keitel and providing him Wendy's development rights, Keitel dropped his other investors. The board member later withdrew and admitted in taped conversations that he was told to get of the deal by Wendy's executives, including Dave Thomas. After the board member's withdrawal, Wendy's revoked the franchise rights granted to Mr. Keitel and purchased the restaurants in 1993.
In the most recent of financial setbacks for a former Wall Street star, Krispy Kreme announced today that it will restate earnings for the fiscal year 2003 and the first three quarters of 2004. The changes threaten to reduce the company's 2004 profits by $3.8 - $4.9 million. In addition to the reduced profits, Krispy Kreme warned that its primary lenders may now have the right to call the company's outstanding loans in the amount of $90.9 million and that its guarantee of $50 million in franchisee debt, if enforced, could deprive the company of cash flow needed to continue operations. According to boston.com, the company's stock price dropped 16.8% in mid-day trading.
This Philadelphia Inquirer article on Krispy Kreme's problems features an investigative accountant that specializes in accounting fraud and an analyst from Morningstar Inc., who opine on the reasons for Krispy Kreme's troubles and the SEC investigation.