Taking the High Road

Cuppy’s Coffee Emerges with Spirit Undeterred After Mis-Association with Troubled Coffee Chain

(Fort Walton Beach, Fla.)--- When Cuppy’s Coffee & More, Inc., was formed in 2006, it hoped to capitalize on Americans’ never-ending thirst for specialty coffee. Cuppy’s Coffee & More and its new associates, however, never expected to dodge obstacles intended for another company.Cuppy’s Coffee & More awards franchises to its franchisees who purchase either a double drive-up building, an in-line coffee café or a tow-behind your automobile mobile unit from Cuppy’s approved vendor, Elite Manufacturing, LLC.  Elite Manufacturing is a wholly-owned subsidiary of Medina Enterprises Inc.  

Medina Enterprises purchased equipment, telephones and assumed the leases from another company that licenses coffee businesses.  Adding to the public confusion, Cuppy’s Coffee leased offices in the same business complex and some of the employees from the former coffee business were offered positions and are now employed at Cuppy’s Coffee.That’s how Cuppy’s problems began.  Although the other coffee company, Java Jo’z, still exists as a licensing company, the owners of Java Jo’z have no financial, operational or legal association with Cuppy’s Coffee, Elite Manufacturing or Medina.  The legal relationship separating the businesses is clearly defined, but some individuals who have had disputes with Java Jo’z didn’t readily understand the distinction.  

“They would say we’re at the same location, we have the same phone number and we have a similar looking logo, so therefore we must be the same company,” said Doug Hibbing, president of Cuppy’s. “But that’s simply not the case. Whenever I talk to a CPA or an attorney and provide documentation, that CPA or attorney clearly realizes that we are two separate unrelated entities.  This confusion even lead to the IRS initially thinking that we were the same business.  Fortunately for us, even that initial perception was corrected by the IRS’s review of our documentation.”Despite inheriting the misdirected criticisms, the affable Hibbing hasn’t let it affect his enthusiasm for Cuppy’s Coffee. Cuppy’s has opened 11 new locations since last May, has 70 stores in development and another 114 franchisees with leases or letters of intent.“I saw an opportunity that was phenomenal in the QSR (quick service restaurant) specialty coffee industry,” Hibbing said. “It’s one of the fastest-growing segments of the coffee industry. I wanted to step in there and take a share of that market.”

Hibbing & Robert Morgan (owner of Medina Enterprises, Inc.) believed that if the business model was operated as a franchise, the core ideas behind Java Jo’z would surpass all expectations.  When the previous ownership decided to sell its assets, the two set out to build a viable, well-managed business with Hibbing at the helm of Cuppy’s and Morgan at Elite Manufacturing. Even though Cuppy’s Coffee has no legal liability to the previous licensees of Java Jo’z, Hibbing and Morgan have worked to accommodate their concerns. They have arranged a no-cost conversion option to former Java Jo’z licensees. In addition, Hibbing has offered a personal invitation and complimentary accommodations to licensees who want to visit the corporate headquarters in Fort Walton Beach, FLA. to see and learn first-hand the opportunities at Cuppy’s Coffee.Hibbing candidly admits he should have performed better due diligence. But there is a calm and determined demeanor that emanates from his voice and one can sense it isn’t the first time his determination has proved to be one of his strongest traits.“With the incredible staff that we have supporting our franchisees, I have no doubt that we can overcome any obstacles.  We’re doing that everyday.”  Hibbing goes on to say.

Hibbing’s openness seems to mesh naturally with one of his primary goals with Cuppy’s Coffee: Build a business with a reputation for integrity.

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TIMELINE OF EVENTS

These entities were owned, controlled and operated by Roy & Kim Snowden:Java Jo'z of Northwest Florida, LLC Emerald Coast Manufacturing, Inc, Java Jo'z Coffee & More, LLCSpecialty Coffee Co-op, IncSnowden Holdings, Inc. The ownership, control and operation of these Snowden entities above continues to remain with Roy & Kim Snowden.  

• On May 4th, 2006, the above entities sold "assets used in the business" to Medina Enterprises, Inc.
• Medina Enterprises is a Nevada corporation formed in 2003 and is owned by Robert Morgan.
• The sales price was $2,532,167.01, plus interest. The consideration for the sale was initial cash and a promissory note which provides for monthly payments of $50,000 per month for 5 years. The note provided for a right of offset should the purchaser pay any debt on behalf of the seller.

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Following the purchase of the assets, Robert Morgan formed these entities:

• Emerald Coast Modular, LLC
• Java Jo’z International, LLC
• Specialty Coffee Cooperative International, LLC.
• Java Drive-Thru, LLC.
• Neither Roy Snowden nor Kim Snowden has any direct or indirect ownership, control, interest or involvement in any of these companies.
• On May 30, 2006 Doug Hibbing formed Cuppy’s Coffee & More, Inc. Neither Roy Snowden nor Kim Snowden have any direct or indirect ownership, control, interest or involvement in Cuppy’s Coffee & More, Inc.
• On June 9, 2006, Robert Morgan formed Elite Manufacturing, LLC. Neither Roy Snowden nor Kim Snowden has any direct or indirect ownership, control, interest or involvement in Elite Manufacturing, LLC.
• Beginning in July & August of 2006, Cuppy’s begins the filing of its UFOC in the registration states.
• The UFOC lists Elite Manufacturing, LLC and Specialty Coffee Cooperative International, LLC as the approved vendors to the Cuppy’s franchisees.
• Java Drive-Thru, LLC operated the one remaining company store. Emerald Coast Modular, LLC and Java Jo’z International, LLC were transition entities & are no longer used.
• In the summer of 2006, payments commenced to Snowden’s under the terms of the promissory note. Elite pays refunds to those Java Jo'z licensees & those Emerald Coast Manufacturing customers that, in accordance with contract provisions were entitled to refunds. Using the offset provision in the promissory note, Elite deducts these amounts from the amounts owed to the Snowden’s.
• In October 2006, the IRS served a subpoena on Robert Morgan. The initial impression of the IRS was that the current operation of Cuppy’s was an alter ego of Snowden. The IRS examined Cuppy’s documents & records and concluded that Snowden’s have no ownership, control, interest or involvement of present operation.
• The IRS, however, levied the payments owed to Snowden under promissory note. This levy also stopped the refunds to the mentioned Java Jo'z licensees & Emerald Coast Manufacturing customers.
• Outside counsel was retained to negotiate with the IRS. Current arrangements with the IRS will now allow us to form a pool with $15,000 per month to pay the debts of the Snowden entities.
• The remaining $35,000 of the $50,000 payments payable to Snowden has been attached by and is being forwarded to the IRS.

FIVE WAYS TO AVOID THIS SITUATION!

1. When such a transaction takes place, produce via a professional source a very thorough and concise press release explaining the deal.
2. If facts and/or dates are confusing, put together a precise timeline of events with bullets representing each step.
3. Make sure your facts are consistent and delivered by a spokesperson who is preferably an officer of the company.
4. Do not “dodge” questions. Answer them in a very clear and concise manner. If there are matters you choose not to discuss, have an answer ready such as “we are not prepared to discuss that matter at this time”.  Then offer to get back to the reporter eventually with a proper answer.
5. Once negative items are revealed in the press, or accusations made by others, answer these with ONE clear statement stating your position and the facts.
6. Do NOT get into a “match” with the accusers, constantly going back and forth making claims and denials.  One dignified statement should suffice.  After that if it truly becomes an issue of libel or slander, it is time to speak with your legal counsel.