AAFD Helps Franchisor Cleanse Past Sins of Its Predecessor

When Doug Hibbing, president of Cuppy's Coffee & More, Inc., reflects back on the past year's turmoil of bringing his franchise out of the shadow of the Java Jo'z Coffee & More licensor, he says it was both a good and bad experience.  "It was actually a benefit considering how many of the Java Joz's people have come forward with us. As people found out the truth they came our way." Medina Enterprises, Inc., an affiliated company of Cuppy's, purchased the assets of Java Jo'z in May 2006, but found itself in the glare of controversy when the new franchise was suspected of being too closely connected to the troubled Java Jo'z brand, which left behind unfulfilled contracts with licensees and issues regarding Trademark ownership.

But now, four months later, the rumblings have subsided and Cuppy's Coffee finds itself in a different light. At its annual conference next week, the American Association of Franchisees and Dealers (AAFD) will recognize Cuppy's Coffee for the innovative changes to its franchise agreements, adding its name to the AAFD's roster of companies earning its Accredited Contract status. The award is given to new franchise systems, or new ownership or management teams, that lack operating history to evaluate relationships.

In explaining the process in a telephone interview, Hibbing said that Cuppy's entire contract was gone through and adjusted with AAFD's assistance, so that it was a reciprocal agreement. He said, "We have always been about being in partnership with our franchisees and we just wanted our contracts to reflect that." AAFD's Chairman Robert Purvin praised the franchisor for setting a new standard in fair franchising agreements. He said when they began looking at their contract it was graded in the mid-50s, but now it is 99.5% conforming to the AAFD standard.   Purvin told Cuppy's, 'If you adopt our model it will help you cleanse yourself of the sins of your predecessors.' Although they do not have contractual obligations to the Java Jo'z people, Cuppy's wanted to continue to support them in providing supplies and marketing.

Today with 176 signed franchise agreements, 80 of which are from Java Jo'z, the franchise is moving in a new direction with its franchisees by establishing a Franchise Owners Association. Hibbing said they gave the AAFD its entire list of Cuppy's Coffee franchisees and they have contacted them. He said, "In order to meet AAFD's standards, our company's franchisee association has to be independent of us." He explained that operators must have the ability to create their own rules and draft their own operating structure, and elect whoever they want to elect.   And, as franchisees come on board, he said the company will give them their first year in the association.

Purvin said Cuppy's has moved to a completely collaborative culture recognizing it has given AAFD complete carte blanche to help form the association. He said, "They have also committed to creating a purchasing co-op so the franchisees will participate in all areas of product distribution." But, having said that, Purvin states that AAFD would not ask Cuppy's for veto rights of any type, explaining that a company needs to run its own business. "What we look for is collaboration."  

Although the Uniform Franchise Offering Circular is not completed at this time, Purvin said Cuppy's agrees it well comply with the disclosure requirements of AAFD's standards.  And, according to Hibbing, all franchisees under the old agreement will be given the offer to sign the new contract.

Attorney Paul Steinberg, who has been closely following the company, feels Cuppy's has made some concrete changes on specific items which he thinks is good. He said normally franchisors will not allow franchisees to sign new agreements that are a better deal, when they are already contractually obligated. He also feels that if the company is going towards a collaborative culture that is a positive move. 

Hibbing said working with AAFD to develop a systems standard document that is truly from the franchise owners is Cuppy’s most significant undertaking.  He said, “It is taken very seriously to address their concerns and our goal is to make it one that works for the franchisees’ success, which ultimately translates into our success.”