There Is Hope for Cuppy's Coffee and Newer Systems in Franchising Right

Never thought I'd say it, but...

Went down to the AAFD meeting. Got sick and missed the second day, but before that I had a chance to meet with the Cuppy's folks and to talk with the AAFD about why they were giving Cuppy's an award.

I went in with doubts, but I came away impressed. The franchisor had in attendence key people including Hibbing and Mrs. Morgan. They went out of their way to introduce themselves and speak with their critics (including yours truly), at length and with candor. Mrs. Morgan's acceptance speech at the awards dinner was genuine, and she's quite a schmoozer in person. Of course, image only goes so far, but...

More to the point, the new Franchise Agreement (not the current one) is almost fully compliant with the AAFD fair franchising standards; that in itself is better than most franchisors can say. The receptiveness of the franchisor to working with the AAFD to turn over a new leaf is one which will hopefully be emulated by other franchisors.

In hindsight, Cuppy's was poorly served by their professional advisors; the problems this franchisor encountered were both forseeable and (to a great extent) avoidable. Take-away is that:

(1) when in doubt, disclose, and

(2) structuring something as an asset purchase agreement does not mean that you are necessarily clear of the seller's liabilities. (Some might add another lesson: sometimes it is counter-productive to sic lawyers on your critics rather than set forth a reasoned explanation of your position.)

The first point is often forgotten by franchisors who ask their legal counsel "Do we have to disclose that....?" If you have to ask a question that starts that way, the answer should be evident. Particularly in the internet age, any past history is going to quickly come to light. In the case of this franchisor, it was the perception of a less-than-forthcoming UFOC disclosure (coupled with the ham-handed tenor of Mr. Dozier) which led many (myself included) to believe that something was amiss.

The second point on the risk of asset purchase agreements is of some importance to franchisees, who often use asset purchase agreements; know your seller and you should always have a discussion with your attorney about purchasing assets, particularly where the Seller may have creditors or pending judgments, and/or where you as the Buyer have some links to the Seller such as business or familial ties.

Where the Cuppy's story diverges from the usual is in Cuppy's decision to make a turn to transparency and collaboration with their franchisees. Time will tell, but it seemed to me that the company has not only made concrete steps but is truly proud of the AAFD award and committed to continuing down the path to full accreditation, which will require the voting support of the Cuppy's franchisees.

Hell may not have frozen over, but I will say that Cuppy's has a good chance at being a success story and model for the franchise industry. The AAFD and Cuppy's have a lot at stake in the success of this new franchise agreement; let's hope for the best.