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Letter below is from an anonymous source. Click on it to read a larger pdf file (1 pg.). 
Coffee Beanery Violates Illinois Franchise Act
Submitted by Janet Sparks on Thu, 2008/01/17 - 09:53.
CEO Shaw Informs Franchisee of UFOC Non-Compliance
FLUSHING, Michigan (Blue MauMau) - As a result of an investigation prompted by a franchisee in the Chicago area, the Illinois Securities Division has issued its finding that The Coffee Beanery did violate the state's franchise disclosure law. The coffee specialty retail store franchise, founded in 1976, has been franchising different formats of its business at various times (coffee shops, cafe's, kiosks and drive-throughs) since 1985. Now, in a Notice of Violation of the Illinois Franchise Disclosure Act, Coffee Beanery CEO/President JoAnne Shaw informed the offended franchisee, Oliver Garner, of the violation (click photo to read her letter). She states, ". . . the disclosure statement you received prior to the purchase of your franchise failed to disclose certain information required by the Uniform Franchise Offering Circular Guidelines . . ."
Garner had opened his cafe concept franchise in April 2005. In March 2006, because of financial difficulties his store was sold by the bank for the assets. In early 2007, he filed a complaint with the State of Illinois regarding possible violations of the law related to the business practice of The Coffee Beanery. As an additional note, Garner said he had also been recruited by the Franchise Partnership, a minority recruiting agency hired by The Coffee Beanery. He felt that proper disclosure was not made in the UFOC stating that he would have to pay a fee to the franchise broker. As a result, he now has claims pending against Franchise Partners and The Coffee Beanery. Garner said that the recruiting firm also goes under the name Center for Neighborhood Technology (CNT), along with other banners.
Shaw Explains Franchisee Rights
As a requirement of the state's findings, Shaw issued a letter to Garner explaining the franchisor's violations and what remedies would be provided. Her letter states that the franchisee may sue Coffee Beanery for damages and/or rescission, meaning the signed franchise agreement could be voided. The Coffee Beanery CEO explained that Garner must sue within 30 days of receipt of her letter (December 28, 2007). He is also given the choice to repurchase the franchise for a price equal to the full amount paid less any net income received by the franchisee plus interest, which may require the franchisee to return unsold goods, equipment and leases. Any person who aided in transactions constituting the violation can also be held liable, jointly or severally, according to the letter. And the franchisee, under law, will be entitled to costs and attorney fees.
Response from State of Illinois
Scott Mulford, Illinois Attorney General's communication person, confirmed that Illinois law was violated and that the CEO's Notice of Violation was only sent to a single franchisee, Oliver Garner. A written complaint by Garner had prompted the investigation with the state. He said, "The rules governing preparation of the UFOC and the Illinois Franchise Disclosure Act were violated by failing to disclose certain material facts." When asked if Coffee Beanery was currently registered, Mulford said it was not, that the franchisor had withdrawn its registration on July 9, 2007.
Franchisor Warned Garner Legal Redress Not Likely to Succeed
Although Garner had already filed his complaint with Illinois Securities regarding possible violations of the Franchise Act, receiving a letter from a Coffee Beanery executive last April reassured him of his decision to contact state officials. The letter from Kenneth G. Coxen (pdf, 1 pg.), Executive Vice President and Chief Financial Officer, which also included a copy of a recent Arbitration Award favoring the franchisor, gives somewhat of a warning to Garner. It states, ". . . in the decision the Arbitrator agreed with our defense of the claims made against us, confirming our opinion of the lack of legal merit of these claims. It is important that you consider that . . . the claims you have made against us are the same claims made by Richard [Welshan]." Coxen cautions Garner that The Coffee Beanery would anticipate the same result in any future arbitration proceeding.
The letter also warns of how costly arbitration can be, saying their recent victory cost the franchisee in excess of $150,000, in damages, fees and expenses, but adds that he had spent over $200,000 on the case. Coxen said, "It has been our experience that the only people who win in these situations are the lawyers."
Repeated calls to Coffee Beanery's attorney Paul Fransway, Pear Sperling Eggan & Daniels, P.C., were not returned.
--
Related stories:
- Coffee Beanery Not To Sell Franchises in Illinois
- Maryland Launches New Probe into Coffee Beanery Violations
Price: $0.00
| Attachment | Size |
|---|---|
| demandofarbitration.pdf | 618.38 KB |
Coffee Beanery Letter
Submitted by Mr. Blue MauMau on Thu, 2008/01/17 - 10:19.
Notice of Violation by Coffee Beanery Franchisor
Submitted by Mr. Blue MauMau on Thu, 2008/01/17 - 13:59.
NOTICE OF VIOLATION
OF THE ILLINOIS FRANCHISE DISCLOSURE
ACT
To: Mr. Oliver Garner
From: The Coffee Beanery Ltd
Regarding: Violations of Me Illinois Franchise Disclosure Act
The Illinois Franchise Disclosure Act of 1983 requires a franchisor to register its franchise with the Illinois Attorney Generate Office or to obtain an exemption, and to make certain disclosures to prospective franchisees before selling franchises C Illinois (815 ILCS 705/1). It is unlawful for any franchise to be offered or sold in Illinois unless.
- The franchise has been registered or obtains an exemption under the Act width the Illinois Attorney General. and
- The prospective franchisee has been provided with a complete disclosure statement registered under the Act, at least fourteen (14) days prior to the execution of any binding franchise or other agreement, or at least fourteen (19) days prior to the receipt by the Franchisor of any consideration from the prospective franchisee, whichever occurs first.
You are hereby advised that the disclosure statement you received prior to the purchase of your franchise failed to disclose certain information required by the Uniform Franchise Offering Circular Guidelines and was therefore not prepared in complete compliance with those Guidelines.
You have certain civil rights and remedies under Section 26 of the AG which provides in pertinent part:
Any person who offers or sells a franchise in violation of this Act shall be liable to the franchisee who may sue for damages ... (and/or rescission).
No franchisee may sue for rescission under this Section 26 who shall fail, within 30 days from the date of receipt thereof. to accept an offer to return the consideration paid or to repurchase the franchise purchased by such person. Every offer provided for in this Section shall offer to repurchase the franchise for a price equal to the full amount paid less any net income received by the franchisee. plus the legal rate of interest thereon, and may require the franchisee to return to the person making such offer all unsold goods, equipment, fixtures, Oases and similar items received from such person. Such offer shall continue in force for 30 days.
Any agreement not to accept or refusing or waiving any such offer made during or prior to the expiration of said 30 days shall be void.
Every person who ... controls person liable under this Section 26, who... materially aids in the act or transaction constituting the violation. is also liable jointly and severally ...unless said person who otherwise is liable had no reasonable basis to have knowledge of the facts . . constituting the alleged violation.
Every franchisee in whose favor judgment is enter. in an action brought under this Section shall be entitled A the costs of the action including, without limitation, reasonable fees.
.... Therefore, Section 26 of the Act provides that if you were damaged the—- Franchisor's failure to register or comply with exemption requirements, and make required disclosures, you may bring an action A recover damages sustained by reason of such violation to the Act Section 26 of the Act also provides that you may seek rescission of the franchise agreement, if your rights under one of the cited sections of the law have been violated. in which case the full amount you paid for the franchise together with interest at the legal rate from the date of payment less any net income you have received from the operation of the franchise business may be returned to you. If you obtain rescission. the franchise would then be at an end and you would be required to cease operation of your franchise business.
THIS IS NOT AN OFFER OF RESCISSION. IT IS A DESCRIPTION OF YOUR RIGHT TO DEMAND RESCISSION OR TO SUE FOR DAMAGES. IF YOU WISH TO PURSUE YOUR ABOVE DESCRIBED RIGHTS, THE ACT PROVIDES THAT YOUR SUIT MUST BE BROUGHT WITHIN THREE YEARS AFTER THE ACT OR
TRANSACTION CONSTITUTING THE VIOLATION UPON WHICH IT IS BASED, THE EXPIRATION OF ONE YEAR AFTER THE FRANCHISEE BECOMES AWARE OF FACTS AND CIRCUMSTANCES REASONABLY INDICATING THAT HE MAY HAVE A CLAIM FOR RELIEF IN RESPECT TO CONDUCT GOVERNED BY THE ACT, OR NINETY (90) DAYS AFTER DELIVERY TO YOU OF THIS LETTER WHICHEVER SHALL FIRST EXPIRE.
We have not waived any rights that we may have in any subsequent proceedings involving you and us, including the right to assert all defenses we may have including that the Act was not violated. The purpose of this letter is A simply notify you of your rights and the time limitations involved in asserting them.
Sincerely,
JoAnne Shaw
President and CEO
Letter from CB
Submitted by Guest on Fri, 2008/01/18 - 09:06.
This letter sounds like a threat.
CB also seems to be pretty sure of a win in arbitration.
Can this zee use this kind of evidence against CB?
It's hard to believe that this zor can get away with all that they have done.
Coffee Beanery
Submitted by Guest on Thu, 2008/01/17 - 16:37.
The man who bought Oliver's cafe from the bank, also had another Coffee Beanery Cafe. He ended up losing both in just a year.
There was another Franchise Coffee Beanery Cafe owner in Illinois as well, Sam and Sally Gurgiess. They lost everything in about 18 months.
The Coffee Beanery is also in the business of selling Drive-Thru Concepts, which close faster then the cafes do.
Re: CB Letter
Submitted by jd on Fri, 2008/01/18 - 09:29.
If the Litigation section in the CB UFOC is correct, I wouldn't consider this a threat because Oliver was using the same attorney as WW, LLC, and he was case was based on essentially the same merits. If the attorney can't win the first time using the same evidence, what's to say that he'll win the second time?
CB "Got Away" with "stuff"...
Submitted by RichardSolomon on Fri, 2008/01/18 - 09:32.
because the franchisee failed to take proper effective steps to enforce its rights. The franchisee waited too long. The franchisee did not initiate action promptly after finding out it had been misled in which it tendered back what it got from CB in connection with full rescission, restitution and fraud damages if they could be proven. The franchisee continued to use CB trade identity in connection with the operation of its business after learning of the facts it claims are evidence of wrongdoing.
When the franchisee proceeds in this manner, no franchisor will be held to account for anything. The franchisee just made a hash of its own siituation here.--
Richard Solomon, FranchiseRemedies.com, has 44 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
The 90 day Notice -----CB
Submitted by Guest on Fri, 2008/01/18 - 11:06.
It looks like the CB intends to use the law surrounding rescission and violation of disclosure laws to their advantage,
and wants Oliver Garner to show his hand. Rescission does not make "cheated" franchises whole and does not save them from bankruptcy. The franchisees' interests are not represented in negotiations for rescissions as demonstrated in the CB Rescission in Maryland.
Obviously, JoAnne Shaw's attorney instructed her to write this letter, or what? Is this as bad sign? Is she saving money?
Again, we see that violations of the disclosure laws, that don't in themselves reveal the unviability of the franchised business plan to potential franchisees, can be interpreted by the States as "technical" or "substantive" but in any event Rescission is designed by the States to NOT make franchisees whole for the purpose of keeping the franchisors in business.
CB "Got Away" with "stuff...
Submitted by Guest on Wed, 2008/01/23 - 20:32.
Richard if I didn't know better, it sounds like you work for CB!! How could you possible, write such without finding out all the facts. Have you hard a conversation with the zee or the zor? Do you know when he (Oliver) learned of the wrongdoing? Also if you read the letter from JoAnne Shaw, she knows of her company's wrongdoing, and she's trying convince Oliver not to seek Justice, or if you do this will happen to you!! Smell like someone have and inside connection to me. I just feel that this man deserves a fair shake. Chances are that CB is wrong. Have you seen tha damage this CB has caused a lot of people?
CB Stuff
Submitted by Guest on Sun, 2008/01/20 - 09:46.
Is far more serious then you think.
There is much to all of this story not yet told.
Due Dulligence might be better served by those who practice what they preach.
Using people who have suffered devastation at the hands of a predatory zor to promote yourself is in poor taste to say the least.
There is much you can learn about the law, arbitration , regulators and how all can be used against innocent people. It is amazing how often I read posts claiming how all of these bad things are the fault of not doing DD.
How do you Know?
What makes you think that the State Regulators or the FTC really enforce any of the laws. What makes you think that could have done any better in any of these cases.
I would have to believe that no one hears from Tinker, just because of this kind of self promoting BS.
I think that some of these stories should be investigated more and the people involved may be willing to share if they know that they are not going to be used to promote someones business at the expense of someone who has already suffered enough.
Have you ever heard of the phrase "Ambulance Chasers?"
Is it ever justified when a franchisor wins a matter with a Zee?
Submitted by Truth in Franchising on Sun, 2008/01/20 - 09:58.
Would it come as surprise to you that if Tinker Bell lost her case with Meineke it was because of the facts and she violated the agreement?
The Truth Shall Set You Free!
TIF
Meineke Arbitration
Submitted by michael webster on Sun, 2008/01/20 - 10:40.
TIF writes: "Would it come as surprise to you that if Tinker Bell lost her case with Meineke it was because of the facts and she violated the agreement? "
No.
Michael Webster PhD LLB
Franchise News
Tinker
Submitted by Guest on Tue, 2008/01/22 - 16:14.
TIF it would surprise me if you knew the meaning of TRUTH.
Tinker
Submitted by Guest on Tue, 2008/01/22 - 16:16.
JD how is that Tinker's case is posted on Pacer?
Are all arbitration decisions disclosed on Pacer?
God Bless your lack of imagination...
Submitted by Truth in Franchising on Tue, 2008/01/22 - 17:34.
Maybe one day you will be enlightened?
The Truth Shall Set You Free!
TIF
It's there
Submitted by jd on Tue, 2008/01/22 - 17:59.
It's there. The court had to approve it for definite reasons that I'm not going to explain here.
What were the consequences for Tinker?
Submitted by Guest on Sun, 2008/01/20 - 13:29.
What did she have to do to compensate Meineke?
Re: Consequences
Submitted by jd on Sun, 2008/01/20 - 14:13.
It's not my place to talk about the consequences unless Tinker were to come on here and say it was.
I saw the award on Pacer, and since people asked, I mentioned that yes she lost and I will leave it at that, unless you want to register and send me a private message, then I might tell you more from what I read on Pacer.
