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Dunkin's Stalking Scheme Plagues Franchisees in Court
Dunkin': Gathering "ammunition" for another confrontation meeting? Photo/Blue MauMau
CANTON, Mass. (Blue MauMau) - Dunkin' Brands' onslaught of litigation against its mom and pop franchisees over the past eight years was foreshadowed by a presentation given by its chief counsel in 2000. The spying techniques it advocates has been a growing plague on its franchisees. At the American Bar Association's Forum on Franchising in New Orleans, Stephen Horn presented to fellow franchise industry attorneys his company's approach in catching franchise operators in acts of underreporting sales as related to royalty payments, and other related issues. At that time Horn was general counsel to Allied Domecq, the umbrella organization over Dunkin' Donuts, Baskin-Robbins and Togo's Eateries, having left his position at Schmeltzer, Aptaker & Shepard in Washington D.C. Two of his partners at that firm, Robert Zisk and David Worthan, now with Gray Plant Mooty, act as outside litigation counsel to Dunkin' Brands.
In Horn's written materials for the 2000 ABA Forum "Franchising without Borders" Volume II (click to see larger cover page pictured on right), co-authored with franchisee attorney Jeff Haff, he instructs the audience, "One of the best ways to gather evidence that will potentially have some impact in court is to conduct surveillance of the franchise." He explained that the best surveillance is not necessarily to generate evidence for court, but to provide ammunition for a confrontation meeting with the franchisee. "If the case goes to court, the franchisor can always use subpoenas to gather all the evidence, of which surveillance will provide but a snapshot."
According to Horn, "There are quite a few former federal agents who now make a living as private investigators, and they certainly are the best at obtaining good results." But he said surveillance can be expensive and has its limitations, in that investigators can be found out. He explained, ". . . this will put the franchisee on his guard, possibly preventing the franchisor from getting the evidence it needs to confirm its suspicions."
Horn's co-presenter seemed to take offense to that. In the written materials of their presentation a footnote was published: "Mr. Haff notes that surveillance also may adversely affect franchisee morale and trust of the franchisor. If the basis for terminating an underreporting franchisee is breach of trust, hasn't the franchisor breached the trust of an innocent franchisee by putting him under surveillance?"
Haff said in an interview with Blue MauMau that he remembers Horn taking a very aggressive stance on franchisee underreporters. "There's no question about that." Haff said Horn took a poll during his speech asking how many in the audience had a rule that business owners get one warning, but on the second time they tell them they are out. He said quite a few people raised their hands. "But It was Horn's opinion that that was an unacceptable position for a franchisor to take. Horn advised, 'The first time a franchisee was caught, they were done. Period. They got no warning, no explanation.'”
Horn elaborated on some of Dunkin's hardball tactics in his written materials. "Investigators are fairly ingenious at figuring out ways to get the job done." He adds, "Some are known to use small video cameras that can fit inside a briefcase. . .and investigator posing as a customer can shoot footage while eating on line or sitting at a table . . .an investigator can pose as a potential buyer if the franchisee has the business on the market."
Dunkin' Views All Franchisees as Suspect
Dunkin's investigations go beyond that of the franchisee's business. Horn expressed that their lifestyles and attitudes should also be investigated. "Everyone knows which franchisee just built a beach house and which one drives a late model Mercedes Benz." He feels every franchisee is suspect, happy or unhappy (ABA forum material, Common Signs of Underreporting, pg. 3). He said, "The franchisee who is happy and wants to expand should be asked, 'Has anyone checked to see how much he claims to earn from the business?' If his P&Ls look so bad that you would expect him to be begging to get out of the system, you have probably discovered another underreporter."
But then Horn presents the opposite scenario of those who are unhappy, explaining, "A franchisee who feels the system has not worked for him may decide to use a little 'self-help' by underreporting sales."
A Look Back at Dunkin's Litigation Pattern
Dunkin's litigation history shows an aggressive pattern that has been destructive for many small operators since 2000. Nation's Restaurant News and the Boston Business Journal reported that 350 suits were filed by Dunkin' between January 2000 and September 2002, compared to 12 filed by McDonald's for the same time period. And during the 18-month span between January 2006 to June 2007, Dunkin' filed 157 lawsuits compared to Subway's 5.
After Dunkin' was acquired in 2006 by three private equity firms, Bain Capital Partners, Thomas H. Lee Partners and The Carlyle Group, Horn took over as chief legal counsel in charge of loss prevention—loss prevention was described by its own operations director as "investigations of underreporting cases and transfer matters, meaning transfers to other franchisees." In the latest barrage of lawsuits, franchisees are alleging that the company is continuing to use the tactic of spying on operators to gather evidence for court in an attempt to terminate small operators—a similar strategy to what Horn described in his 2000 forum presentation.
Most involve allegations of breach of contract issues and a variety of infractions, but also include accusations of violating federal laws such as tax evasion and noncompliance with labor and immigration rules.
In one federal lawsuit still going on, Dunkin' terminated 52 franchisees, accusing many of masking overtime pay by using identities of former employees, violating the Fair Labor Standards Act, engaging in identity theft and failure to pay payroll taxes. But the franchisees represented in the suit allege that Dunkin's bogus threats are all part of its scheme in utilizing a nonnegotiable term of its franchise agreement known as the "obey all laws" provision. They contend that Dunkin' uses noncompliance to any law "in a manner which is unfair and deceptive to coerce unwarranted financial concessions from franchisees," and that they are "victims of a pretextual and malicious scheme" perpetrated by Dunkin' to disenfranchise them from their stores.
The lawsuit goes on to describe Dunkin's scheme as one utilizing "a so-called Loss Prevention" unit . . . which engages in Gestapo-like raids on franchise locations in a threatening and intimidating manner designed to strike fear into current and former employees, and embarrass the franchisee in his community."
The court held that Dunkin' did not have to prove its claims prior to terminating the franchisees in this case. The motion for protective order discloses that in addition Dunkin' eventually wants to gather personal information—including social security numbers and medical files—on the franchisees' employees. At issue is the fact that this sensitive information is being released to people who are not authorized to access or see such private data. Without the consent of the employees their information is given to Dunkin' the franchisor, not the franchisee who is the employer.
Another lawsuit filed for underreporting against a franchisee in Pittsburgh was dismissed in 2003 because the court did not find Dunkin's accounting methodology to be credible. At the same time, Dunkin' dismissed the same charges against a store operator in Florida, although its attorneys continued to litigate other charges of tax evasion and employment law violations.
Horn's Post-Presentation: Ammunition to Negotiate with Owners
At the conclusion of his 2000 ABA Forum presentation, Horn turned on a slide projector and, according to Penn State Law Review's acclaimed Beguiling Heresy: Regulating the Franchise Relationship, authored by eyewitness Paul Steinberg, a frequent contributor to Blue MauMau, and the late Gerald Lescatre, Horn "regaled the assembled attorneys with photographs not of Dunkin' stores, not of Dunkin' franchisee deliveries, not of surveillance inside stores—rather, Horn showed photographs of the personal homes, boats, and cars of Dunkin' franchisees." According to Steinberg, he attended that session and took detailed notes.
The report reveals, "He then made explicit to the attorneys what he meant by "ammunition" for a confrontation meeting: the franchisee would be confronted with photos that the private investigator had taken while lurking around the family home. Dunkin' attorneys would point out that there was an "obey all laws" clause; the family appeared to be living beyond its means, and what would happen if the IRS got these photos? Under such circumstances, Horn stated, the franchisee would normally pay the Dunkin' demand. Franchisees who fight Dunkin' risk exposure of their private lives, as Horn's slide show indicated; one franchisee subsequently said that Dunkin' even makes inquiries into franchisees' "romantic relations." The threat of forfeiting a $500,000 investment and having one's "romantic relations" exposed provide a powerful weapon to ensure franchisee submission to franchisor demands."
One citation from the Penn State Law Review states:
Franchisees who fight Dunkin' risk exposure of their private lives, as Horn's slide show indicated; one franchisee subsequently said that Dunkin' even makes inquiries into franchisee's "romantic relations" --n554. Martin, supra note 148, at 111 (citing fall 2002 interview in Bloomberg Markets magazine).
After the attorneys finished presenting, the Law Review publication reports that several attendees gathered around the two presenters. Several asked Horn about his recent novel, a legal thriller he wrote in 2000, and one asked for his autograph. According to Steinberg, "None asked about the ethics of Dunkin's strategy. When this author [Paul Steinberg] asked if Dunkin's practices did not amount to extortion, Horn hastily said that he had been misunderstood. Some while later, this author had communication with three attorneys about Horn's presentation; two of the attorneys had attended the meeting. One of those who attended noted that his clients had told him about the Dunkin' surveillance, but that he was surprised that Dunkin' was so public about discussing such practices, as well as surprised at the lack of reaction from the attendees."
Steinberg's book also states, "One attorney who had not attended the presentation defended the Dunkin' practice and said it was ethically permissible. That is debatable: an attorney who retired after working for a disciplinary committee in a major east coast state told the authors that the issue was clear-cut: threatening criminal prosecution (tax fraud) in order to gain advantage in a civil matter. (See Code of Professional Responsibility 107:5.) The issue was not, she explained, how artfully the franchisor attorney skirted the letter of any ethics regulation: "he knows precisely what he is doing, why he is doing it, and he knows what the response of the other party will be. It's not even a close call in my mind. It's shocking to get up and boast; it makes you wonder what else they're up to."
Dunkin' Responds with Threats
In April Blue MauMau asked Dunkin' if Stephen Horn had made statements at a meeting implying that " . . . if he saw a franchisee driving a fancy car who owns a Dunkin' shop, he felt that the franchisee wasn't working hard enough or he was stealing." Stephen Caldeira, Dunkin's chief global communications officer, said he had spoken to Steve Horn and he had unequivocally stated that he had never made such a statement. "This incident simply did not happen," insisted Caldeira. He said, "Franchisees that know Horn know he would never think or say such a thing, knowing his strong moral and ethical character. This is pretty shocking news to us."
Caldeira warned that the company had spoken to their outside counsel and without a legitimate basis for running the quote [on Blue MauMau], and without proper documentation, they would consider it as an act with reckless disregard as to whether it was ever said. According to Caldeira, Dunkin' lawyers told him it would give them a strong suit for libel.
He continued saying that they were giving fair warning: "Unless you have some kind of foolproof documentation that Steve Horn made this statement, I've told you what our next steps will be . . . With all due respect, I just hope you have your ducks in a row if this is the way you are going, because we will be prepared to refute and get engaged in short order."
Reporter's Note: Dunkin' Donuts is invited to respond to this article. If Blue MauMau receives a meaningful response it will be published immediately.
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Related reading:
- Franchisee Sentenced amid Dunkin’ Lawsuit Barrage
- Jury Finds Hole in Dunkin' Donuts Case Against Pittsburgh Franchisee
- Dunkin’ Spate Stirs Anger among Franchisees
- FindLaw:Dunkin’Says Stores Skimped on Overtime Pay
- Detroit Mom and Pop Franchisees Sue Dunkin' over Illicit Business Practices
- Smoking Gun Emails Billow Dark Cloud over Dunkin' Brands
- Dunkin' Donuts Mom and Pops Squeezed Out by Private Equity Firms
- Indians allege discrimination by Dunkin’ Donuts company Articles
- Duelin' Dunkin' has "one of the toughest franchisee discipline programs in the country", Franchise Times
- Beguiling Heresy: Dunkin' Donuts' Strong-Arm Approach in Spying on Franchisees
- Regulating the Franchise Relationship (Introductory chapter of the book Beguiling Heresy: Regulating the Franchise Relationship posted online)
- October 2002 issue of Bloomberg Market's magazine, Dunkin' Donuts' Spate of Lawsuits Stirs Anger Among Franchisees
TIF is missing the point
TIF, I believe Guest has answered your question. How about you answer this one?
Well some of your family members are NOT underreporting royalties, sales/income taxes and DO NOT employ illegals but are accused of and assumed guilty of doing so without any discussion or evidence, for the sole purpose of extorting money. By the way, by the time your family proves this they are basically on the street. What do you think should happen to the accusers?
A real example of Horn's Extortion Game
As a Franchisee currently being extorted by little Stephen Horn, here is an example of DBI's Loss Prevention tactics of Guilty until proven Innocent or until you go Bankrupt.
My partner and I joined the DD system in 2001 by signing a 3 unit SDA. We barely hit financial requirements but managed to become approved Franchisee’s. In 2002, we built our 1st store by risking everything we had including collateralizing all of our personal assets with our SBA financing facility. The 1st 18 months was brutal sweat equity. There were times, sometimes months at a time, where we couldn’t afford our payroll, so my partner and I would send our employees home and work the counter until either 11PM or 12AM when our overnight crew checked in. Every DD mom-n-pop operator knows what it is like to sleep on a 50lbs bag of flour. And quite honestly, it’s actually not that bad, when you accept failure as not being an option. We did whatever needed to be done to make our investments work.
In 2004 we opened our 2nd store and felt the relief of a successful opening. With that, my partner and I began drawing a minimal $500/wk salary. In 2005 we opened our 3rd store with greater success compared to store #2. Finally, we starting to see and feel the fruits of our labor come to life.
In the summer of 2006 we signed another 3 unit SDA and opened our 4th store around the same time. What I thought was good, at the time, was actually the pretext to their extortion game. Our 4th store was developed exactly 1 mile away from another Franchisee’s store and things got emotional during the period leading up to the store’s opening. During that time, DD Loss Prevention somehow received a tip that our organization was paying cash to employees. They acted on the information and we were lucky to be randomly selected for a Loss Prevention Audit the same year. Like Stephen Horn says, “A lot of our guys have backgrounds as former FBI investigators and IRS audit agents.” They will say they don’t but trust me little Stephen Horn acts on anonymous tips. If his buddies at the FBI do it – Why wouldn’t he?
The 1st interview with Loss Prevention occurred 2 months after we delivered, in entirety, including some original files, the documents that were requested. What I thought was going to be a friendly business review followed by discussion was actually a strong handed attempt to find anything, even if immaterial, to support the anonymous tip received. The individual slammed his hand down in my store’s dining area and said, “We have all the information we need at this point but we’d like to hear it from you personally. How is it that you get the cash to pay your employees?” He had my Manager’s W-2 in his hand and continued, “The average DD Manager makes $40K plus per year. How is it that your Manager can make a living earning only $29K per year?” My response was simple. “Before answering that question, I would like you to ask me 1st – Did this individual work the entire year? The answer will be No. Now, to answer the 2nd part, he was away for 3 months during the year at which time he had gone to India to marry his wife. If you annualize his salary, the numbers will show a salary of approximately $39K. In addition, I provide him with a SUV, cell phone, life insurance, and a gifted ticket to India.” With that said his tone became friendlier and asked some other questions trying to figure out this grand scheme that had no basis. I run a clean shop operationally and financially bottom line. Four months later, in October 2006, the same individual from Loss Prevention requested to meet with one of our other Managers in a different store. The store in question is a NTO within a supermarket. In order to operate the store, effectively, it is business critical for the Manager to live within a close proximity. After consulting with our CPA, we decide to include, as a convenience to the employer, a leased apartment facility for the primary Store Manager. Regardless of whether or not the Manager occupies the leased apartment has no bearing on the individuals pay and treated as a general business expense as a convenience to the employer.
The Manager being questioned had an annual salary of roughly $41K. The conversation was more to the point this time around:
LP - “Who pays for your apartment?”
SM - “Boss pays.”
LP – “Do you have to repay him?”
SM – “Boss has done a lot for me and I owe him a lot.”
LP – “Meaning, for the apartment.”
SM – “Yes.”
LP – “Do you know it’s against the law to have your Boss pay for an apartment without paying taxes on it? Do you pay taxes on your income?”
SM – 1st part “No.” 2nd part “Yes.”
LP – “No, you do not pay taxes on all of your income because your Boss does not give you a 1099 for the apartment. What do you do with the cash that your Boss gives you?”
SM – “I deposit my check in the bank.”
LP – “I don’t think you’d deposit all of the cash in the bank. If so, I want you to go home right now and get me your bank statements. Otherwise, you are also going to get in trouble with your Boss.”
* The above conversation is not verbatim but provides a general description of the tactics used during the conversation. It is my assumption from the manner in which the questions were being asked that all conversations with Loss Prevention were recorded by the individual handling the case. However, it has not been confirm to date.
At that point, my Store Manager wasn’t sure how to handle the questions and started tearing thinking he had done something wrong. Not being able to respond any further, LP excused my SM by saying he’s going to ask Boss the same thing and that the bank statements may still be requested. Once again, they had nothing to go on.
In March 2007, I had presented a development plan to the Development Team demonstrating, in detail, our strategy on growing our existing 4 store network to 10 stores in 2 years followed by an additional 2 stores in year 3. The development plan, fully executed, would have positioned our organization as a 12 store network within a very unique geography within the Mid-Atlantic region. Most Franchisee owned networks are in geographies that overlap with other Franchisee owned stores that foster development competitiveness between Franchisees of the same brand. Our specific market would have been exclusive to us, within a 15 square mile radius, creating significant value added synergies.
After the presentation, I was given numerous “pats on the back” with one particular comment that stuck with me made by the Regional Director of Development, “I wish all Franchisee’s thought about development the way you do. What they need to understand, is we are going to penetrate the markets. And if you don’t do it, someone else will.”
We began executing on our plan, within 2 weeks of the meeting after securing the necessary financial commitments, by issuing a LOI to acquire 2 stores. The LOI was sent to Dunkin, by the selling Franchisee, for review and acceptance. The selling Franchisee was also under a lawsuit with DD at the time. I was expecting their approval of the acquisition, based on the positive presentation and being an integral piece of our strategy; instead, I was delivered a Termination Letter, within 30 days, in April 2007. The allegations being made are as follows:
1) Underreporting of Gross Sales. The basis is in 2004. Our primary production store reporting $1.2M, in gross sales on our annual filings, our total deposits into that account was $1.7M. They are alleging we have concealed sales of $500K. The difference was reconciled to the penny, in perfect balance, during the 2nd interview with Loss Prevention. The reconciliation was performed with 35 minutes using an excel spreadsheet that was printed and given as support.
2) Payment in lieu of compensation (snowballs as a payroll tax issue since we don’t issue a 1099 on fringe benefits):
a. Expenses taken for the lease of a SUV given to a key associate.
b. Expenses taken for the lease of a residential apartment.
c. Expense taken for a tuition payment made on behalf of a cousin who had built an excel model for us to use in our business operations.
Hitting us for breach of contract and obey all laws has nothing to do with protecting the integrity of the Brand. It’s about a Den of Thieves who hawked our books to uncover the value. The value to them has to do with the Collateralized Debt Obligation (CDO) issued to finance the LBO by the 3 pigs (Private Equity):
a. Churn our franchise agreements from a 16 year average life into fresh 20 year franchise agreements. This creates greater ongoing present value for the assets that underlie the CDO that was supposed to “Liberate” us. The underlying pool of assets is made up of Franchise Agreements and options on real estate leases held by the Franchise’s.
b. Our portfolio of store leases is only 5% of our total Gross Sales. By exercising the options, on behalf of the Franchisor, they will reap the residual spread by subletting our leases to new Franchisee operators at 10% for the next 16 years.
c. Generate immediate transfer fees.
d. Enforce ridiculous penalties for allowing us to sell our stores.
The last item d, above, exemplifies the extortion. Being for settlement purposes only, I received their purposed settlement letter from little Stephen Horn’s friends at GPM. Highlighted as follows:
1) Allowed to sell to our “selected” not just “approved” franchisee.
2) The sale must be completed within 3 month otherwise we will impose a $300K penalty.
3) If the sale is not completed within 5 months, then we will impose a $500K penalty.
4) In consideration of the above, we will waive our right of refusal in selling your stores.
I wonder if this about “In Her Defense” or maybe the “Laws of Gravity” because it’s certainly not reality. When presented, I asked them to justify the $300K & $500K penalties. That was over 4 months ago and I’m still waiting for an answer. More importantly, it’s been over 16 months since receiving the termination letter. They are holding up the development of my 5th store that was in process when were “Terminated”. Having secured the property, I am bearing the holding cost of the rent as an ongoing expense. Maybe they can’t win in court because they technically sold the company to finance the LBO. Meaning they have a Master Franchise Agreement with the TRUE FRANCHISOR – DB Master Finance, LLC – the bondholders on Wall Street. It’s difficult to win a case based on fraud when the true Racketeers aren’t even named as a Plaintiff. That’s right Dunkin Brands, Inc is a dual servicing organization on behalf of the bondholders and the Franchisor. Like a management fee relationship that can get replaced. Little Stephen Horn has to compensate with his overly confident and arrogant character because he managed to win by scaring little mom-n-pop operators in the past. It makes me wonder why no one inside the company has been able to speak with me as businessmen since filing the complaint. We went from “A” rated operators to “C” rated overnight with no indication of this coming. Their audit lasted over 1 year and now we have been in litigation for over 16 months. Our organization has not been able to move forward over the last 28 months while absorbing on-going legal cost on top of increasing operating expenses. And what is Stephen Horn doing – taking pictures of my house? What a d*ckhead!
Dunkin' extortion comment reply
This is disturbing, and indicative of a new level of extortative behavior by Dunkin; previously this type of tactic was not used against employees of the franchisee.
My understanding is that in another current case, Dunkin is seeking medical and pay records of franchise employees.
Any judge considering permitting Dunkin to have access to personal data of third parties should consider the consequences. The people working in the store have NO legal relation to Dunkin. This is a company which has been very aggressive in working hand-in-glove with the government to get people criminally prosecuted, and in a case such as the exchange between the Dunkin interrogator and the third-party set forth above, the implicit threat is clear to any reader.
You should have your attorney communicate with Mr. McCarthy and with the attorneys who are currently dealing with Dunkin problems. There is a pattern of activity being alleged which may rise to the level of criminal activity. You may also wish to read the 2004 Penn State Law Review article; your attorney can pull this from online or drop me a line and I will send a courtesy copy.
Lastly: don't feel picked on about having your employees threatened. You are not the first to have this slimy Dunkin' tactic, and if they are threatening Janet Sparks and store employees my guess is that they are getting bolder and more open in their tactics. That arrogance may just prove to be their undoing.
Good luck to you.
Paul Steinberg
Franchisee Attorney, New York City, Ph: 212-529-5400
This is standard operating procedure for Dunkin
It isn't new ground for Dunkin.
It isn't even the tip of the iceberg.
This good person is only one typical example of someone who has created value that was targeted for appropropriation.
I bet the attorney general of Connecticut and Illinois could provide more info.
RE: TIF is missing the point
Guest writes - Well some of your family members are NOT underreporting royalties, sales/income taxes and DO NOT employ illegals but are accused of and assumed guilty of doing so without any discussion or evidence, for the sole purpose of extorting money. By the way, by the time your family proves this they are basically on the street. What do you think should happen to the accusers?
TIF answers your exact question - They should be strung up from the highest yard arm by their nasty bits.
The Truth Shall Set You Free!
TIF
The virtue of consistency
TiF does have the virtue of consistency in this thread. But as so often with extremist positions, this one is intellectually coherent but pragmatically unworkable.
No human being is perfect, and in a cash business this can be a particular concern. Having audited retail foodservice operations and been a QSR franchisee--not to mention running into flawed people on a daily basis-- I am inclined to lean more towards a dose of mercy, if for no other reasons than pragmatic.
What this Stephen Horn incident demonstrates is that there are non-pecuniary costs to distrust when that distrust becomes known to the counter-party.
What disturbs people about this Horn behavior is that a business matter becomes personal and intrusive. If Horn was surveilling the donut shops and dinging people on discrepancies between reported sales and their business tax returns, that would be one thing.
But snooping around people's private lives with telephoto lenses and becoming a junior G-Man is crossing the line.
There is a difference between someone partnering up with a competing donut shop (in violation of a non-compete) and someone partnering up with someone for a tumble in the hay. There is a difference between someone reporting different gross sales on their 1040 and someone who takes a deduction for private school tuition.
I'm not condoning extramarital sex or taking a tax-deduction for tuition. But I don't see what those have to do with keeping a clean donut shop and reporting your correct sales pursuant to contract.
Paul Steinberg
Franchisee Attorney, New York City, Ph: 212-529-5400
Obey All Laws
The obey all laws clause is objectionable in the extreme as it permits Mr. Horn the fig leaf to investigate all possible infractions of any law, use maximum power to extort a settlement, and has no reciprocal obligation on the franchisor.
Michael Webster PhD LLB
Franchise News
Dunkin’s Horn Denies Bias Allegations; Threatens to Sue Press
Well well....now Dunkin' is now trying to intimidate the Press for revealing Dunkin' Brand's long known prejudices against their very own franchisees. Prejudices that have led to Dunkin' Brands becoming the franchise industry's leading litigator.
However,like any dictatorial law abusing entity they have a little problem - our Free Press can expose them to the world. In fact, our Constitution and society welcomes and protects disclosure of illegality, abuse of power and violation of public trust. Free Speech sheds light on Dunkin' just like cameras exposed Bull Connors' dogs attacking Civil Rights workers in the 60's.
Janet Sparks' supurb investigatory work is revealing, frame by frame, the illegal and immoral actions of Dunkin' Brands and its equity owners, Carlyle, Bain and Lee. And the world will be a better place because exposing corruption and shedding light on illegal and immoral business practices will enlighten and motivate those in power who can act to protect franchisees. And if they don't act on information like this then I'm sure informed public outrage will force them to act in protection of franchisee victims.
Mr. Horn and Dunkin' are used to abusively taking their one-sided franchise agreements into Court where they have the advantage in a rather unlevel field. But if they are stupid enough to try and silence the Press (as they have threatened to do) then they will run smack into the First Amendment which is designed to protect the Press and enhance revealtion of the truth. Mr. Horn and Dunkin' Brands will loose that battle - for it is a battle against America and our traditions of Free Speech and fair play. People have a right to know the truth about Dunkins' prejudices and business practices and our Constitution protects that right.
Re: Good luck. We are a DD family...
Since you've failed to respond I'll put the question to you once more...
Well some of your family members are underreporting royalties, sales/income taxes and employ illegals. What should happen to them?
The Truth Shall Set You Free!
TIF
For the total FRAUD TIF
I said a few days ago that we were a DD family, which in my language means my family. You immediately jumped to a conclusion that I made an all encompassing statement about the world of DD franchisees.
Make a case out of that you snide, obnoxious, no faced fool.
The more that people understand your stupidity the lower your stock, which I suspect is pretty low. And you run a company? I doubt you run anything but an online fraud known as TIF. I finally got a laugh after seeing you for what you are - just a pranster who's having fun making people mad.
Congratulations - a clown is always fun, once they're seen in their drag.
Re: For the total FRAUD TIF
Sorry you feel the way you do, however opinions they do vary and some are more valuable than others!
The Truth Shall Set You Free!
TIF
RE: Re: For the total FRAUD TIF
"....however opinions they do vary and some are more valuable than others!"
Yours are worth as much as a verbal promise from a Quiznos' sales agent. Man, does he have your number.....and so do I and a lot others.
,,,,,,,,Here are a few more commas for your usage in your posts, ignoramous.
You made my day
Quote to TIF about his opinions, "Yours are worth as much as a verbal promise from a Quiznos sales agent."
Thanks guest I'm laughing so hard. Like they say comedy only works when there is truth behind it.
TIF I will ask again
Knowing all of this, and asusming (based on your posts) that you fully intend to and will comply with all terms of a Dunkin franchise agreement,
would you buy a commitment to develop the minimum 5 shops from Dunkin Donuts?
Re: TIF I will ask again
I have no idea. I've done no due diligence on Dunkin Donuts and would not let the posts on BMM subsitute for actual research.
The Truth Shall Set You Free!
TIF
TiF correct on sex and spying
TiF is absoutely correct. There is nothing wrong with forcing someone to forfeit their business if they break a single law.
On the other hand, if they break the law 20,870 times this is deserving merely of a slap on the wrist. After all, they are a franchisor and therefore can do no wrong. That's why TiF doesn't comment on that.
As to spying with telephoto lenses outside peoples homes and sending gumshoes to dig up the juicy sexual dirt, TiF again is correct. In fact, I hear that Steve Horn is looking into an RFID tag which will be implanted subcutaneously at the first training class, as well as a chastity belt which can only be unlocked after Horn has verfied the identity of the zee's prospective sexual partner, and cross-matched same against his database of marriage licenses.
People outside of the franchise industry find Horn's obsession with people's personal lives to be creepy. But they simply don't understand the franchise industry like TiF and I do.
Paul Steinberg
Franchisee Attorney, New York City, Ph: 212-529-5400
TIF is missing the point. Again
The franchisees were NOT GUILTY of under reportting or employment law violations. All they did was drive a Mercedes or buy a nice house.
That is what leads Steve Horn to believe that he can extort a penalty out of them by filing a federal lawsuit that he has no evidence for. Many franchisees just pay to get their lives back or because they can't afford to fight a giant Washington DC law firm and run a 24 hour business.
I ask TIF what should happen to people in a franchisor system that do this?
Beach House in the Cape or Hamptons
Does DD have to investigate everyone who buys a Beach House in the Cape and Hamptons? What about if the spouse works or money is in trust or inherited. Is that why they wanted to review personal returns as well?
Luther's got a ne beach house in the Hamptons! Call Magnum P.I.!
Sound the sirens!!! Load your cameras with film! Look for incriminating underwear!
Steve Horn better get his gumshoe brigade to storm over down there to see if Mr. Luther spent franchise roylaties on his new fancy beach house!
He is living large, so he must be a thief, right?
See where this boneheaded approach leads? Nowhere good. Some BIG changes need to happen at Canton. Wait!!!! I see some panties in the window!
RE: TIF is missing the point. Again
Here is one more try for an answer regarding DD cheaters! It is a simple question about cheating and not about how a franchisee is caught cheating or the practices of a Dunkin Brands.
Re: Good luck. We are a DD family... Submitted by Truth in Franchising on Mon, 2008/08/25 - 06:06.Since you've failed to respond I'll put the question to you once more...
Well some of your family members are underreporting royalties, sales/income taxes and employ illegals. What should happen to them?
The Truth Shall Set You Free!
TIF
The Truth Shall Set You Free!
TIF
Last time, TIF
I understand that franchisors pay you to litter these posts with noise so that franchise investors and law enforcement might miss the real things going on. You have passed the point of dimishing returns and they will just skip replies to your threads and focus on the meat at this point.
If they WERE stealing, the contract says you pay the money you owed and lose your franchise. That is what should happen, but that is not what this article says is happening here. This is alarming if this is at all true. Maybe I should sell my boat and beach house so I don't have people rummaging through my trash?
WHO was under reporting, TIF? Horn didn't say anyone was did he? The article says that Horn said let's see who bought a new boat. I bet we can squeeze him. Who has a girlfriend on the side? I bet we can squeeze money out of him. That is what was reported. Not that he has a girlefirend who told me he wasn't paying his royalties.
Who was caught cheating the franchisor? No one. Why is the franchsor suing people for cheating on their wives? To get money? The law has a name for that and it isn't franchise enforcement.
This is the targeting of people on no rational basis. It is absurd. I almost don't believe it. I have to ask my lawyer what the heck is going on here.
Re: Last time, TIF
If a franchisee's lifestyle does not match their P&Ls and tax returns do you think it is okay for a franchisor to hire an investigator to look into the matter?
The Truth Shall Set You Free!
TIF
TIF
Only if the zee gets the same consideration when they realize the zors lifestyle does not reflect thier bottom line.
THE ZOR SHOULD HAVE PAID FOR KILLER DD
Last time, TIF
A franchisee's lifestyle is none of the ZOR's business. The franchisee could be independently wealthy and running his little dunking donuts shop as a hobby. Maybe he just liked the "time to make the donuts" ads and likes donuts!
DD needs to spend more time getting some of the costs out of the business and come up with updated advertising with more memorable taglines like the aforementioned "time to make the donuts". If the volume of a store as measured by "subject to royalty reporting" is low or going in the wrong direction, forget the witch hunt, work with the owner on getting volume up through all available means. If there is skimming going on, it will probably float to the surface while going through this process.
Spying on zee's only makes for more disgruntled operators and more spinning wheels an wasted time. A franchise that is afraid to attract attention by enjoying the fruits of his labor soon becomes less motivated and then the zee and the zor have lost! The zeal for improving the business gets side tracked and you end up with a bloated company where no one trusts anyone!
I like this line
'A franchisee's lifestyle is none of the ZOR's business.'
Reminds me of the time the company I worked for was hired by a church to determine how much many an accountant had stolen from them over 12 years (she admitted to over $250k) The accountant was living a lifestyle way above her means (lake house, boat, trips, etc), but everyone thought it was because her husband's business was doing well, and her lifestyle was none of their business anyways. Turns out, maybe it should've been.
When the Zor could be damaged by the ways of a wayward zee, they should be concerned.
Another question I have, because it's brought up often about the IFA, but if the DDIFO is aware of any illegal activities of a franchisee, do they feel that they have a responsibility to protect the 'good' franchisees and notify the Zor?
maybe the issue is larger
It was written:
'A franchisee's lifestyle is none of the ZOR's business.'
My reply:
Perhaps the issue is broader than you think. Many companies now are mining credit card data bases for lifestyle based choices and genetic based problems. Credit issuers are now reviewing credit card transactions crossed with loyalty cards to determine credit scores, insurance companies are examining receipts to detect patterns that they believe are at risk behaviors, etc, etc.
Do I approve of this - heck no, but the reality is this is what is going on, and the Government likes it, they like it very much. There is nothing the Government and businesses as whole would like to do as much as eliminate cash transactions so they can track every moment and develop detailed profile and count transactions for a variety of reasons.
So while I understand to some point the visceral response to DD, it should be pointed out it extends far beyond DD, and the Government is very much in favor of it. In fact, when doing a background check on someone the Government goes to private industry to purchase the data in order to circumvent the laws that prohibit the Government itself from doing such direct tracking.
FuwaFuwaUsagi
"Never underestimate the power of stupid people in large numbers."
I agree with this line, JD
"When the Zor could be damaged by the ways of a wayward zee, they should be concerned".
Being concerned, taking appropriate steps to determine the extent of the violations of the FTA, and enforcing the contract's provisions are all reasonable, ethical and defensible responses.
The alleged practices by Dunkin Donuts as detailed, if true, are unreasonable, unethical, and indefensible, regardless of any presumed probable cause.
In a word, no. What the
In a word, no.
What the franchisor does have every right (and some inherent responsibility) to do is to investigate the manner in which a specific franchise is being operated, with an eye toward determining whether the terms of the FTA are being violated in some way that is detrimental.
A hot car, boat, or girlfriend on the side are personal matters that may have absolutely nothing to do with underreporting or other franchise violations. Maybe the franchisee hit the lotto, had a rich relative pass away, or heaven forbid, has another legitimate source of income outside the franchise system in question.
What you are apparently condoning is a form of "profiling", followed by thinly veiled harassment disguised as "investigation", followed by extortion. If the allegations regarding Dunkin Donuts as reported are true, I find it difficult to understand how anyone could find such practices justifiable. There is a right way and wrong way to do just about everything--if a franchisee is cheating, the franchisor has plenty of ammunition at their disposal without resorting to such despicable tactics.
Re: In a word, no. What the
Franchisors have every right to investigate bad operations, any non-compliance, underreporting, fraud or illegal activity in which their franchisee may be involved.
Franchisors have as much right as anyone else in a contract to enforce their rights. And if they chose they may hire a third party investigator, forensic accountant, lawyer or psychic to uncover the facts.
The Truth Shall Set You Free!
TIF
RE: Re: In a word, no. What the
TIF....STFU. You come across as more ignorant with every post in this thread. You've already proved the point.
Re: RE: Re: In a word, no. What the
Regarding STFU...May God Bless You Cowardly Guest Troll!
The Truth Shall Set You Free!
TIF
RE: Re: RE: Re: In a word, no. What the
"Regarding STFU...May God Bless You Cowardly Guest Troll!"
Oh. I'm sorry tif. I forgot to identify myself as you do.
FIT, or am I XYZ or is it LSMFT? I keep forgetting. Which do you prefer?
By the way, why aren't you using those commas I left you in another post? Oh, and one more thing........STFU! Try harder.
A right to do something vs. the right thing to do
While Dunkin might have the right to do these sleazy things, it seems pretty stupid to do them. Of course the business guys like Luther and certainly Kussell probably have no idea just how low this back room operation has sunk.
They are trying to sell like 15,000 new franchises right now. You want to buy one? Do you know anyone who would? You can be completely honest and live like a choirboy and it doesn't seem to matter.
It'll be much harder for the business guys to make their deals now. Think they like it? I don't.
I'm thinking Steve Caldeira's bluster is just that. The last thing Dunkin needs is yet another public lawsuit, especially a defamation one where truth is the best defense. That means they will drag the story on for years, and it will get worse and worse as even more sleazy things roll out into public view.
TIF, I agree that
"Franchisors have every right to investigate bad operations, any non-compliance, underreporting, fraud or illegal activity in which their franchisee may be involved". Agreed.
They also have every right to do so in an ethical, professional manner without resorting to the types of tactics alleged of Dunkin Donuts, practices that when exposed, by their very nature could damage the brand as much or more than any underreporting franchisee.
Last time, TIF
I understand that franchisors pay you to litter these posts with noise so that franchise investors and law enforcement might miss the real things going on. You have passed the point of dimishing returns and they will just skip replies to your threads and focus on the meat at this point.
If they WERE stealing, the contract says you pay the money you owed and lose your franchise. That is what should happen, but that is not what this article says is happening here. This is alarming if this is at all true. Maybe I should sell my boat and beach house so I don't have people rummaging through my trash?
WHO was under reporting, TIF? Horn didn't say anyone was did he? The article says that Horn said let's see who bought a new boat. I bet we can squeeze him. Who has a girlfriend on the side? I bet we can squeeze money out of him. That is what was reported. Not that he has a girlefirend who told me he wasn't paying his royalties.
Who was caught cheating the franchisor? No one. Why is the franchsor suing people for cheating on their wives? To get money? The law has a name for that and it isn't franchise enforcement.
This is the targeting of people on no rational basis. It is absurd. I almost don't believe it. I have to ask my lawyer what the heck is going on here.
not sayin' it's right....
BUT-
My "on the street" impression is that DD has more than its share of dirty Zees. We get immigrant applicants that we won't hire due to obvious paperwork problems, as well as people we have let go when visas expire or affirmative info comes out that papers are not valid.
Then we see the same EEs working at DD's. We are friendly with many of their EEs as some people work for both us and them. We ask did So-and-So get their papers straightened out, I see he is working. The employees laugh and say "you don't need papers at Dunkin's".
Yeah yeah this is anecdotal about that particular Zee, but if that kind of thing is widespread in their system, what is the Zor to do??? It is negative for the brand when their Zees get "raided" (as several have been) and featured on the 11 o'clock news. This has happened somewhere sometime at almost every brand in QSR, but just seems like DD gets more than their share.
Illegals
are welcomed by the IFA. Check out the IFA web site. They are lobbying for illegals to to work without "The Proper Paper Work"
Franchising has become so corrupt it's hard to know where the next finger will point.
I think that Richard has an opportunity here, in that the Zor should have invested in some Killer DD, prior to trusting certain zee's with future royalties.
This Zor is now the one who been fleeced. Looks like the zee is now on the other foot.
Richard is so against our ridiculous position on immigration
that I consider myself a supporter of the sanctuary movement. The fascist neocon mentality that currently runs this country has to go, or we will face rapid ostracism by the rest of the world - moreso even than we now have to deal with. --
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
Liar
Unlike your dirty shop, Granville Bean, Dunkin Donuts franchisees screen ALL employees through the Homeland Security website for proper work eligibility.
Dunkin is the ONLY QSR operation that does this.
The franchisor may lorder its employees not to write anything down when shaking down a clean franchisee, but the franchisees have MANY paperwork requirements.
Stop lying.
Jon Luther
Does this very aggressive behavior have anything to do with Jon Luther becoming CEO and Chairman?
Probably not
Luther isn't a vindictive person. He would personally prefer to get things done cooperatively, but with recognition that in the end he does have the whip hand.
The agenda is set by the new owners, not by Luther.
I have seen in many companies a similar change in the modus vivendi when control passes to new authority. The new authority doesn't have the relationship baggage, and can be more easily insistent upon the formalities of compliance.
Resisting the formalities of compliance is usually a bad decision, In the end, what is being demanded is what the franchisees signed their names to in the franchise agreement. Former lax enforcement doesn't change the new owners' prerogatives. Accusations and name calling certainly won't help sort things out well over the short term. Acrimony is worthless wampum.
A compliant system is a more profitable system for the franchisor if the concept still has life expectancy. The incentive to whip it into compliance is very strong. How painful that process will be, and how long it takes to get there, will be affected by acceptance or resistance. But in the end, the contract still rules in this kind of situation.
Actually, the more cooperative the franchisees are, the more likely it will be that some accomodations may be considered. Confrontation that is not meritorious on legal grounds usually just makes things worse.--
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
Jon Luther, Chairman & CEO of Dunkin'
Richard, I hope you are correct in your assumptions about the Chairman and CEO, however