Dunkin's Gluck Deposition Not Forthcoming
CANTON, Mass. (Blue MauMau) - As a follow-up to a statement made by Steve Caldeira, Dunkin' Donuts Chief of Global Communications, in a previous article, Blue MauMau has attempted to obtain a copy of the deposition of franchisee Cindy Gluck that is in question. The legal dispute is over Gluck transferring 15 percent ownership of her store to a manager. Dunkin' alleges she had violated her franchise agreement by completing the transaction without approval, while she vows she was seeking Dunkin's permission prior to finalizing the transfer.
Caldeira's statement was as follows:
"The franchises of Cindy Gluck and Asam Habib were terminated because they transferred an interest in one of their stores and knowingly concealed it from Dunkin' Brands, Inc. (the franchisor) with fraudulent documents which is entitled to know who owns its licenses per the franchise agreement.
After the fraud was detected, Cindy Gluck confessed in a letter to the franchisor. As a result of that confession, Ms. Gluck was deposed under oath and denied the contents of her own letter.
As is the case with all franchisees that have been terminated, Ms. Gluck and Mr. Habib have been offered an opportunity to sell their stores rather than lose their franchises as part of the termination process. As a franchisor, we seek to retain locations when a franchisee is terminated. As part of that process, field personnel naturally discuss (as part of their collective responsibility) what will potentially happen to the store locations as a result of the litigation.
To be clear, there is absolutely no evidence in the emails to suggest the termination was pre-textual (sic), and any such characterization is misguided, wrong and irresponsible. To reiterate, Dunkin' Brands does not enter into litigation with franchisees unless there is clear cause, which was unequivocally the case with Ms. Gluck and Mr. Habib, end of story."
As reported in the Smoking Gun Email article (below), Blue MauMau had planned to attach the Gluck deposition after acquiring it from Dunkin' Brands. But in requesting a copy of the transcript, Caldeira stated that if it was part of the public record, Blue MauMau should be able to obtain a copy. If not, he suggested requesting it from Gluck's attorney, David Jaroslawicz. He added that in addition to Gluck's deposition, Blue MauMau should ask him for the depositions of "the people that Ms. Gluck purportedly transferred interest to, received money from and then never returned."
But according to Jaroslawicz the depositions were not filed in court by Dunkin's attorneys. He said, "They are not a public record, as Mr. Caldeira well knows. Dunkin' attorneys have not yet provided me with a copy of the deposition, which they should under the rules." Jaroslawicz adds, "I do not have the deposition of the other people that Mr. Caldeira refers to, but those are the people that Cindy Gluck planned to sell an interest to, and which apparently fell apart, and is the reason Dunkin' is seeking to terminate Cindy's franchise."
As another update, Blue MauMau has not been able to reach Konstantino Skrivanos, a Dunkin' multi-unit operator who was named in the "smoking gun" emails related to the termination of Cindy Gluck and business partner Asam Habib. It has been reported in the media that Skrivanos now owns at least 12 Dunkin' stores in the Brooklyn area and approximately 100 on the east coast.
According to court records, attorneys for Dunkin' Donuts and franchisees Gluck and Habib are currently in court settlement conferences.
Related reading:
- Dunkin' Donuts Mom and Pops Squeezed Out by Private Equity Firms
- Smoking Gun Emails Billow Dark Cloud over Dunkin' Brands
- Franchise topic:
Is Dunkin' Leading Franchising into the Abyss?
Dunkin' Donuts was one of the founders of modern franchising and long prospered hand-in-hand with its franchisees - which I believe they used to call "family". Now Dunkin's current hedge fund owners Bain Capital, Carlyle Group and Lee Capital rule by the cold numbers alone. If they can make money by terminating franchisees like Ms. Gluck and profit on the re-sale and add on another $100,000 as an illegal penalty they will do it until some Court or Government Agency stops them. No other franchisor dares or has the low business morals to attempt to impose $ 100,000 penalties on 2 shop franchisees for such a realitively minor infraction as is at issue here. Really now, whats their excuse? - the operators are being accused of transferring or attempting to transfer 15% of their shops to known and trained Dunkin' store managers...and they found this out after Ms. Gluck told them about it.
If Dunkin' gets away with such illegal practices you can be sure other franchisors will soon follow. Bain, Lee and Carlyle plan to sell their stake and be long gone but in their wake they will leave a hollow, throughly milked and considerably weakened Dunkin' franchise system populated by frightened franchisees.
What propsective franchisee in their right mind would ever invest their money in the Dunkin' "family franchise system". A family friendly franchise system where the adults nuture their young and then eat them like munchkins on Halloween.
Re: Is Dunkin' Leading Franchising into the Abyss?
How is what Dunkin doing illegal? What does the contract say?
The Truth Shall Set You Free!
TIF
What does the contract say?
TIF said "What does the contract say?"
Seems like it says "DO NOT INVEST YOPUR MONEY IN THIS SYSTEM BECAUSE WE WANT TO STEAL IT"
I can tell you what the contract doesn't say. It does not say there are crippling financial penalties. It does not say that when we send someone that says they are there to help you that they are really spies working behind your back to steal your shop and calcualte how much money is in your bank account so the amount of a penalty can be set to empty it out.
It does not say that the spies are going to be ordered not to write down any evidence of what they are really doing to you. It does not say that if you get caught in a cross examination that you should try to hide the papers someone did make in your briefcase and get out of court as fast as u can with it.
Again...What does the contract say?
While your emotionally laden conclusive opinions may seem exciting to you they really don't mean anything. So again, I ask what does the contract say?
The Truth Shall Set You Free!
TIF
Was Dunkin approval a condition precedent?
Yes, the language of the contract for the transfer of ownership interest is critical, perhaps even dispositive as a matter of law. Certainly a well-drafted contract would have made the transfer contingent upon zor approval.
As I have said before, one of the key take-aways here is that before you transfer interest in your business (even a minority interest) be careful and seek legal and tax advice.
Even if your business is non-franchised, you may have loan covenants, lease provisions, rights-of-first refusal by partners or debt holders, etc. which restrain alienation. As with any restraint on alienation, courts may scrutinize closely, but you really should err on the side of caution here.
Paul Steinberg
Franchisee Attorney, New York City, Ph: 212-529-5400
Dunkin-Gluck Complaint
So, I read the original complaint filed by Dunkin and unless I am mis-reading the complaint, it sounds like Gluck had misrepresented the ownership of their second store in their initial 'filings' with Dunkin. The two managers were owners but on the application, Gluck and her original partner put themselves as the only owners.
Have any of the other attorneys on here read the complaint? If so, am I mis-reading the complaint?
No mention in comlaint about what is now claimed is default
The Zor defenders were all screaming about Gluck being a broker for 7-11, yet the complaint says nothing about that.
Of course, it's tough to keep your story straight when you are forbidden to write anything down and can't use e-mail or anything else but Mafia type communications and you have to stuff evidence in your briefcase so nobody can see it.
Dunkin' Contract Says Nothing About $ 100,000 Penalties
The $100,000 penalty the franchisor tried to make the franchisee pay here for allegedly attempting to transfer 15% of her shop to a manager or managers is ILLEGAL - that means its not in the franchise agreement and its against all state and federal laws. Some would call this EXTORTION and not be wrong.
Now...is that finally clear to you Mr. Truthy?
you lose either way
either pay dunkin 100k and sell your stores, or fight, take a chance, if you lose you lose everything, and you should bet that dunkin will come after you for legal fees, or if you win, you still cant recover your legal fees which will be in the hundreds of thousands to fight to the end. If you settle with dunkin, well guess what? they want their legal fees still, so yea... got to pick the route with the minimum damage.
Clarification (Dunkin)
Since a few people contacted me offline regarding this matter, I should clarify that there is a crucial distinction:
On the other hand... if you threaten criminal prosecution to gain advantage in a civil matter, that is a whole 'nuther story, both from the perspective of attorney ethics and the criminal law.
A franchisor which shall remain nameless does indeed skate perilously close to the edge and even crosses the line on occasion, but in this instance, I don't see that fact pattern with Dunkin'/Gluck.
However, Momma Gluck and Momma Horn should tell the kids to play nice in the sandbox--one of the kids got a shaky legal case and the other got a boss with an IPO in the not-too-distant future.
Perhaps about time to smoke the peace pipe.
Paul Steinberg
Franchisee Attorney, New York City, Ph: 212-529-5400
RE: Dunkin' Contract Says Nothing About $ 100,000 Penalties
Guest the "Gluck Defender" asks - "Now...is that finally clear to you Mr. Truthy?"
Repsonse - No.
The Truth Shall Set You Free!
TIF
Dunkin' "extortion" ??
As one who had a few choice words published about the dubious practices of Mr. Horn, I am hardly a defender of Dunkin' tactics. I have never before or since seen a presentation such as that infamous one given by Mr. Horn, and I am in addition acquainted with the practices of Mr. Zisk and would hardly place him as a shining light of the franchise bar.
However, TiF has a point about the facts.
I find it odd that Dunkin' depositions are published, but the zee depositions are not. If what Mr. Caldeira says is true, there appears to be not only a breach, but a willful attempt to disguise the breach. Without the zee and the other 3rd party EBTs referenced by Caldeira, we don't know.
Be that as it may, if there is a breach and that breach is non-curable (both big assumptions here), then the zee is indeed subject to termination.
If the zee is terminated and continues to use the marks, that is a Lanham Act violation (here, there appears to be an estoppel issue viz the continued supply of marked product for resale, but that's another story) and the breaching/infringing party is subject to damages and injunctive relief.
Now, if at this stage of the dispute the non-breaching party then chooses to refrain from fully exercising its remedies at law in consideration of a monetary sum, that is generally not something which would be unethical--let alone illegal.
Let me be clear: Horn, Zisk and their ilk are the type of people that give lawyers a bad name. And I don't see a lot of zors emulating them, which suggests that their practices may be perceived by their peer group as counterproductive.
But...in this instance, I'm not convinced that sufficient facts are on the table to jump to the conclusion which "Guest" has made. I am uncomfortable with throwing around words like "illegal" and "extortion" based on what has been laid out to date.
Paul Steinberg
Franchisee Attorney, New York City, Ph: 212-529-5400
Dunkin's unethical tactics
Paul said "As one who had a few choice words published about the dubious practices of Mr. Horn, I am hardly a defender of Dunkin' tactics. I have never before or since seen a presentation such as that infamous one given by Mr. Horn"
Perhaps a partial reprint is in order to clarif what exactly Dunkin is doing to its franchisees. Hiring private investigators to catch franchisees who are cheating on their spouses to use the htreat of exposure to stral their shops is only one example that they BRAG about.
Does the franchise agreement say "we will never follow you to expose personal conduct to blackmail you"? No. It doesn't. So, I guess is it is OK?
Gee. That makes me want to write them a BIG check to put muself in that jackpot. Not.
Actions More Important Than Contracts Longterm
Long-term it doesn't matter what a contract says or whether the actions above are legal or illegal. The actions above send up a red flag concerning Dunkin Donuts and how it views its relationship with its franchisees. For any investor who would need to pony up millions of dollars to buy, open, and run a Dunkin Donuts franchise it's a major reason to look elsewhere.
Franchisors like Quiznos and Cold Stone that have long-term records of shafting franchisees are withering on the vine...watching the number of open stores fall as investors look elsewhere and current operations close. Dunkin Donuts is headed down that same path.
Re: Actions More Important Than Contracts Longterm
It is always about the contract since that is what is enduring and should be reliably durable.
And there is a huge difference between Coldstone and Quizno's vs. Dunkin Donuts. Dunkin has business models that work for their franchisees and the losers at Coldstone and Quizno's don't.
The Truth Shall Set You Free!
TIF
Dunkins Biz Model Works, Q's Doesn't
How true. The sad part is that Quiznos execs know the business model is broken and there is no effort to make it work.
Not when there is a change of ownership
With the originator still in command, I agree that the relationship and the course of dealing quality usually rule over the contract - because when that is positive no one ever has to look at the contract - it just works.
But when ownership changes, and especially when the change is brought about mainly because of the financial operating statement of the franchisor, the new owners don't invest in "relationships" except for the relationship that is stated in the franchise agreement.The value of the company to the investors is that the franchise agreements are enforceable and that enforceability permits the franchisor's insistence upon compliance. PERIOD GET IT.
The days of touchy feely shit at DD are over. If you don't like it, you can sell your franchise. That's your remedy. If you want to make a fight of it, you either have to get the group together in a militant campaign that is warchest funded, or you will take it in the ear. One franchisee at a time on meager budgets won't get it done.
Y'all stand around lamenting po ole Cindy Gluck, but you aint standing into a real fight. Maybe it's because Cindy Gluck really doesn't have a case that everyone wants to go to war over. Frankly, I agree with that. She doesn't. But since you aint puttin it up, yo might consider that all this whining only makes you look ridiculous.
--
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
Irritable Male Syndrome
Richard--
You suffer from acute IMS, Irritable Male Syndrome. Get thee to a proctologist, posthaste.
Is War Looming at Dunkin' Brands?
For once in his fatuous life Solomon has the right remedy and here it is, and coming from a franchisor toady to boot:
"The days of touchy feely shit at DD are over. If you don't like it, you can sell your franchise. That's your remedy. If you want to make a fight of it, you either have to get the group together in a militant campaign that is war chest funded, or you will take it in the ear. One franchisee at a time on meager budgets won't get it done."
If the franchisees at Dunkin' stand and fight they have plenty of tools and lots of friends:
1. The bad facts Dunkin' is generating can be used in state legislatures for passage of franchisee friendly statutes like Rhode Island has recently.
2. The franchisee organization at Dunkin'... the DDIFO could make a list of their reasoned issues and demands and simple issue a " negative rating" or "rejection of Dunkin's management practices" and not lift it until Dunkin' Brands makes positive changes. The press, media and public would support franchisees I'm sure. Bad publicity is lethal for equity owners like Bain, Lee and Carlyle. It hurts and bad publicty will make them change. Just like it changed the civil rights movement when dogs were finally shown on national television attacking civil rights protestors.
3. The courts and the FTC and state attorney generals should be directly solicited to investigate this increasingly abusive franchisor - they can change Dunkin' quickly and effectively.
4. Boycotts are classic effective tools to fight oppressive corporations - maybe against other Bain, Lee and Carlyle products...they have plenty of targets.
5. The franchisees could unite and refuse to sign new franchise agreements until specific reasonable demands are met...and abusive practices stopped. Franchisees could simple stop attending Dunkin' corporate funstions...management would get the message.
6. There is more and more determined franchisees could do to help their own cause and defend their very livelihoods and families. As the famous Roman philosopher/emperor used to say when addressing his peoples and armies... "All is Possible" but "Its up To You".
Re: Is War Looming at Dunkin' Brands?...Never Going to Happen
Franchisees are making too much money to risk mounting a rebellion as you've described. If you do not like being a franchisee you should sell.
The Truth Shall Set You Free!
TIF
Dunkin Franchisees are LOSING MONEY
You are wrong. Outside of New England and maybe a few franchisees in Chicago Dunkin franchisees are lsoing money and the franchisor wants them to spend millions more on changing the store to look like the prototype when they don't need to.
Even the New England franchisees are not happy and reported that they were less profitable under the new ownership. They posted a long survey about finances and the direction the companyw eas taking here a few moonths ago. Maybe it needs to be put up here again to make the facts obvious.
Entrepreneur Says Dunkin Among Top Three Franchise Buys
Dunkin franchise owners are largely losing money? That cannot be. Entrepreneur magazine lists happy Dunkin in its top three picks of best franchises to buy. That's selected from a list of its top 500, which in turn is chosen from thousands.
You seem to be implying that Entrepreneur wants us to buy a loser. Now you can criticize Dunkin all you want but I resent you tarnishing the reputation of such a venerable news magazine.
Beauty is in the eye of the beholder
Entrepreneur 500 is not much more than a beauty contest.
For the past 25 years I have closely perused the January Issue.
In my estimation the Franchise 500 it is not even close to an investors buy list, that Morningstar, or by a brokerage firm may issue.
It is nothing more than a listing of up to date (12 month) information about Franchise Systems. Sort of a productivity tool to see whats happening in franchising. It's not much more than a listing tool, not much of a due diligence tool for that matter (other than it lists the franchises in the category that you may be investigating, which has some value).
Just because Entrepreneur Magazine lists 7-Eleven as the #1 Franchise, doesn't mean anybody shoud go out and buy one, but I will tell you, over the years I have met many franchisees that have have made good livings owning 7-Eleven. I can also say that for Subway and Dunkin Donuts. There are failures in all (see my blog post regarding SBA Loans )
I do find it offensive when companies brag about the the fact that they are #1 in their category, to me people in franchising know that the Franchise 500 is a weak due diligence rating. So why should they boast?
Jim Coen
877-469-3002
Blog: Lets Talk Franchising
Executive Director of the New England Franchise Association
Clerk, Dunkin Donuts Independent Franchise Owners (DDIFO) Board of Directors
Bob, your point is humorous, but very serious in practice.
I'm sure that many have accepted Entrepreneur's endorsements as free (credible) commentary on franchise quality.
Years ago I was called to consult with one Franchise 500 'list recipient' that was reduced to operating on an owner's personal credit card. I looked, I listened, and I walked away.
It seems to me that our industry is beginning the cleansing process, but not from the inside out or with government's assistance. It's being done the old fashioned way - through education and self-defense.
And BTW, isn’t Entrepreneur Media for sale? Haven’t certain practices regarding the Internet come to light?
Nick Bibby is a franchise consultant and principal of the Bibby Group.
Nick. Drek. Bob.Wonderful Magazine!
Guys, I cannot stomach the sarcastic tone of these paragaphs. For me, Entrepreneur Magazine has always been THE publication that I have pointed my franchise candidates to, year after year, month after month, and minute after minute.
And to think that a great franchisor like Quizno's was omitted from the "Franchise 5,000,000 just because they did not submit their information in time. What is the publishing world coming too.
The final straw for me, regarding this tremendous publicatrion was when Jeff Elgin from FranBoyce was able to buy his "FREE Advice/FREE Consulting" expert columns.
I could go on, but the devil on my shoulder is suggesting other things to do with my time.
Franpro
Franpro is:
Joel Libava , President Franchise Selection Specialists Inc. Cleveland, Ohio
Entrepreneur Magazine is Drek
They're simply shills for the franchisors and their "rating" is nothing more than taking what these modern day pirates say and publishing it. Franchisee profitability and happiness is a non-issue with that "magazine". In return these modern day robbing hoods throw a few schekels the publisher's way to keep that rag solvent. That in turn helps ensure the line of suckers looking to dump their hard earned savings down a rat hole is never ending.
Other top raters in years past include dogs like Quiznos and UPS. Poll those franchisees and see how happy they are now that they've been through the wringer.
Blue MauMau's Top 10 Synonyms for Entrepreneur.com
Borrowing from Entrepreneur.com's scientific ranking system, Blue MauMau presents the definitive list from the mouths of franchise owners.
The top 10 words to describe Entrepreneur.com's list of franchise best buys:
My favorite is #10. Coprophagous listers: It sounds so lofty and respectful.
Frankman humor
"Guest": Frankman was being sarcastic regarding Entrepreneur. On a serious note, sites such as BMM are increasingly consulted by prospective zees and their counsel; the days of Entrepreneur's influence have likely peaked.
Paul Steinberg
Franchisee Attorney, New York City, Ph: 212-529-5400
I Recognized The Sarcasm Concerning Entrepreneur
and thought it was funny. But I also felt the truth needed to be mentioned yet again for those who read that rag and believe the magazine really does investigative journalism before unveiling their "top franchise" list.
Love It or Leave It
That's a good point TIF makes. If the stores are very profitable, then it will be difficult for mom & pop owners to show the entire system (peers and management) the fallacy of its way.
In my opinion, if the system, including franchisees, apathetically tolerates gestapo-like tactics from their zor, then eventually it will catch up with everyone. In pushing for change, senior officers will probably try to convince franchisees that criticizing them and their policies will bring down the company. Not so. The board and the company has a strong survival instinct and would have no qualms about replacing management - in a Canton, Massachusett's second.
What executives are really saying is that they like their jobs.
We've seen from news reports here that if franchisees can figure out how to change management and the company in the direction that is favorable to strong operations and their interests, then their company miraculously learns to treat its mom and pop owners with the respect that is deserved.
Or you can take TIF's advice of selling your store and start looking for work.
TIF and Bob are both right.
The nuclear option is just that, an option. Staying cool on the way to a an all out showdown is always the smart move (with benefits) and in no way indicates a lack of spine to do it all when necessary. Bob is dead on target when he says that management, in a well communciated move, will be the first to blink. Ownership, in turn, looses its lunch at the thought of bad publicity brought by its decision to push in a stupid direction. Nothing new here.
Nick Bibby is a franchise consultant and principal of the Bibby Group.
Come on TIF
I'm sure that the guest wouldn't have a problem with a franchisee only paying 85% of their gross sales, because it's only 15%. Who cares what the franchise agreement says, because it's only 15%.
Arbitrary $100,000 Dunkin' Penalties are Illegal...
No franchise agreement is existance, which includes the Dunkin' franchise agreement, allows the franchisor to impose $ 100,000 plus "penalties" on top of legal costs on top of transfer fees upon a small franchisee. Dunkin' Donuts picks their targets who are almost always small operators whom they know are frightened and bewildered by extensive scorched earth litigation which Dunkin' is known for - against their own franchisees. This is plain old fashioned extortion and a serious breach of good faith and fair dealing and a violation of federal and state unfair and deceptive business practices.
Not only that
But it is wrong! How do they sleep at night?