Today's news for the franchise & small biz owner

(PODCAST) SACRAMENTO — California state senators listened to franchise owners and associations ask for passage of Senate Bill 610 yesterday. Authored by Senator Hannah-Beth Jackson [D-Santa Barbara], the bill was crafted to bolster good faith in a franchisor's dealings with franchisees and the right to associate without fear of reprisal.

In the attached audio file of the hearing, remarks by participants are typically targeted towards Senator Noreen Evans [D-Santa Rosa], chair of the Judiciary Committee. Senator Jackson is the first voice to be heard as she introduces the bill to members of the Judiciary Committee.

Listen to the full hearing of Senate Bill 610 below by clicking on the triangle next to the speaker icon (flash needed) or download the mp3 audio file. (21:23 minutes)

In support of the bill, McDonald's franchisee Katherine Slater Carter is the first to tell her story on how brand standards can be arbitrarily changed on the spot by a franchisor to obtain what it wants. Bill sponsor Robert Purvin, chair of the American Association of Franchisees and Dealers, followed. "All we are asking for in this bill is the opportunity for franchisees to protect the right of good faith and fair dealing," states Purvin. "This is a very pro-franchising bill," he adds.

A former Cold Stone Creamery franchise owner also tells his story about how his franchisor wants him to pay future royalties from his insolvent and shuttered ice cream shop as if he were still in business. He is then followed by Amin Salkhi, who represents some 10,000 service station franchisees. Ali Mazarei gave support of the bill on behalf of the Paris Chamber of Commerce. Franchisee Keith Miller, chair of the Coalition of Franchisee Associations and San Rafael-based franchisee attorney Peter Lagarias also spoke about the need for the bill.

Lobbying against the bill was the International Franchise Association's Dean Heyl, director of  the IFA's state government relations. Heyl stated the bill will reward plaintiff's (franchisee's) attorneys through increased litigation and "will harm California's already fragile economy."

The bill passed the state senate's Judicial Committee yesterday afternoon by a vote of 5 to 2. Despite strong lobbying against it, the bill is likely to pass on the floor of the senate in the next few weeks. However, it is anticipated to see strong opposition in the assembly.

Former Cold Stone Creamery multiunit franchisee Frank Caperino

SAN DIEGO — Former Cold Stone Creamery multiunit franchise owner and once president of its franchisee association, Frank Caperino, speaks with Blue MauMau about how Cold Stone Creamery has lost the love of the brand. Caperino paints a dim scene scene of buying and running a franchise with under the Cold Stone Creamery brand.

Building up to eight stores, Caperino was one of the largest multiunit franchise owners in the Cold Stone Creamery system. Having been with Cold Stone for 15 years, San Diego-based Caperino says his problems became more acute when his franchisor was taken over by Kahala Corporation, the current holding company of Cold Stone Creamery. The conglomerate company that sells franchise licenses and supports franchisees under concepts such as Blimpie sub shops, Taco Time, Samurai Sam's, and Cereality has 14 brands under its umbrella.

Nowadays, franchise owners are desperately pushing for franchisor transparency in how much it marks up goods in an effort to bring down their sky-high cost of goods. "We can't get into the franchisor's books and nobody wants to show us," says Caperino.

After the brand was acquired by franchising conglomerate Kahala, says Caperino, there has been a lack of dedicated staff to support Cold Stone Creamery. Where once there was 250 staff that supported Cold Stone franchise owners, there are now only four dedicated employees, he observes. Business functions are shared among the brands. "We've lost that love of the brand," declares the former Cold Stone multiunit owner about how in a conglomerate when brands share everything, all become poorer.

The results? From a franchise owner's perspective, Kahala's two largest brands are failing miserably. Cold Stone Creamery in 2012 was considered to be the 19^th worst franchise to buy among almost 600 major brands. Blue MauMau compiles an annual list from the Small Business Administration that ranks how many franchise owners fail to pay back their SBA-backed loans. Cold Stone's rank isn't as bad as sister company Blimpie. Its sandwich shops are ranked 15^th worst. That ranking is particularly bad since SBA lenders require a franchise borrower's own house as collateral should they not be able to satisfy their payments. Kahala's two brands of Cold Stone and Blimpie are passed by only a few worse duds, such as Mr. Goodcents Sub and once grand Carvel Ice Cream.

Cold Stone's National Advisory Board, a committee of owner-operators who tried to advise the franchisor on the operations of the ice cream shops, wasn't effective in getting the conglomerate to listen and respond to their efforts to lift the brand for all. So Frank Caperino and other franchise owners founded the National Independent Association of Cold Stone Creamery Franchisees in 2011. It is an independent group that can look after the interests of the ice cream shop entrepreneurs, without fear that the franchisor can silence or disband them.

At first the association tried to collaborate with the franchisor. But that didn't work.

Going forward, Mr. Caperino hopes that the members of the association can one day create a national franchisee purchasing cooperative to bring down the cost of goods and bring transparency to its cooperative owners — franchisees.

An electrical engineer by education and profession, and a once financial planner, Caperino now consults prospective franchise owners on what to look for in buying and growing a franchise on his web site FranchiseFrank.com.

Here is a twelve minute audio interview (mp3 file) by Blue MauMau of Frank Caperino. Click the arrow below to listen to the interview. (Must have Flash to see the arrow.) Listeners can also download the entire mp3 file in the link "download audio file" below.

Prof. Benjamin Lawrence

Benjamin Lawrence, assistant professor of food and beverage management at Cornell University's School of Hotel Administration speaks about how franchisors can short circuit independent franchisee associations from fully developing.

Lawrence shares an example on how one of the smartest things that the CEO of the Curves fitness center chain Gary Heavin did in preventing franchisees from being fully independent was to provide seed money for the now defunct independent franchisee association.

Lawrence specializes in food and beverage and channels of distribution in the context of franchising. He and Boston University's Patrick Kaufmann worked with many independent franchisee associations in researching how association leaders must walk a thin line between failure and success. They recorded their findings in the Journal of Retailing, Identity in Franchise Systems: The Role of Franchisee Associations.

This is the audio part of a two part series, Growing an independent association and Franchisees trust co-ops and democracy more.

Click on the arrow below to hear the interview audio stream or download the full 5 minute Podcast (*.mp3 format). Safari and Apple products cannot see the arrow and will have to download the Podcast file.

Traymore Hotel of Atlantic City, N.J. was built in 1879. Photo posted by ibsut

Hotel consultant and author Stanley Turkel speaks about thirty-two hotels in New York that were built to last.  These century-old hotels defied the passage of time for a variety of reasons, according to the author. For eighteen, it was the fortuitious creation of the New York City Landmark Preservation Commission in 1965.

Turkel gives an insider's view on what makes these hotel landmarks so great.

Click the arrow next to the speaker below to listen to the interview (9 minutes 56 seconds). Or download Podcast here.