Cuppy's Franchisees Desperately Plead for Answers

SAN DIEGO (Blue MauMau) - After Bob Purvin, chairman of the American Association of Franchisees and Dealers, gave his opening remarks on plans to suspend Cuppy's Coffee as an AAFD Accredited Contract recipient during last Friday's conference call, he opened the forum for discussion, but cautioned that they didn’t know, out of the 13 people signed up, who else might be on the call. He said it could be foes or friends.

But the five franchisees participating showed little fear of speaking out and eagerly waited their turn to ask questions, hoping to get answers to their desperate situation. One asked, "What in the Lord's name would compel Dale Nabors to take over this company from Morg Morgan and Doyle and the others when they are in such bad shape?" He also expressed that he thinks Nabors' relationship with Morgan was a lot deeper than anybody knows.

But Purvin disagreed saying he was convinced that the new owner of Cuppy's never knew Morgan before he learned of him on Blue MauMau. He said Nabors told him after he acquired Cuppy's that it's either the worst or best decision he ever made. Purvin said, "I think what Dale saw was a system with 100 units open that had potential if he could get everybody else open." But he felt what Nabors didn't see, and probably what Morgan didn't see, was all the bad character, or karma, of the prior management.

In answering another's inquiry as to what capital Nabors might have coming into his company, Purvin said he didn't see any new capital coming in to resolve the problems. Someone else asked, "So if he doesn't have any other capital available, how is he able to move eight or ten people to Alabama?" Purvin said Nabors told him in confidence, which is now public, that his intent from the beginning was to move the company to Alabama. "He thought the company had a very expensive infrastructure that caused some of the problems, and that there were too many employees. He explained that the real estate was way too expensive being on the Gulf of Mexico."

One franchisee who said he wasn't able to open his store for 22 months asked, "How can this continue? How do you shut down a company like this? Obviously, they are taking in capital, they are moving capital around, and they are not getting anything done? They should be saying 'Hey, we can't get your deal done, so here's your money back.' They cannot continue to ruin lives." He expressed that there is no allocation, no accrual fund where they hold the money until a franchisee is open. "They go out and spend the money while the franchisees are sitting on their own waiting to get opened. How do you go about getting it stopped?"

In answering, Purvin told him that franchisees could contact the criminal authorities of their states and tell them their charges. He said they may engage their own investigation and take action to prosecute the company if they uncovered criminal activity. But Purvin challenged the franchisee on wanting to stop Cuppy's from operating. He told how franchisees were coming to AAFD worried that the company would shut its doors before they got their stores open. Then what, he asked.

Purvin continued, "If you think Nabors is a con artist and still continuing to con, then I think there might be justification to what you say. If you think Morgan is a con artist he is already shut down, he’s out of picture. You could probably go find him. If you think Snowden is a con artist, he's easy to find in the federal pen in Florida."

Purvin told the group, "I don’t disagree with you that there may have been criminal activity at some point, that they were taking money that they knew wasn’t going to go where it should go." But he said he felt the people running Cuppy’s now are trying to turn it around.

One franchisee asked if AAFD had statistics on how many stores are currently open and successful and paying royalties, again bringing up how the company will follow through on their commitments to all owners who are waiting for refunds or buildings. Purvin said they did not have hard statistics, but related to the listeners what was represented to him. Going back six months, he said they showed 97 stores were open; 100 stores had secured real estate and were in various stages of trying to get buildings done; and 100 franchisees were still looking for real estate. Purvin said Dale Nabors was very concerned about getting those in the construction process.

He also said there were royalties coming in. "There has to be revenue coming in because they are paying employees." But he said he knows they are trimming their sales, cutting things down, although he didn't have hard data.

One man expressed that when they trusted the Cuppy's people in the beginning it was everyone's dream, investing in their business. But he said, "We didn't realize that in talking with these people one of them was going to be in federal prison." He said he felt they were dealing with a bunch of crooks.

Purvin explained it was a much bigger problem which he addressed in a book he wrote, The Franchise Fraud, which was republished recently. He told them that it wasn't so much about the people that were out selling fraudulent deals, but that the franchising industry had painted a rosy picture about franchising. He said they tell you that when you buy a franchise you are reducing your odds for failure and dramatically increasing your odds of success, because everybody knows when you buy a franchise you buy a proven commodity. He said, "That's false. Most franchises are much weaker than they appear to be. The blue chip list of franchise opportunities is a very short list."

He also said that people believe that they are protected by a fabric of laws that would prevent them from being defrauded. "That also is false." The point of his book was to wake up the buying masses that when they buy a franchise they have to be very careful and treat that purchase every bit as cautiously as the guy in the corner who says, do you want to buy my Rolex watch. Unfortunately, hundreds of thousands have been bitten by the franchise bug and can't believe that they weren't buying into a sure thing, Purvin said.

Another franchise operator offered advice that maybe going to all the local newspapers and other media might open a can of worms in exposing what's going on in franchising. He said if this is happening in other franchise organizations, in other industries, then franchising is really a crooked business to be in. He said, "They tell us they feel our pain. Let's make them feel our pain. Can you go after their personal assets? Can you put them in financial ruin?"

Purvin told listeners he was going to New York in a week and he and AAFD's PR person sent out specific requests, in part dealing with Cuppy's situation in particular, to all the news shows there trying to get things front and center. He said they received zero interest. They didn't know if it was because of the Olympics or because franchisors make up a significant part of their advertising base. But he added that people just don't understand franchising.

Purvin Offers Solutions

Purvin stressed throughout the conference call his deep concern about Cuppy's recently cutting off communications with the AAFD, and said now that they are going to lose their accreditation the AAFD had less leverage to get concrete information. "We've been as close a friend to them as anyone."

In offering solutions, he said the last time he looked the FTC had zero staffers prosecuting franchise claims, although they had the ability to undertake an investigation and compel disclosure information that would square with whatever was disclosed in a UFOC. He said, "The states also have that capability, but good luck. Guys, when you made the decision to invest with a company in trust you incurred the situation that we all do, that the guy at the other end is going to keep his word. And if he doesn’t keep his word we have the courts to rectify that. The courts in my opinion are the only dispensers of justice to people who can afford it."

He told the group that the way to get compelling information on the company was to file a lawsuit and commence discovery. He said he was a great believer in leading AAFD's groups in a way to begin their journey with the end in mind. "Every group we talk to we discuss what is the goal we have. I suspect the goal we have for your group is to recover your money, or in some instances to get your building done so you can either be an independent or for some of you, to continue to be Cuppy's franchisees. Then, how do we pursue a strategy that will succeed with that goal?"

Purvin said he gets suspicious when he hears franchisees say they want to put Cuppy's out of business, out of their misery. "That is not the solution." But he concurred with the person who said they've got to stop these people from selling franchises. Purvin thinks that has already happened.

He finishes by saying, "Now the question is, do you want revenge or do you want your money back? Revenge might be sweet, but you have to start with what your goal is."

Related readings:

• AAFD Accredited Agreements Do Not Translate to Good Franchise Investments
• Purvin Justifies Decision to Suspend Cuppy's Accreditation
• FranSynergy Cleans Cuppy's House
• An Interview with Cuppy's Coffee President
• Cuppy's Coffee: In-House Attorney Attempts To Set Record Straight