Wiggin and Dana's Franchise Law Blog

What some franchisees will do for a beer. . .

As the Hooters liquor license saga continues, a Cheesecake Factory in Braintree, Massachusetts, is paying $225,000 -- or, as this article puts it, “[t]hirty-six thousand slices of chocolate Oreo mudslide cheesecake” – for its own liquor license. Because there are no more available licenses in Braintree (at least two are being held by restaurants that have been closed for some time), the Cheesecake Factory is buying its license from another facility for more than 90 times the license’s $2,500 face value.

. . . And some won’t

Meanwhile, a group of disgruntled former Mail Boxes, Etc. – and current UPS – franchisees calling themselves the Platinum Shield Association (“PSA”) is challenging a UPS policy that they say requires them to carry alcohol for selected customers, through UPS’s “Corporate Retail Solution.” This article reports that PSA also recently called attention to a similar policy that requires franchisees to handle shipments for a company called Zero Tolerance Pornography (as in the company’s slogan, “Zero Tolerance for Bad Pornography”). In the words of a PSA official, "UPS . . . seems to be developing a pattern of imposing possibly improper business relationships on franchisees who have moral objections or may operate in locations where these special services are illegal." And another coalition of UPS franchisees, calling themselves the Brown Shield Association, says that it amended its pending Complaint against the franchisor alleging unfair and predatory conduct and other claims.

It’s like taking money from a baby (or its parents)

An Ohio court has entered default judgments against the former and current operators of two Northeast Ohio USA Baby stores, on charges that the stores failed to deliver paid-for merchandise and refunds for undelivered products, and provided poor customer service. The Ohio Attorney General’s office brought the suit after it received complaints from 75 customers. This article reports that the defendants – including Midwest Baby Group, which is co-owned by Ron Eriksen, USA Baby’s CEO – said that they had just learned of the judgment and that they would be retaining counsel – their earlier lawyer withdrew when his bills were unpaid.

Unfriendly squabbling at Friendly’s continues

Troubles at Friendly’s continue. (See "Looking for a Friendly Face – and a Big Wallet)." This article offers a fascinating look at recent feuding between the two brothers who founded the company in 1935, now 92 and 86 years old, while this piece reports that the franchise’s largest franchisee, Kessler Gamily LLC, is exploring the possible purchase of the company’s assets.

Venting over Vente on YouTube

A growing conflict between Starbucks and Ethiopia over trademarking of the African country’s noted coffees has made it to the big-time – YouTube. As this article explains, it started in December when Dub Hay, Starbucks Coffee Co. senior vice president, posted a video claiming that Ethiopia’s efforts to have its coffees trademarked and then licensed to companies like Starbucks was illegal. Now a senior partner at Arnold & Porter, Robert Winter, who is representing the interests of the Ethiopian coffee farmers, has joined the fray by filming his own grainy video, defending the country's initiative.

Time to stop making the Dunkin' Donuts

Franchisor Dunkin' Donuts and Baskin-Robbins have brought suit against a New York-area franchisee and development agent Kneadin' Dough, Inc., which is still operating under the donut and ice-cream brands notwithstanding the termination of its franchise agreements. This article quotes the franchisee insisting that things will work out, saying: "There'll be no impact on consumers, no impact on our employees either. No one will know that anything ever happened." (Yes, but that's kind of the problem...)

Looking for a Friendly Face – and a Big Wallet

Friendly's Ice Cream Corp., may be looking for a buyer. This article notes that the company’s shares had dropped 34 percent since going public in 1997, at $18 a share. Its largest shareholder is publicly criticizing chairman Donald Smith’s failure to “create shareholder value.” The company announced last week that it had hired Goldman, Sachs & Co. to explore a possible sale of the company.

And Hooters is Still Looking For a Drink

In the continuing saga of Hooters' pursuit of a liquor license for its Big Beaver, Michigan restaurant (see "Hooters Agrees to Size Reduction in Return for Booze," and "City, Restaurant Chain Continue Blows Over Pair of Hooters."] the chain has sent a letter to the mayor of Troy stating that it no longer agrees to the terms of a consent decree that would have resolved a pending federal lawsuit but required Hooters to reduce the size of its signage (a deal the Troy City Counsel has already declined to sign). Its new proposal would have it shut down its second location in Troy in return for transfer of the license to Big Beaver, with no sign-size reduction.

Coverall Sued Again

Two months after it settled a federal lawsuit bought by a group of 10 franchisees from Massachusetts, Coverall North America Inc. was the target of another suit in US District Court, in which a Lowell Massachusetts man contended that Coverall failed to provide him with the business that had promised before he purchased a franchise. According to this article, the plaintiff, Pius Awuah, alleged that Coverall promised that he would obtain $3,000 a month in commercial building cleaning business, but Coverall provided him typically less than $1,300 a month. Awuah’s complaint also charged that “Coverall targets individuals with limited fluency in English because they are easily victimized by Coverall's misrepresentations and other systemic legal violations.” Coverall’s general counsel said that she had not seen the complaint and therefore could not comment on the allegations.

Oops... Wrong Number

Benjamin Franklin Franchising LLC, a national plumbing franchise, recently began using the toll-free phone number 866-867-5309 as part of its national marketing campaign. Apparently, the number and campaign are inspired by the otherwise forgettable 1982 Tommy Tutone song “867-5309/Jenny.” Why is this a problem? According to this article, a Rhode Island-based heating and plumbing business had already been using Jenny’s phone number for several years in connection with a marketing campaign that was also based on the song. Last week, the Rhode Island business sued Clockwork Home Services, the franchise's parent company, in a Massachusetts federal court, where the two firms are competitors, demanding that they stop using the number and seeking financial damages. Neither Jenny nor Tommy Tutone was available for comment.

Tribe Finds Nasty Surprise Under a Hard Rock

When the Seminole Indian Tribe of Florida bought the Hard Rock Casino, hotel and restaurant chain in December for $965 million, they didn't expect to have to shell out an additional $10.5 million annually and $525 million in loans. But that's what they have now agreed to pay to settle a lawsuit brought by Power Plant Entertainment, LLC, and its affiliate, Cordish Co., alleging that the Tribe and former Hard Rock owner Rank Group PLC colluded to deny Cordish a chance to bid on the Rock. [See our earlier entry on this dispute, January 4, 2007.]

Hortons Hears a Who -- And Sues For Defamation

Coffee franchisor Tim Hortons has sued a popular Canadian radio talk-show host, a radio station and CanWest, which owns Global TV, alleging that they defamed it by suggesting that its recent opening of a Hortons franchise in Kandahar, Afghanistan, was in fact funded by Canadian taxpayers. According to this article, the suit, which seeks $105 million in damages, challenges such statements as talk-show host Bill's Carroll's statement that "Tim Hortons has been sliding by on the great publicity about the Kandahar franchise all these months and then Global uncovers the dirty little secret. You and I, the taxpayers, are picking up $4 or 5 million dollars a year so that they can look good to the public. . . . Shame on Tim Hortons."

Popeyes Claims Church's Stole Franchises

The owner of Popeyes Chicken & Biscuits restaurants, AFC Enterprises Inc., has sued Church's Chicken for more than $20 million in damages for allegedly colluding with a former Popeyes franchise group to buy and convert 10 former Popeyes franchised units in the Rio Grande Valley in Texas. Popeyes claims that Church's knew very well that the conversions breached Popeyes' franchise agreements, since Church's -- which was owned by AFC jointly with Popeyes from 1992-2004 -- operates under virtually identical agreements. See these articles for details.

City, Restaurant Chain Continue Blows Over Pair of Hooters

Following up on one of our more popular blog entries ("Hooters Agrees to Size Reduction in Return for Booze," January 9, 2007), this article reports that a Federal District Court Judge in Troy, Michigan, has stayed Hooter's lawsuit against the city alleging that Troy discriminated against it by denying it a liquor license. Judge Julian Abele Cook, Jr. decided to hold the federal case pending the outcome of a similar action pending before the Michigan Court of Appeals.

Restaurant Sued for Throwing Wok at Chinese Talk

Minado, a Long-Island, New York Japanese restaurant chain, has settled an EEOC case alleging that it discriminated against Chinese employees by prohibiting them from speaking Chinese in the restaurant at any time, even on their breaks -- but did not restrict Korean and Hispanic employees' language use. Minado agreed to pay $130,000 to close the case, including payments for backpay and compensatory damages to injured Chinese workers.