Lessons from a Vaporized Coffee Chain: Communication and Franchisees

Tense communication between franchisee Elinor Legaspi and CEO

MUSCLE SHOALS, Ala. – In the last of a three-part series, Dale Nabors, the chief executive officer of Cuppy’s Coffee franchise chain, discusses lessons learned as his chain quickly vaporized. Nabors says a word to the wise is to pick the right franchisee at the right stage of a company’s growth and to keep communication channels open. These lessons have been learned the hard way.

It is rare to have events of small start-up franchisors followed by the media so closely from its beginning days until the end. But Cuppy's has been a small chain with big stories that touch on huge issues in franchising. Blue MauMau has reported on this coffee shop concept from when its Java Jo’z founder Roy Snowden went to prison for tax fraud. From the ashes of Java Jo’z, the chain was reborn as Cuppy’s Coffee. The troubled chain peaked over a year ago at 80-plus built coffee shops and some 200 sold but not opened stores.

Continued from Part One and Part Two

BMM: To your credit, you sat down with the franchisees who confronted you in front of the courthouse. What are you telling them and other franchisees?

Nabor: The most important component is good communications.

BMM: Really?!? You say communications is important but your franchise owners are saying that there is no way to contact you. There's a disconnect between those two statements.

Nabors: It is unfortunate that it took the actions of the Benefields and Legaspi today [the three protesting franchise owners at the courthouse]. It did open up the channels of communication. I'm a very big proponent of communication. I think communication does work to our advantage. Unfortunately in this particular case when communications are put out on the Internet, when personal information and threats are put out on the Internet, or disseminated across the Internet, where people can make threats against me and my family in our home, where you are getting bombarded with a gang mentality, you have to shut the communication off. And that is what has happened due to legal reasons, economic reasons, a lot of different reasons.

BMM: It sounds like ex-employees, franchise owners and vendors are taking their frustration with an imploding franchise system and focusing them on you and even your family.

Nabors: Correct. As I explained to the Benefields and Ms. Legaspi this morning, we cannot resolve the issue today but we can discuss the issue. I'm certainly willing to carry on those discussions and make the best of a bad situation. But those conversations need to be open, honest, above board, but kept amongst us, not publicized for everybody because I cannot talk to everyone at the same time as much as I would like to.

They needed an opportunity to vent. They needed an opportunity to express their frustrations, aggravations and personal feelings. As I've said to many people, if it were my $50,000 or $200,000 that was lost, I'd certainly want to jump up and down as well.

Unfortunately, I've lost a lot as well but there is really nobody to go to jump up and down and scream at. That doesn't mean that there aren't people that I could scream at but the legal system will have to determine that. We are exploring that.

But I want to talk with the franchisees. I care about the franchisees. I care about their families. I know it is probably hard for them to believe right now. I hope that I have the opportunity to turn this very bad situation into the very best situation possible. That's only going to work if all of us can work together and can communicate together toward a common goal.

BMM: But some in your system say that you have a strong understanding of communication tools and Internet technologies. As you may know, there are Webinars and other technologies where you can communicate for almost nothing to your franchise owners without giving out your home address, phone number and personal information. There are ways to communicate to your system without revealing personal information and putting you at risk.

Nabors: Part of the problem is the economics and costs associated with addressing many of these issues. We do hope to turn some things back on.

Look. We got hit with a lot of different things from a lot of different directions at the worst possible time. I had initiated a communication portal with the franchisees and as things imploded it made it impossible to keep up operations. We are now to the point where I hope to get some of that back up.

BMM: In watching the system collapse I was surprised that Cuppy's franchisees did not take it on themselves to form their own franchisee association to better protect their self interests or form a purchasing cooperative to lower their costs to help get them by. Why do you think Cuppy's franchisees didn't take more leadership in cooperating with other franchisees in the face of the many issues confronting them?

Nabors: I think there's a lack of unity and a lack of knowledge. A franchisee becomes a franchisee because they are looking for some coaching, guidance, the training and the system. If they felt confident that they knew everything in the business to be successful, they probably wouldn't become a franchisee. They become a franchisee because they are looking to the franchisor to provide the insight, information and guidance.

BMM: Yes, but not all franchise systems have passive franchise owners. There are franchise systems where franchisees are quite assertive.

Nabors: That's one of the many managerial mistakes made by Cuppy's. The typical franchisor who starts out will typically seek entrepreneurial types in the beginning. Those entrepreneurial types go out and do things anyway, with or without the franchisor. But they also bring a lot of knowledge, skill and value, a lot of skill from trial and error. Early on a franchisor brings in those entrepreneurial types [to help the franchisor build a robust system]. But then the franchisor gets to a certain level of growth where they go back to recruit a mid-management level of franchise owner with a mentality that they are more likely to follow the system.

If you go back and look at the franchisees over the history of Cuppy's, they did just the opposite of that, which compounded the problem. They had a lot of people who said just do it for me in the beginning. And then about the time that I took control of the company there were a lot of people in the franchise pipeline that were really dynamos. They were the real go-getters. They were going to do it and they were strong. But that created some internal problems of a system not used to stronger personalities.

Some [franchisees] have been taking a let's wait and see attitude. Some have had tunnel vision that this is my shop and I'm going to focus on what I have to do here. Some are doing it and doing it successfully and well. And some are not.

Coming shortly: Interview of three Cuppy's franchise owners

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A Quick Guide to Cuppy’s Troubled History:

• Roy Snowden of Java Jo’z Gets Four Years
• Regarding fraudulent conveyance of Java Jo’z to Cuppy’s, In-House Attorney Attempts To Set Record Straight
• Cuppy's Coffee & John Dozier: What Franchise Times Won't Tell You
• How Blogging Saved the World: A Tale of Java Jo'z and Cuppy's Coffee
• AAFD Says Cuppy’s Has Fairest Franchise Agreement
• Cuppy's Coffee Sold!
• Cuppy's New CEO To Improve Operations and Meet Refund Obligations
• Cuppy's Speaks Out on Accusations, SBT, AAFD and More
• Official Response of SBT
• Cuppy's Coffee Goes to Court: SBT Sues Elite Mfg.
• Loan Broker Cuts Ties with Cuppy's Coffee
• AAFD Terminates Accreditation of Cuppy's Coffee Franchise Agreement
• Cuppy's Coffee CEO Dale Nabors Arrested! Wanted in Florida
• Cuppy's Coffee CEO Attends Court, Confronted by Franchisees

Click here for a list of all the Cuppy’s Coffee stories