Wiggin and Dana's Franchise Law Blog

"Whatever Happened to HoJo's?"

For a bittersweet retrospective on Howard Johnson’s illustrious history (and its great ice cream sundaes) and its dwindling to only three locations today, check out this story.

Check This List Twice

The California Department of Corporations announced the launch of Project FAL$E HOPE$ in which a consortium of state and federal regulators and law enforcement agencies are targeting bogus business opportunities and work at home scams. According to this article, over a hundred law enforcement actions by state and federal agencies in 11 states have been brought against such previously well-thought of concepts as hypo-allergenic cats, rental of margarita machines and home delivery of pet products, among others.

There’s Almost Nothing We Won’t Put On The Blog

A Maine beer distributor has accused the Maine Bureau of Liquor Enforcement of censorship for denying its applications for labels for “Santa’s Butt Winter Porter.” Shelton Brothers, which filed its complaint in federal court, had a similar dispute with the state of Connecticut last year when the state questioned the tastefulness of “Seriously Bad Elf Ale.”

Trans-Fat; Sans-Fat

On December 5, 2006, the New York City Board of Health approved a measure requiring restaurants to eliminate almost all trans-fats from their food items. All city restaurants will be required to use frying oil that leaves food with less than half a gram of trans-fat per serving by July 2007. The measure could be challenged by city regulations and the restaurant industry. Yum! Brands, for one, did not seem that supportive. Its representative, David Novac, was quoted as saying, “We think it’s ridiculous – it’s just going to create more confusion and slow things down for the consumer.”

This information is taken from a December 6, 2006 Wall Journal article which requires a subscription to link.

Booker T Is Outside The Bun – Taco Bell Pulls Green Onions

Taco Bell Corp., apparently thinking inside the bun for a change, has pulled green onions from all of its 5,800 U.S. restaurants according to this article. Preliminary testing by an independent lab apparently found 3 samples of green onions that tested positive for a potent strain of E. coli bacteria. Executives of Taco Bell, however, indicated that the tests were not conclusive. Taco Bell has at least 46 confirmed cases of E. coli sickness linked to Taco Bell units in New Jersey, New York and Pennsylvania.

Fall River Customer Takes a Fall--Twice

According to this article, a Fall River, MA man recently claimed that he fell ill after eating a taco from a local Taco Bell that someone had tainted with a "white, powedery substance" that, according to one restaurant emplyoyee, "looked like cocaine," at least after the customer had, he claimed, pulled the partially eaten taco from the garbage. The man's imagination has obviously improved. Come to find out that three years ago, the same customer hired a lawyer and filed a complaint with McDonald's, alleging that he got sick from eating -- a pickle, which, allegedly, he had specifically asked the restaurant to leave off his burger.

Hold the Spit, Please

A police officer has sued the Waffle House restaurant chain and one of its former cooks, claiming that he saw the cook spit into his food. According to this article, the officer claims that the cook told the manager what he had done, but the manager did nothing to warn the officer or report the incident to authorities.

Uggh

This article reports that Dallas Cowboys wide receivers coach Todd Haley recently sued a Texas McDonalds, alleging that his wife and au pair found a dead rat in their take-out salads. Haley, who has also made news for his recent run-ins with volatile wide receiver Terrell Owens, seeks $1.7 million in physical and mental pain and anguish, contending that “[t]his tremendous horror translates into continuing gastric disaster.” We have no word on whether Haley or the Cowboy organization plan to sue Owens at season’s end for the “pain and suffering” that the flaky wide receiver has inflicted on Cowboy coaches’ and fans alike.

What’s Next, Veggie Chicken?

A group of KFC franchisees are using a new liquid cooking oil that will greatly reduce the trans fat in the chain’s fried chicken and other menu items. According to this article, the change “could have broad implications for KFC” as the chain looks to reduce the trans fat in its cooking oil and promote a more nutritious menu. As of this writing, Subway spokesman Jared Fogel has not said whether he will switch to eating KFC (don’t call it fried) chicken as part of his overall diet and exercise plan.

Another Finger Licking Hoax?

Fans of the blog may recall our April 05, May 05 and January 06 posts (“Finger Licking Good”) about the Las Vegas woman who was sentenced to nine years in prison after falsely claiming that she bit into a fingertip in a bowl of chili at a Wendy’s restaurant. Well, a woman who recently ate at a Subway restaurant in Chowchilla, California claims that she found part of a human finger in her Subway sandwich. However, after conducting an on-site visit, two health inspectors found no evidence that a restaurant worker had lost part of a finger. (Presumably, the investigators required store workers to exchange high-fives during the on-site visit). According to this article, the substance, which a store worker believes was just a piece of fat, was sent to a lab for testing. Subway is also investigating the incident.

Everyone Hates Slow Service

Rose Rock, the mother of comedian Chris Rock (of “Everyone Hates Chris” fame), plans to sue a Cracker Barrel restaurant in South Carolina, claiming that servers ignored her and her 21-year old daughter for more than 30 minutes. According to this article, Rock believes that the slow service was racially motivated, even though a manager offered free meals in response to their complaints. Rock commented that “[t]he only thing he said was we could have a free meal and neither of us wanted to eat.” Which makes us wonder, why go to a Cracker Barrel if you’re not hungry?

Franchising Comes Fishing for Ford Employees

While Ford's Board of Directors discussed the company's future, some Ford employees spent part of the first week of an extended idle period at their Norfolk, Virginia assembly plant at a company training center, "listening to franchisors' pitches on sub shops, sign-making businesses and religious jewelry and clothing stores." Said one employee, while looking over materials at the Go Fish Clothing & Jewelry Co. and SportsClip tables, "I'm kind of fishing around here. It's not the end of the world by any means. Life goes on. You just have to adjust."

Drop-off in e-Bay Drop-off Franchises

Check out this article for an interesting look at the history of eBay drop-off store franchising, from its humble beginnings in 2003, to apparently raging success in 2005 with approximately 7,000 locations across the country, to today, when, according to the author, serious questions are arising as to the strength of the concept, which is plagued by low profit margins, high operating costs, and weak inventory flow, among other issues. The author offers the example of iSoldit, the largest U.S. and Canadian franchisor, which claims to have over 900 stores "under contract" and to project expansion to 3,000 stores in 50 states. In fact, the system has only 182 stores currently operating, and acknowledges that it is still "conducting studies" to determine the feasibility of expanding to even a 1,000-store range. The author concludes that "Not all is gloom and doom. Many eBay drop-off stores continue to prosper. But given the initial outlay, the tight profit margins and overhead in the brick-and-mortar model, the drop-off store business is not for eBay or business neophytes. ... Those inexperienced on eBay who plop down a pile of money and think they will live off the eBay name-sizzle are in for a disappointment."

Independent Ink – Supreme Court Abandonment of Market Power Presumption

In this article Independent Ink – Supreme Court Abandonment of Market Power Presumption, Wiggin and Dana lawyer Erika Amarante discusses the March 2006 United States Supreme Court case, Illinois Tool Works, Inc. v. Independent Ink, Inc., 126 S. Ct. 1281 (2006), which “sounded the final death knell” on franchisor market power presumptions in the antitrust tying context that some United States Circuit Courts of Appeal had adopted. As noted in the article, the Court’s “long-overdue holding that tying is not per se illegal absent actual (not presumed) market power in the tying product will provide franchisors with additional ammunition for justifying their valid tying arrangements.”

Who’s the Franchisee?

In recent article, Mad About ‘You’, Drafting Agreements to Do No Harm, Wiggin and Dana franchise lawyer Bob Burstein warns about some of the less obvious dangers of franchise agreement drafting, particularly when identifying the parties to the agreement and their respective roles and responsibilities. Mr. Burstein provides examples from two recent cases: one that involves a franchise agreement’s collective definition of the franchisee limited liability company and its principal as “you”, which made it easier for a third party to hold the individual principal liable for personal injuries (with no benefit to the franchisor), and another where the franchisee owner signed on behalf of the franchisee in a signature block including the word “individually,” which made the franchisee’s identity ambiguous. The article concludes: “Using plain language and shortening agreements are legitimate goals, but clarity and precision should be maintained.”

That's Not The Topping I Ordered

The next time your pizza is delivered cold, be grateful it’s a pizza. According to this report, a Domino’s deliveryman was supplementing his income by using his delivery vehicle (after he was finished with his shift of course) to transport dead bodies to Philadelphia-area funeral homes. A police officer noticed a stretcher in the rear of the vehicle during a routine traffic stop and was informed by the driver about his other job. The driver is now facing $400 in fines for driving with a suspended license and operating a vehicle without an inspection certificate. The police determined, however, that use of the car for the dual purposes was not illegal.

Your Chicken is Safe

The bird flu has not reached the U.S., but KFC still wants its customers to know that they are safe. The Associated Press reports in this article that KFC is engaging in a campaign to assure customers in the U.S. that their chicken is “rigorously inspected, thoroughly cooked, quality assured.” Small stickers are being put on the lid of every bucket of chicken sold by KFC in the U.S. to allay concerns about bird flu. Jonathan Blum, a spokesman for Yum Brands Inc., the parent of KFC, states that KFC has safeguards in place stretching from “farm to table” to guarantee that its chicken is safe.

He was the bravest of them all - - Gene Pitney Dies at 65

Gene Pitney was found dead in a hotel in Cardiff, Wales on Wednesday, April 5. Pitney was 65, on a tour of Britain and had performed in Cardiff the night before. According to the Associated Press, he appeared to have died of natural causes.

Pitney was born in Hartford, Connecticut and before embarking on his own singing career, wrote songs for Steve Lawrence, Roy Orbison and Bobbie Vee. Pitney also penned the Ricky Nelson hit “Hello Mary Lou” and the Crystals’ “He’s a Rebel,” recorded by Phil Spector. Yes, yes, we know that Darleen Love sung the lead vocal, but it was still credited to the Crystals. Pitney is probably best known for his hits, “Town without Pity,” “(The Man Who Shot) Liberty Valance” (although the song never made it into the movie) and “Only Love Can Break a Heart.” Pitney also recorded the Rolling Stones’ “That Girl Belongs to Yesterday” in 1963; in 1964 it became the first Jagger/Richards composition to chart in the United States. Pitney also had a hit in Britain in the late 80s with “Something’s Gotten Hold of My Heart” which he sung with Mark Almond.

Pitney was inducted into the Rock and Roll Hall of Fame in 2002.

A Million Annoying Little Pieces

Oprah . . . James Frey . . . truth or dare . . . who cares?

In The Midnight Hour

Wilson “Wicked” Pickett died of a heart attack on January 19, 2006. Pickett was born and reared in Prattville, Alabama, the youngest of 11 children. He later formed a gospel music group called the Violinaires, which participated in gospel music tours across the country with, among others, Sam Cooke. He joined The Falcons, which already included Eddie Floyd and Sir Mack Rice, in 1959. “I Found a Love” with Pickett on lead vocals, was a hit for The Falcons in the early ‘60s. Pickett then recorded for Atlantic Records (where Solomon Burke made a hit of Pickett’s “If You Need Me”). Pickett later went to Stax Records in Memphis and there recorded his famous “In the Midnight Hour.” In the same recording session that turned out “In the Midnight Hour,” Pickett also recorded “Don’t Fight It,” “634-5789” and “Ninety-nine and One-Half (Won’t Do).” These songs were recorded with the Stax house band, Booker T. and the M.G.’s, including guitarist Steve Cropper.

From Memphis, Pickett moved on to Muscle Shoals, Alabama where he recorded “Mustang Sally,” “I Found a Love,” and “Funky Broadway.” Young Duane Allman was a session guitarist on some of these songs. Pickett also scored hits with covers as diverse as The Beatles’ “Hey Jude” and The Archies’ “Sugar Sugar.” In the early ‘70’s, Pickett worked with famed “Philadelphia Sound” producers Kenny Gamble and Leon Huff.

Many popular artists have recorded Pickett’s songs, including The Rolling Stones, The Grateful Dead, Roxy Music, Los Lobos and others. Pickett was inducted into the Rock and Roll Hall of Fame (which yr crrspdt recently visited) in 1991. RIP Wilson.

Down By Law

Iconoclastic musician/actor/franchise hero Tom Waits believes in protecting his own style as a unique legal property. In a New York Times article on January 20, 2006, Mr. Waits discussed cases he’s brought against Frito-Lay, the Audi division of Volkswagen and the Opel division of General Motors. The Frito-Lay case was decided in Mr. Waits’ favor 16 years ago; he was awarded $2.5 million for Frito-Lay’s use of a vocal sound-alike in a Doritos commercial. The case against Audi resulted from a commercial in Spain using music suspiciously similar to Waits’ song, “Innocent When You Dream” and sung by a voice suspiciously similar to Waits’. In November 2005, a Spanish appellate court in Barcelona decided the case in Waits’ favor and he was this month awarded $43,000 for copyright infringement and an additional $36,000 for violation of his “moral rights” as an artist. A lawyer for the company which produced the Audi commercial said that the producer and Audi acted in complete and absolute good faith. Mr. Waits’ case against Opel focuses on a version of Brahms “Lullaby” performed in what Waits calls a suspiciously Waitsian voice.

In explaining his tenacity in defending his image, Mr. Waits said “It’s part of an artist’s odyssey, discovering your own voice and struggling to find the combination of qualities that makes you unique. It’s kind of like your face, your identity. Now I’ve got these unscrupulous doppelgängers out there – my evil twin who is undermining every move I make.” . . . every breath you take; every cake you bake . . .

Upon Further Review....

According to this Reuters article, on Thursday January 5, 2006 Krispy Kreme Doughnuts Inc. said it terminated the franchise license of its Southern California franchisee, Great Circle Family Foods, because it was not paying royalties and other fees. Great Circle operates 28 Krispy Kreme outlets in Southern California. On Friday, however, Krispy Kreme announced that it reinstated the franchise license because Great Circle agreed to resume payments. In September, two principals at Great Circle sued Krispy Kreme, accusing the company of overcharging for equipment and supplies and misappropriating franchisee funds. Great Circle’s attorney acknowledged that Great Circle had not been making royalty payments because the company believes Krispy Kreme may owe it money. Krispy Kreme allegedly has refused to provide Great Circle with financial information to determine if money is owed.

An Employee Recognition Program That Really Works...

A Donatos Pizza manager in Lakewood, Ohio was arrested after her boss discovered 400 rotting pizzas in her garage. According to this article from CourtTV.com, the manager established fake store accounts in 2001 for area hospitals and a school district. She then told fellow employees that she would deliver the pizzas to the customers herself in order to maintain good rapport. To further the charade, she even sent flowers to herself with a thank-you note from one of the hospitals. Police say that the manager did not benefit financially from the ruse and that her sole purpose was to get her name in the company’s newsletter. The manager is also accused, however, of stealing more than $38,000 from Donatos and then forging documents and damaging the company’s computer system to cover it up. She is also accused of writing restitution checks on a closed account.

Calmer Than You . . .

Faithful FranchiseLawBlog readers know that this is a forum for hard-edged franchise news stories and no place for treacly personal interest items. But we would be remiss not to inform you that effective November 28, Kim Toomey, our founding editor and blogger extraordinaire, became the General Counsel of Century 21 Real Estate LLC. In the crusty-but-benign manner of a 21st century Lou Grant, Kim’s steady editorial hand, combined with her crisp writing and comprehensive knowledge of franchise law, guided the blog from inception to its present position of legal blog prominence. We wish Kim the best of luck and we hope to maintain her high blogging standards.

Burger King Franchisee Comments on Company's Breakup with the NFA

As reported in the October 20, 2005 blog entry, Burger King formally severed relations with its National Franchise Association. Here's one Burger King franchisee's take on the situation.

Burger King Corporation Reported To Have Severed Ties With the NFA

Two months after Burger King's National Franchise Association ("NFA") filed suit against McDonald's, Burger King appears to have severed relations with the franchisee organization. According to one news source, Burger King claims that although it is "clearly pro-NFA," the organization has failed to publicly back certain of the company's marketing campaigns and promotional initiatives. The source speculates that the rift between the company and the NFA may also be connected to Burger King's opposition to the NFA's lawsuit against McDonald's, which the NFA later withdrew. The NFA, which is believed to represent approximately 90% of U.S. Burger King franchisees, alleged in its lawsuit that McDonald's engaged in unfair competition through rigged promotional games, which ultimately led to convictions for employees of McDonald's advertising agency. McDonald's was never implicated in any problems with the promotions. Notwithstanding that, the NFA sued McDonald's, alleging that Burger King franchises lost customers as a result of the promotion.

Kid-Friendly Pyramid Scheme

Debate Over Rising Gas Prices

Unlike the 1970s, there doesn't presently appear to be a gas shortage pushing gas prices over the $3.00/gallon mark. This San Jose Mercury article posits that the hikes mean nothing but profits for Big Oil. As for little oil - or the gas station franchisees - some claim that their manufacturers increased prices are pushing them out of the market. In this Philadelphia Inquirer story, Wiggin and Dana's Joseph Schumacher joins other experts in considering the issue of a Lukoil franchisee protesting the company's prices. Schumacher argues "Just to say 'I'm being priced out of the market' is not sufficient. There has to be some violation of the law."

Dial "P" for Pizza

With a growing number of pizza delivery call centers setting up around the country, customers dialing a local pizza shop may now be placing orders with a person in another state. According to the Pittsburgh Post-Gazette, a Domino's franchisee in eastern Pennsylvania uses a call center in Oklahoma, and a Vocelli Pizza's call center located in Scott, Pennsylvania, receives orders from Virginia and Florida. Although outsourcing customer services to different states and countries is not a new concept, it is a relatively fresh idea in the restaurant industry. As reported by the Pittsburgh Post-Gazette, while some businesses have reported delivery delays and mistakes as a result of the call system, others report that business has increased because of the efficiency of the call centers.

It's Not Easy Being Handy

T. L. Tenenbaum, owner of a Mr. Handyman franchise in Los Angeles, has a way with giving his employees instructions and guidelines for the best approach to drywall and plumbing problems. Tenenbaum provides his workers with rules on a broad range of issues that might come up on a job, such as a misplaced pair of racy underwear, a butcher knife found under a bed or a customer seeking consultation for personal matters. According to Tenenbaum, you have to "[p]retend everything you see is perfectly normal" and "agree with everyone and don't take sides." Tenenbaum is not the only one in the home-maintenance industry anticipating unique and often unexpected challenges faced by their technicians when conducting business in the privacy of their customer's homes. For example, Andy Bell, founder of Handyman Matters Franchising Corp., advises his technicians on how to deal with pets, which seem to be a constant issue for his workers. Bell coaches his technicians to carry dog biscuits and to learn their customers' pets names, which is then inputted into the company's database.

Taco Bell Is Back on the Menu in Southeast

Ending the three-year boycott over the low wages of tomato pickers, Taco Bell agreed to assist the indigent immigrant workers of the Florida tomato fields in getting better wages and working conditions. Neither Taco Bell nor its parent company, Yum! Brands, employs the workers, but the Mexican franchise company entered into an unprecedented agreement with the Coalition of Immokalee Workers to pay a penny more per pound of tomatoes with the increase to go directly to the workers. The Coalition has urged boycotts of Taco Bell because it claimed that Yum pressured tomato growers to give volume discounts that resulted in severe depression of the farmworkers' salaries. According to this article in the Washington Post, before the accord was reached, a farmworker earned 40 cents for each 32-pound bucket of tomatoes. Under this wage calculation, a worker would need to pick 2 tons of tomatoes to earn $50. The agreement between Yum! and the coalition gives the workers hope that other companies will follow suit.

Another Caveat to Franchisees

Two articles in one day warning franchisees about the risks in franchising. This article in the Herald Today advises franchisees to spend 30 hours reviewing the Uniform Franchise Offering Circular and agreements, as well as interviewing franchisees about assistance, operating costs and percentages of expenses to total revenue.

The franchise litigation I've seen typically involves franchisees claiming that they skimmed the documents provided to them and called a franchisee or two. Whether these claims are made to try to avoid responsibility for reading all the disclaimers and waivers contained in the UFOC or whether people on the verge of buying their own business don't do their due diligence is not really important -- it's probably some combination of both. But I'd venture to guess that the average individual franchise operator does not spend the recommended 30 hours reviewing/studying these materials and interviewing people in the system before they decide to sign up. Having a dispassionate, business-like view of a franchise as an investment with substantial risks is the only way to approach the endeavor. Otherwise, franchisees are likely to ignore warning signs and avoid asking difficult questions.

USA Today Opines on Successful Franchises

In this USA Today article, the author describes his top five reasons that some franchises fail. Citing the 30% first year failure rate of new non-franchised businesses, the author identifies the pitfalls of first year franchises -- the system itself, the location, lack of advertising, competition and lack of start-up capital.

Four Is the Least Lonely Number

In a sociological experiment, a potential franchisor has discovered that the best networking number is 4. Putting four people together at a lunch, says the owner of Networking Lunch of Santa Fe, New Mexico, creates the best chance for continued conversation between the participants and the smallest risk that the group will break down into sections or cliques. Once the conversation gets going, the networkers find clients and business opportunities. The owner, Deborah Finkelstein, has gotten great feedback from the company's members, inspiring her to possibly take the idea of four on the franchising circuit. She's already launched chapters in Santa Fe, Albuquerque and Taos.

Who's the Boss?

Fox News reports on a story of real job dedication. Evidently, the employees of a Seattle Quiznos Subs' store faced a puzzling situation when the franchisee owner just stopped coming to the store. Although the paychecks stopped coming in, some of the employees (apparently in the name of team spirit) continued to man the store and kept the place open. Initially, the employees purchased inventory with cash from the register; Quiznos' bread was obtained through other local franchises and wages were paid with whatever cash was available. As days went by, post-it notes covered the soda machine giving the customers limited beverage choices, a three-page list was posted at the door with what the store didn't have and eventually the paychecks stopped altogether.

After a Seattle Times reporter visited the store, The Times got in touch with the Quiznos company which sent representatives to insepct the store. Since then, food deliveries resumed, staff was added and employees were paid back wages. Ownership of the franchise is being transferred to a new set of owners.

Second Connection Made Between Franchising and Religion

A couple months ago, we posted an article from Times and Season that compared churches to franchising -- uniformity, standards, training manuals. This week, we discovered this article on mega-churches (or multi-site churches) that have implemented more than just the look and feel of a franchise. They're using technology, including video sermons, to reach larger audiences with satellite churches and to "provide consistent quality and service wherever you go." One of the pastors of a megachurch called Willow Creek explained the movement this way: “When Starbucks opens up a Starbucks, people expect it to be Starbucks, not a mom-and-pop coffee shop. There's a lot of meaning in the Willow brand.” The Willow brand has already opened several church campuses in Illinois and draws more than 20,000 each week. A new church is planned for downtown Chicago next year.

Rice on Rice

McDonald's has adopted a change in their Taiwanese menu . . . rice burgers. After 18 months of development and research, Taiwan has become the first nation to offer rice burgers under McDonald's brand. The Taipei Times reports that McDonald's Taiwan is out to change its image by promoting a healthier diet. Although other restaurants offer rice burgers, McDonald's hopes to sweep the rice market with its offering. The rice burger is available in two flavors, chicken or beef, and it's sandwiched between two rice cakes. That's a lot of rice.

Milestone Moment for Subway

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.

Burger King's Trump Card

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.

Animal Cruelty Laws Do Not Apply in Slaughterhouses

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.

Separation of Church and Franchising

During this spiritual season, thoughts of franchising come second to thoughts of faith. This post from Times and Seasons, however, helps tie two life-affirming concepts together by considering the Church (presumably any Church - although this site is run by Mormons) as a franchise -- right down to the uniformity of practice and doctrine, training and ops manuals that characterize so many successful franchises. If "Law and Order" can have a franchise, why should the Church be denied?

The First Paean to a Franchise Giant

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.

Make 'Em an Offer They Can't Refuse

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.

Hooters' Former President Convicted

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.

Boise State Students Square Off Against Administration and Taco Bell Franchisee

A dozen students, faculty and alumni are trying to fight Boise State University's plan to grant the naming rights of the campus Pavilion to a Taco Bell franchisee. The group argues that the Unversity's unilateral decision to grant the franchisee naming rights is not financially beneficial to the University because it accepts in-kind contributions rather than cash for the rights and it also ignores Taco Bell's conduct in failing to sufficiently pay migrant workers for tomato-picking. This is only the latest in a number of stories about university backlash to the employment practices of Taco Bell. See previous blog entries.

Taco Bell Troubles Continue

The one place that Taco Bell thought it was safe was South Bend, Indiana. Not so. Notre Dame University has announced that it will not renew Taco Bell's contract because Taco Bell uses tomato suppliers that allegedly treat migrant workers unfairly and don't pay them adequately. According to Notre Dame, the issue was raised by Notre Dame students and Taco Bell did not provide an adequate explanation of their policy. The school's temrination of the Taco Bell contract will mean a loss of $50,000 that Taco Bell paid to sponsor sports events at the university. See these blog entries for other group activism against Taco Bell.

Checking in on Krispy Kreme

CBS Marketwatch reports that the franchisor's auditors have not finished the company's financial statements and will not do so until an independent law firm completes "additional procedures" related to an unspecified acquisition by the company in 2004. The company stated in its SEC filings that the independent law firm had already concluded that neither Krispy Kreme nor its employees committed any misconduct in connection with the acquisition, but the company authorized the law firm to perform the "additional procedures" requested by the auditors. For a copy of the 10-Q filed on September 10, 2004, click here. Krispy Kreme's stock was up four cents at $11.60 at the close of trading today, but the company's stock has declined by 75% in the last year.

In the Wall Street Journal Today

The Wall Street Journal -- Franchising, nothing but franchising. If you don't have a subscription to WSJ, you should think about getting one. There are at least three interesting articles coming out of today's WSJ on franchise companies.

First, The Wall Street Journal Online published this interesting article about the problems at Krispy Kreme. The article suggests that Fortune Magazine's 2003 pick for hottest brand in America may have expanded too fast and diluted its "cult status" by distributing its doughnuts through a number of venues -- like the brand equivalent to Hollywood's media saturation.

In another article, the Wall Street Journal reports on another publicly traded franchisor, AFC Enterprises, that has generated some news over the last year. On Wednesday, we posted a story about AFC suing Arthur Andersen over the company's two restatements of revenue and a number of shareholder lawsuits. Today, the Journal reports that AFC's insurance company is attempting to rescind some of the company's insurance policies because, according to the insurance company, they were obtained through misrepresentations.

Finally, the Journal published this article about the attempted sale of DB Companies for $71 million that was blocked in Delaware bankruptcy court in a struggle involving the founding family, the franchisees and competing bidders. The company, which filed bankruptcy in 2001, operates a chain of 149 stores and franchises 50 DB Marts. Judge Peter Walsh will hold a hearing today to hear about a number of pending deals, including bids from Getty and DB competitor Cumberland Farms.

Franchisee Accused of Abusing Cultural Exchange Program for Cheap Labor

In the Philadelphia Inquirer yesterday, there was an article about Romanian students working at local Wendy's restaurants, who claim that they were misled into coming to America under the State Department's cultural and educational exchange program. The students claim that they came to the United States as part of a management training program to assist them with careers in tourism in Romania, but were essentially used as cheap labor at the Wendy's restaurants, manning registers, cleaning and working a required 50 hour-work week. The franchisee's representative denies the allegations and claims that part of management training includes working in every position in the restaurant. According to the article, some immigration groups charge that employers are increasingly exploiting the Exchange Visitor Program to import low-cost labor from other countries under the guise of training.

PETA's Poet Laureate and Her Unenviable Task

Adding to its list of celebrities on the KFC campaign, PETA announced on its website that Alice Walker will judge an anti-KFC poetry competition. It may be safe to say that the age of romanticism is now dead. Ms. Walker, the author of The Color Purple, recently sent a letter to David Novak, the CEO of Yum! Brands (KFC's parent), asking Mr. Novak to imagine himself as a chicken. A copy of Ms. Walker's poem "Mother's Day" is available here. Whether Mr. Novak actually imagines himself as a chicken, KFC continues to be plagued by this PETA campaign that has worked its way across the country. Billboards featuring Pamela Anderson in a lettuce bikini hang in a number of metropolitan areas. Richard Pryor has appeared in television commercials and Paul McCartney has taken out full-page ads in newspapers to draw attention to the issue. The effect so far on the franchisor or its operations is unclear; but YUM! Brands stock does not appear to be affected. The parent company stock closed at $39.27. For other articles on PETA's campaign, see blog entries from July 21, June 28, and February 20.

KFC Supplier Caught on Tape

In a rather graphic article, the New York Times reports that PETA has released a videotape showing slaughterhouse workers for one of Kentucky Fried Chicken's suppliers repeatedly engaging in the inhumane treatment of chickens. According to the article, the video shows the workers kicking and stomping the birds. The mistreatment of the animals was videotaped during a covert operation by one of PETA's investigators. In response to the video, the supplier has suspended the workers involved (who may face criminal charges of animal cruelty). KFC has announced that it will buy no more chickens from the supplier unless the supplier assured KFC that the abuses had stopped. KFC also plans to inspect supplier slaughterhouses more frequently to ensure that KFC chickens are treated humanely.

Pamela Anderson Asks: What Does the Dalai Lama Got That I Don't Got?

Besides gobs of spiritual enlightenment, the Dalai Lama appears to have some pull with KFC. According to this article from Reuters, the Dalai Lama may have succeeded in Tibet where Pamela Anderson and Paul McCartney failed in America. KFC was looking to expand its presence into Tibet. After an appeal from the Dalai Lama, Tibet's spiritual leader and a long-time vegetarian, KFC scratched its plans for Tibetan expansion. A KFC spokesperson said that the decision was based on financial feasibility and KFC claims that it never received the Dalai Lama's letter. KFC now operates units in 230 cities in all regions of China, except Tibet.

In the last year, PETA has worked with celebrities like Anderson and McCartney in a letter-writing campaign accusing KFC of certain inhumane treatment of chickens. On its website, PETA now includes an alleged copy of the letter sent from the Dalai Lama to KFC. The Dalai Lama quote of the day is available here.

Indictments Handed Down After Worldwide Coffee Franchisor Violates Consent Order

On June 4, a South Florida grand jury indicted the owners of what the government calls "a telemarketing business." The defendants face 20 counts of criminal contempt for violating a consent order with the Department of Justice. In 2000, the defendants, John and Terri Salley, agreed that they would not violate the FTC Rule or misrepresent facts to franchisees. A copy of the consent order is available here. According to the government, after entering into the order, the Salleys continued to sell coffee franchises through Worldwide Coffee, Salley's Coffee and other brands. They also violated the FTC Rule by failing to provide certain disclosures required by the FTC and by failing to disclose felony convictions and bankruptcies. The court ordered Jeffrey Salley to be detained pending the pre-trial hearing and ordered Terri Salley to post a bond of $100,000. A copy of the DOJ's press release is available here.

The Passion of the Vine, More Trouble for Taco Bell’s Tomatoes

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.

Student Activists Still Hungry for Change

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.

McDonald's CEO Dies of Heart Attack.

Investors and franchisees alike were shocked to learn of the death of McDonald's CEO, Jim Cantalupo, this morning in Florida. Mr. Cantalupo, who is credited with a dramatic turnaround of McDonald's in last year, was attending a franchisee convention in Orlando at the time of his death. His death appears to have been the result of a heart attack. Mr. Cantalupo was 60 years old. McDonald's has named its Chief Operating Officer, Charlie Bell, to replace Mr. Cantalupo.

KFC Posts Offer for "Apprentice" Runner-Up

Before even having the name in hand, KFC has released a statement that it will offer a one-week position to the first runner-up in the NBC series "The Apprentice." Four contestants remain on the Donald Trump show and the winner is offered a one-year position heading one of Trump's companies for a salary of $250,000. KFC has offered a one-week salary of $25,000 for the runner-up to act as Chief Sales Officer for KFC and roll out KFC's new oven-roasted chicken line. Given KFC's penchant for using reality TV pseudo-celebrities in commercials, the company has not ruled out the possibility that its one-week CSO may also appear in a company ad.

The Janet Jackson Pendulum Swings into the Hampton Inn

The Agape Press, a Christian periodical, reports on a Michigan family's complaint that they were exposed to obscene material during their visit at a Hampton Inn in Detroit. Apparently, a mother and her 10-year old son viewed the material on the televisions in the exercise room. The article does not identify the material except to say that it involved "explicit sexual conduct." The American Family Association of Michigan has decided to join the family in filing a complaint with the FCC against the Hampton Inn.

Welcome to our new home!

We're in the process of moving the Franchise Law Blog from Blogger to Movable Type.
For now, visit us at our old site.

We'll keep you posted as we make progress.

Angela's Ashes Outside

Hard as it may be to believe, Ireland is set to introduce the most sweeping workplace smoking ban in the European Union. The ban, if passed, will prohibit indoor smoking in all workplace environments, including pubs and restaurants. Violators of the ban will be required to pay a fine equal to $3,850 US.

Richard Pryor Joins the PETA Chicken Battle

As the saying goes, potential mistreatment of chickens makes strange bedfellows. Richard Pryor has joined Pamela Anderson and Paul McCartney in an anti-KFC campaign. Pryor will appear in ads asking consumers to boycott KFC for its cruely toward chickens. According to PETA, KFC breeds and drugs its chickens so that they become so heavy they are crippled by their own weight. PETA also accuses KFC of cruel slaughter methods.

Here's another article on the

Here's another article on the Independent Shell dealers' claims that Shell is attempting to drive them out of business.

Entertainment News. A couple of stories lingering a while

Entertainment News. A couple of stories that have been lingering for a while:

A. Viacom Will Sell Its Shares in Blockbuster. The Washington Post reports that Viacom announced after Blockbuster's dismal fourth quarter (Blockbuster posted a $1.19 billion loss), it will divest itself of an 81% controlling share in the movie rental company through a tax-free spin-off. Although Viacom has been discussing a sale of its stock for months, this is the first discussion of a spin-off.

B. Tower Records' Parent Files Bankruptcy. MTS, Inc., the privately held parent of Tower Records, filed a Chapter 11 bankruptcy in the district of Delaware. The company announced that it filed a prepackaged plan of reorganization. The filing is expected to ultimately result in the sale of the 93-store Tower Record Chain, that has suffered under changes in the music industry and the impact of discount stores like Wal-Mart and Best Buy.

Scottish Groups Protest Krispy Kreme's

Scottish Groups Protest Krispy Kreme's Fundraising Program. When Krispy Kreme first opened in Harrod's in London, there was a bit of a fat flap over it. FT.com claimed that some watchdog groups complained that the Brits had obesity problems and that Krispy Kreme doughnuts would only exacerbate the problem. See blog entry October 3, 2003. The store opened and it seems like the delicious doughnuts have soothed the watchdog beast. In Scotland, however, some groups charge that Krispy Kreme's program of selling their doughnuts to non-profit groups like schools for reduced prices so that the groups can resell the doughnuts is improper. Specifically, the watchdogs claim that Krispy Kreme's targeting of a disabled charity group went too far. Although the group rejected the offer, the manager of the group stated: “The idea of plying disabled people with doughnuts is not something I would endorse."

From Soup to Nuts. A

From Soup to Nuts. A Florida man, who claimed that Shoney's failure to give him the correct soup order caused him to suffer from psychological and sleep disorders, was no doubt disappointed by a judgment that awarded him a de minimis amount for his pain. After suffering an allergic reaction to clam chowder (which he thought was potato soup -- common mistake), the plaintiff claimed that he developed a nervous disorder. Shoney's claimed that the plaintiff's disorders were more likely caused by his own traumatic life, including his imprisonment for sexual activity with a child under 12 and his listing as a sexual predator. The jury found that the plaintiff was 90% responsible for his own condition and awarded him $407 of the total $55,346 that plaintiff originally sought.

McDonald's Widens the Burger Gap.

McDonald's Widens the Burger Gap. In the Miami Herald today, this story discusses the dwindling rivalry between the #1 and #2 burger chains in the country. After a surprising turnaround in 2003, in which McDonald's managed to increase sales despite the highly-publicized obesity lawsuit in New York, McDonald's has managed to expand while Burger King at #2 has suffered losses with overall sales declining 2% in 2003.

Quizno's Loses Minority Shareholder Lawsuit.

Quizno's Loses Minority Shareholder Lawsuit. In a ruling issued Friday, Denver Judge Robert McGahey awarded Quizno's minority shareholders $32.50 per share for shares sought to be repurchased by the company. This price amounts to almost four times the price paid to shareholders in 2001 when majority shareholders Rick Schaden (Quizno's CEO) and his father announced a privatization deal. In a decision finding that Mr. Schaden lacked credibility, Judge McGahey stated that at the time the Schadens made the privatization offer, "The 'true status' of Quizno's as a company on the verge of a growth explosion was obviously known to (Rick Schaden and his father), but they told shareholders little, if anything, of substance concerning that potential growth explosion." Quizno's sales increased 67% in the year ending September 2002 -- the second highest growth rate in the country. Quizno's plans to appeal the ruling.

Is this Line Secure?

Is this Line Secure? At a Troy, Michigan Burger King, police believe that one or two young men have tapped into the wireless frequency used for the restaurant's drive-through service and are interrupting orders and insulting customers by saying things like, "You don't need a Whopper. You're too fat." Good times.

Rising Above the Nameless Gourd

Rising Above the Nameless Gourd. After a brief hiatus (when Team Blog went to Hollywood, Florida for the ABA Forum on Franchising annual meeting), the blog returns. The ABA Forum's annual meeting gives the franchise bar an opportunity to discuss some important topics in franchising. This year, Wiggin & Dana partners, Jack Dunham and Joe Schumacher each presented two programs at the Forum meeting. During the mini-programs on Wednesday, Jack was part of a panel of franchise experts that presented Fundamentals of Franchising and Joe, as a member of the Litigation and Alternative Dispute Resolution committee, participated in the NITA sponsored program "Road Warriors: Effective Direct and Cross Examinations in Franchise and Distribution Disputes." During the main program on Thursday and Friday, Jack moderated a program called "The Road to Perdition: The Case Against Arbitration in Franchise Disputes," and Joe (along with Scott Korzenowski) presented "Crouching Tiger: Franchise Fraud." Great programs, great location.

The Legislative History of Franchising:

The Legislative History of Franchising: A discussion of the origins of franchising and the evolution of franchise regulation appears in "Franchise Regulation - Past, Present and Future" at Entrepreneur.com.