FranSynergy Cleans Cuppy's House
Last Friday Nabors made the decision to go forward with the acquisition of the holding company which includes not only the controversial Cuppy's Coffee, but also Planet Wings, San Gelato Cafe', Elite Manufacturing and Specialty Coffee Co-Op. Although the purchase is in his own corporation, FranSynergy, he said they have a number of partners that have committed resources. "We are holding them at the moment and based on discussions with my advisors and partners, we are going to look at how best to structure the overall entity and move forward."
In the process, Nabors said he had to purchase Elite Manufacturing because there are stores that are not opened that have entered into agreements with Elite. He said, "In order to protect the interest of our franchisees, I had to make sure I was in control of Elite." Specialty Coffee Co-Op was also part of the acquisition, but he explained that it was a distribution methodology that was used in the earlier days. "I had been working in my consulting capacity with the company in developing a better distribution model which would allow franchisees to have better service, delivery and pricing where it would help boost their bottom line profitability." Nabors said they have entered into a distribution agreement with Figaro Bros. which will provide franchisees with considerable savings on products. He said, "We expect our franchisees to realize a 20 to 30 percent savings across the board on product."
Cuppy's currently has 73 stores open and approximately 135 that have signed franchise agreements and are waiting to open. Nabors said some have secured real estate and are waiting to have their construction programs completed. Others are still in the pipeline looking for leases or land they can acquire. As far as the status of the franchise system, Nabors said, "We have no franchisees that are as profitable as I want them to be and we probably never will." They do have franchisees that are profitable, franchisees that are happy and franchisees that are growing to the point of breaking even. But they also have those that haven't reached that point. But Nabors explains that all Cuppy's stores are young, that they are only about a year old.
The Cuppy's Coffee franchisees have been officially notified of the acquisition. Nabors said they did that in two stages. "We reached out to a handful of franchisees that I had personally worked with because we felt that we needed a few operators that were familiar with me to break the news to all the others." One franchisee, Joe Mancuso, stated, "I have worked with Dale extensively over the past year and his experience and skill set is exactly what Cuppy’s needs to go to the next level. I’m 100% percent behind this.”
The franchisees do not have an association at this time. Recently, the company had formed a franchise advisory board consisting of several franchisees that were working with them at corporate. But Nabors said they are working with the AAFD on developing a franchisee association in the near future.
As far as where the headquarters will be, Nabors said that was still in discussion but it would remain in Fort Walton for now. Regarding staff members, he replied, "There were a couple of people that absolutely had to go, and part of the condition of the transaction was that Robert Morgan turn in his immediate resignation," as was the case with Ben Doyle. Doug Hibbing remains as interim president while they find another person to fill his shoes. "I have reached out to a number of friends that I have in the industry and are currently interviewing them," Nabors said. "We hope to announce a new president that has the skill set needed to take Cuppy's to the next level."
In addressing whether they will keep the same attorneys, Nabors said he has his own legal team and he will be meeting with them next week. Lou Manganello is still employed as the company's attorney, but he said, "Whether he will stay is yet to be determined. Those who can pass our standards and contribute to the bottom line will stay. Those who can't will not."
Dale Nabors has over 20 years of experience working with small business owners, focusing primarily in the franchising industry. Prior to launching FranSynergy, Dale had been employed by the Dwyer Group, a multi-brand franchisor headquartered in Waco, Texas, from March 1995 to August 2000.
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- Franchise topic:
What are you people smoking? Does anyone really think that money is coming back to Cuppy franchisees on accocunt of anything? Que pendejos! Y'all gotta be nuts if you believe that.--
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Here is reality:
Notes:
Do not read the above to be a slam on Cuppy’s or Dale, it is simply a reality check. No matter how ethical, no matter how wonderful, all a zor contributes to in this market is a higher break-even point that rarely can be justified by increased sales, and generic advertising that raises awareness without regard to the brand.
And consider the next point carefully. If you cannot figure out how to roll out your own coffee shop you are probably too stupid to go into business - period. There really is not a way to justify the cost of involving a franchise in this process.
My observation, without apologies,
FuwaFuwaUsagi
"Never underestimate the power of stupid people in large numbers."
FuwaFuwaUsagi
"Never underestimate the power of stupid people in large numbers."
Thank you, Fuwa San. Especially in these "challenging" economic moments that we now enjoy, the cost of failure to see through the bullshit is overwhelming catastrophy.--
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Here are a few counter-points, without apologies.
Think hamburgers, sandwiches, taxes, videos, hotel rooms, chicken, tacos, cakes, cars, doughnuts, auto repair, maid service, phones, water, weight, exercise, insurance, hair cut, flowers, pests, hardware, pets, signs, print, senior care, tanning, vitamins, etc. and franchise chains. It appears that there are many franchise chains that justify their existence by increased sales, lowered costs, and advertising that raised awareness.
Think Starbucks or Juan Valdez and his burro.
Think of the stores and restaurants in your neighborhood and how easy it is to duplicate their business. Patent an anti-gravity machine instead.
According to one source (one of many to come up first in a Google search) Starbucks invests $320,000 for an average shop. Investments can vary "from $63,000 - $220,000 to open" an independent coffee shop. As one can plainly see, start-up costs are negligable - if you have a money tree.
After we roll out of bed, stumble into the car and drive to work at 7:45am with only 4 hours sleep because our family kept us up late the night before, how unique is the selling point (USP) of being able to get a cup of coffee by drive-through before driving to the on-ramp to get to work?
Even though the annual bills to your business entity by the Internal Revenue Service say otherwise.
It was written:
Think hamburgers, sandwiches, taxes, videos, hotel rooms, chicken, tacos, cakes, cars, doughnuts, auto repair, maid service, phones, water, weight, exercise, insurance, hair cut, flowers, pests, hardware, pets, signs, print, senior care, tanning, vitamins, etc. and franchise chains. It appears that there are many franchise chains that justify their existence by increased sales, lowered costs, and advertising that raised awareness.
My reply:
Exactly. They may ATTEMPT to justify their existence but only a fool would believe it without demonstration. In the end they have to overcome the burden imposed by a royalty and advertising on every dollar that flows through the door not every profitable dollar. That is a very large burden to overcome.
However I will put some Hamburger chains and many hotel chains in a different cagtegory. Several have brands of merit and my comments do not apply to these.
It was written:
Think Starbucks or Juan Valdez and his burro
My reply:
Once again you understand my point. All Starbucks has done is raise the awareness of premium coffee. No one gives a darn about Starbucks vs. any other premium coffee. There is little loyalty. You can see this any day in crowded urban areas. One premium coffee shop is as good as another.
It was written:
Think of the stores and restaurants in your neighborhood and how easy it is to duplicate their business.
My reply:
Once again, just because someone else is stupid enough to give away perfectly good dollar that could raise their ROI to a potentially acceptable level does not mean a logical person should. There needs to be a compelling reason to justify a franchise, a me too concept in mature industry is not one.
It was written:
According to one source (one of many to come up first in a Google search) Starbucks invests $320,000 for an average shop. Investments can vary "from $63,000 - $220,000 to open" an independent coffee shop. As one can plainly see, start-up costs are negligable - if you have a money tree.
My reply:
The point was and remains there is no effective barrier to entry. It is cheap to enter this market. The fact that many franchises chose to burden their zees with non-productive branding build-outs that do not drive profits is not a compelling reason to franchise.
Now tell me your patented process will allow me to produce the same cup of coffee for 1/3 of what it costs anyone else and suddenly I am interested.
It was written:
After we roll out of bed, stumble into the car and drive to work at 7:45am with only 4 hours sleep because our family kept us up late the night before, how unique is the selling point (USP) of being able to get a cup of coffee by drive-through before driving to the on-ramp to get to work?
My reply:
That is my point. There is no USP. A retarded monkey could duplicate this. Oh yeah, let me pay a royalty for this real unique concept...coffee from a drive through. Wow...why is it my checkbook keeps opening....and now my pen has uncapped itself....must take pen in hand and write check....can't resist...such is the power of the USP of this concept...in your dreams.
It was written:
Even though the annual bills to your business entity by the Internal Revenue Service say otherwise.
My reply:
Wow, that was so very clever. Do you also perform illusions before the blind? When you franchise you license rights, you do not own them. Many franchises have no right to renewal and you have no right to the branding.
Hey, but nice try.
FuwaFuwaUsagi
FuwaFuwaUsagi
"Never underestimate the power of stupid people in large numbers."
Interesting. I have a friend who is crazy about Seattle's Best.
I salute the retarded monkey that makes my morning cup of joe possible. I'm wondering if that monkey has a retarded sister that might open up next to my office.
Speaking of chimps, the shop owners downtown have been telling me that hiring is a real problem. Even with the high cost of bananas nowadays, using chimps could provide strong cost advantages. With luck, the retarded monkey has younger cousins that can work. I know a great franchise trainer that might want to take a whack at how well she can train the cousins of retarded chimps. An operations director thinks that she might be able to further simplify roles and tasks geared towards working teens to these new workers.
Two years ago the Subway chain had its franchise owners exclusively buy a patented product that direct competitors did not have. TurboChef was a new kind of oven that a physicist in Georgia invented. The oven can do what no other subway sandwich competitor can. It toasts and thoroughly cooks a sandwich within 17 seconds, without ruining the bread. It saves a huge chunk of time from the hot sandwich assembly process and takes little floor space. I guess that is when Subway would have come onto Fuwa's investment radar.
I can be required to hang a brand's sign outside or have clean, up-to-date kitchen equipment and still own my business.Darnelle writes:
Interesting. I have a friend who is crazy about Seattle's Best.
My reply:
Granted. Here is the test. If you are out with your friend will he force you to hop in the car and drive a mile to get Seattle’s best or will you simply go to the Starbucks 15 feet away? By the way, I have done market research on this. I do know of one small chain that simply has a superior products. Literally 100s of people bypass Dunkin Donut’s, StarBucks, and I think 6 other coffee places to go to this place. Apparently they have the coffee. So I am not denying it can happen. But that analysis is on a concept by concept basis. I have tested the theory with subs. In the case of subs brand preference which did exist did not manifest itself in a way that overcame convenience, a coupon, a sale, length of the line, or group preference. Burgers are another story, like pizza, they have their devotees who will by-pass other concepts to get to the brand they like. The question you have to ask is does the brand drive enough additional sales to justify the royalty and advertising? And hen I would ask myself is the margin of additional sales is enough to justify the other encumbrances of the FA.
Darnelle writes:
Two years ago the Subway chain had its franchise owners exclusively buy a patented product that direct competitors did not have. TurboChef was a new kind of oven that a physicist in Georgia invented. The oven can do what no other subway sandwich competitor can. It toasts and thoroughly cooks a sandwich within 17 seconds, without ruining the bread. It saves a huge chunk of time from the hot sandwich assembly process and takes little floor space. I guess that is when Subway would have come onto Fuwa's investment radar.
My reply:
I did not know that TurboChef had an exclusive arrangement with Subway. I was under the impression anyone could by one. Correct me if I am wrong, but my understanding was Starbucks was using these also. If I am correct I do not see what competitive advantage that conveys to Subway. Simply buy one yourself and the advantage disappears. So I do not understand why suddenly Subway would become so compelling, TurboChef might be a different story.
And Richard addressed the ownership myth for me.
By the by, the chimp stuff was hilarious. Cracked me up.
FuwaFuwaUsagi
FuwaFuwaUsagi
"Never underestimate the power of stupid people in large numbers."
Yes. I put the weblink to show that Starbucks is using TurboChef. I thought it appropriate for these comments under the Cuppy's Coffee article.
Subway owners would not consider Starbucks as a direct competitor. Not yet. Subway was one of the first chains to purchase this machine that creates toasted subs. They have it and their competitors do not.
Quiznos owners, who do create subway sandwiches, use quite large, expensive machines to toast their sandwiches. Q-owners probably argue that their conveyor-belt machines make sandwiches grill better than microwave-sized TurboChef ovens.
That's one of the myths the franhcise industry sells - that you own your own business.
Ownership connotes a predominance of control versus limitations. Franchisees have many more limitations that control prerogatives. That makes notions of ownership just fairy tales.
With the assets that you "own" (subject to leins and mortgages), you cannot change your business name. You cannot change whatever it is you sell. You cannot control what you buy or from whom you buy it. You cannot determine what you say in adverting and promoting your business. You cannot use those assets in any other business - even after termination or expiration of your franchise, except for non competing business activity. If you fail to fulfill your franchise contract term, your assets will be claimed to satisfy your obligation to fulfill your your franchise contract term.
Own your own business? GIMME A BREAK!--
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Counselor,
I could use help in defining "owning a business". How does the legal world define ownership?
- If I have a company, White Restaurants, Inc., that owns 20 franchises with 3 brands, legally, who owns (is legal possessor of) White Restaurants, Inc.?
- At what point are franchisee limitations so constrictive that legally the courts do not recognize the business as the proprietor's anymore?
- If I have a restaurant independent of any franchise system out there, if I default on bank conditions, am I still considered the owner?
Now granted, a free-wheeling entrepreneur like yourself may consider such restrictions as having to clean the toilets every day and keeping equipment updated as slavery, but legally, do I own a business?There is technical/apparent ownership, and there is "real" ownership. If you really do own it, you can do pretty much anything with it you like except things that are illegal.
If you own it "on paper" but can't do anything with it without the let and leave of someone else, then "real" ownership isn't there, no matter how many toilets you clean.
Again, it would be helpful to deal with reality and not with emotions. Reality is what people can do/can't do. Emotions consist of what you might like to do/be credited with doing, but can't, because you have no right to do it.
A court may recognize that you "own" something, but if you have no freedom to use it as you might like to do, there is no economic ownership. Legal ownership without economic ownership aint much.--
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
I always thought that Columbia's Juan Valdez was way too mellow a guy to represent coffee.
We are missing coffee's wild side. I'd like to see an Arab man with a crazed look in his bloodshot eyes. Picture him running wildly into a coffee shop, presenting a big jolt from Arabica coffee.
Now that would be a memorable brand.
Would that enforce some bad stereotypes? Unfortunately, yes.
The permutations of gin options trivialize what anyone ever thought to do with coffee.
I don't care what Howie Schulz did with coffee bullshit - whether it is fair trade or employee benefits or environmental sensitivity or whatever - it doesn't cut it when compared with gin.
Moreover with gin, any low down Irishman with the slightest ability to tell bullshit stories can go into business and make a success of it. And if your success becomes too great for you to manage with grace, it is gin that will relieve you of that success so that you no longer have to endure the pressure.
The gin business is also easier because you don't have to learn much about the product except how to mix it with other things. Careful, delicate blending isn't required with gin, because the careful blenders of things botanical that differentiate this gin from that gin is already done for anyone who can read a gin bottle label.
There is romance and adventure with gin. Try doing that with coffee. Moreover, gin can be bother an aphrodisiac and a birth control agent. You can't shoot pool with a rope.
The smell of gin on your breath tells prople that you are drunk, not just stupid.
Coffee shoppe retailing is a rose that has already lost its bloom in the USA. Saloons, on the other hand, have great potential. If you are not so fortunate as to have been sired by a very rich daddy, owning a pub in a hard drinking community is the functional equivalent to an annuity.--
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
--
JimB
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