en UPS Charged $25M on Whistleblower Suit for Overcharging Feds <!-- google_ad_section_start --><p><img alt="UPS truck and the UPS Store in NYC" src="" style="width: 680px; height: 220px;" />WASHINGTON, D.C. &ndash; The Department of Justice declared this week that United Parcel Services (UPS), the world&#39;s largest package shipping company, agreed to pay $25 million to resolve allegations of overcharging. UPS was accused of submitting false claims to the federal government in connection with its delivery of Next Day Air overnight packages.</p> <!--break--><!--break--><p>The civil settlement resolves a lawsuit filed under the whistleblower provision of the False Claims Act, which permits private parties to file suit on behalf of the United States for false claims and obtain a portion of the government&#39;s recovery. The civil complaint, filed in Eastern District of Virginia by Robert K. Fulk, a former employee of UPS, will receive $3.75 million.</p> <p>&quot;Protecting the federal procurement process from false claims is central to the mission of the Department of Justice,&quot; said Benjamin C. Mizer, DOJ&#39;s principal deputy assistant attorney general. He declared, &quot;We will continue to ensure that when federal monies are used to purchase commercial services the government receives the prices and services to which it is entitled.&quot;</p> <p>The resolution of the litigation, <em>United States ex rel. Fulk v. United Parcel Services, Inc., et al.,</em> filed on February 24, 2015,<em> </em>was the result of efforts brought by several government agencies. They include the U.S. Attorney&#39;s Office in Eastern district Virginia, General Services Administration&#39;s Office of Inspector General, Federal Deposit Insurance Corporation, Defense Criminal Investigative Service, and the Treasury Inspector General for Tax Administration and the Department of Treasury OIG, with assistance from the Department of Veterans Affairs.</p> <p>Acting Inspector General Robert C. Erickson of GSA responded to UPS&#39;s settlement on claims of overcharging government by saying, &quot;The United States should get what it pays for, nothing less.&quot;</p> <p>As required in settlements, DOJ disclosed in its press release &quot;the claims resolved by the UPS settlement are allegations only, and there has been no determination of liability.&quot;</p> <p>A UPS spokesperson said the company still disputes the government&#39;s claim but settled the case to avoid long and expensive litigation.&nbsp;</p> <h3><span style="color:#800000;"><strong>UPS&#39;s long pattern of alleged deception </strong></span></h3> <p>Blue MauMau first reported on allegations of UPS overcharging customers when UPS Store franchisees complained in 2007. Some store owners had filed state complaints regarding the inaccuracies of UPS&#39;s weight equipment and flawed laser technology. Because UPS was installing the weighing equipment itself in retail and shipping outlets, some state officials said they questioned the accuracy. By law, states were required to set and calibrate the devices to assure consumers were not being overcharged.</p> <p>A franchisee in Colorado told how his complaint prompted the state to test equipment at UPS shipping facilities. After the testing was completed, the store owner said he was told that in the test of five packages, all the same weight and dimension, all came up with different measurements and weights. UPS Corporation in Atlanta observed those tests, but did not answer questions as to how they would handle the back charges to customers.</p> <p>When franchisees discovered that a class action lawsuit was filed in California on behalf of anyone who ships packages under contract with UPS, some decided to join the suit. When the proposed class action complaint was filed, UPS corporate sent out the lawsuit to the entire UPS network. The UPS Store president at the time, Stuart Mathis, shared with the chain&#39;s franchise advisory council members that after his experience with the laser measuring devices he concluded they were generally accurate. But he stated there were mistakes.</p> <p>Unable to rectify the problems, Mathis sent out a letter to all franchisees, region coordinators and district consultants, urgently explaining the process they should take in disputing back charges. While the franchisor tried to work with the franchisees in fixing the problem, store owners questioned what the company was doing to rectify problems with account holders who were being overcharged.</p> <h3><span style="color:#800000;"><strong>Investigations into UPS overcharging allegations </strong></span></h3> <p>Earlier this month the <em>New York Post</em> conducted an investigation on whether or not customers were being overcharged. The probe was triggered by news reports of litigation between franchisees in Manhattan and The UPS Store. Going into different stores undercover, the <em>Post</em> found that for the same size and weight packages customers were paying different prices. Some consumers were charged as much as $20 more for the same type package.</p> <p>In the Manhattan litigation, franchisees Robert and Thomas Hagan, owners of 11 The UPS Store outlets had themselves hired a private investigator to look into pricing policies in various stores. The results revealed that more than 40 The UPS Store franchises were promoting the alleged practices of up-charging customers on air shipping packages. When the franchisor looked into the matter, it put the Hagans on notice that they were out of compliance with their franchise agreements. The Hagans met with the company to try and resolve the issues, but their 11 stores were then terminated.</p> <p>After The UPS Store filed a complaint against them, the Hagans filed 12 counterclaims. The district judge in New York has allowed the Hagans to go forward on one claim, stating the franchisees had standing under New York General Business Law, Section 349. The claim is defined as making it unlawful to engage in deceptive acts or practices in the conduct of any business, trade or commence or in the furnishing of any service in New York. They are represented by Stephen J. Savva.</p> <h3><span style="color:#800000;"><strong>Consumers file lawsuit for overcharging </strong></span></h3> <p>On May 5, 2015, yet another lawsuit was filed against UPS shipping giant and the San Diego-based chain, The UPS Store, along with certain franchisees and other retailers. The complaint, like the Hagan suit, was also filed in federal court in the Southern district of New York. This one is filed on behalf of consumers who allege they have been overcharged by the shipping companies from 2011 to present. The lawsuit is seeking class action status. David Andrew Stampley of KamberLaw, is representing the consumers in the case.</p> <p>Lead plaintiff Lynn W. Tucker claims that consumers are misled about and overcharged for UPS services. The complaint states that both UPS and its franchise system are aware of and retain records showing consumers&#39; overpayments. Because franchised locations are required to keep records through their point-of-sales system (POS), as well as the credit card billing details showing the amounts customers pay, UPS and TUPSS know of the overcharges. They also keep records of Counter Manifest System information used to initiate and track shipments of consumer packages, showing rates and costs for UPS Air and ground services, according to the lawsuit.</p> <p>Store representatives frequently do not give customers receipts from the POS systems. When they do, POS system receipts often do not contain package dimensions or charge details. Because of that, UPS and The UPS Store chain allegedly retain the benefits of hidden overpayments by customers.</p> <p>The complaint asserts that UPS and franchisor TUPSS also violated Section 349 of New York General Business Law, which makes it illegal to engage in deceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in the State of New York. It also claims unjust enrichment on behalf of the consumer plaintiffs and national class members. UPS and TUPSS is accused of wrongful retention of the benefits to which consumers are entitled.</p> <h3><span style="color:#800000;"><strong>New York Attorney General legal action against UPS </strong></span></h3> <p>Although New York Attorney General Eric Schneiderman has not looked into the legal matters of UPS overcharging consumers, the AG has taken another action.</p> <p><span style="color:#171e24; background-color:#f8f9f4">Earlier this year, Schneiderman filed a $180 million lawsuit against the package shipping giant for delivering nearly 700,000 cartons of cigarettes into New York that were allegedly untaxed. He claims that fueled a contraband market that cheated state and local tax coffers and threatened the public&#39;s health. </span></p> <hr /> <p><strong>Related Articles: </strong></p> <ul> <li><a href=";rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=1&amp;cad=rja&amp;uact=8&amp;ved=0CCkQFjAA&amp;;ei=sElfVaSaB8bwoASV8YDQBg&amp;usg=AFQjCNEExBZlZbQZUMXxI601tn3dskMxwg">UPS to pay $25M for false delivery claims &ndash; (USA Today</a></li> <li><a href=";rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=2&amp;cad=rja&amp;uact=8&amp;ved=0CDYQFjAB&amp;;ei=aNJgVcOXC8HFogSPh4D4CQ&amp;usg=AFQjCNGwRuHGAqjKQrWhBOM44YDw07JVQA"><span style="color:#660099; font-size:11pt">UPS to Pay $25 Million to Settle False Claims Case</span></a>&ndash; (Corporate Crime Reporter)</li> <li><a href=";rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=3&amp;cad=rja&amp;uact=8&amp;ved=0CDcQFjAC&amp;;ei=nNFgVeetKIvHogTgq4H4Bg&amp;usg=AFQjCNFV1SdonrdTHFew0CrcJ0iYRKdT1g">United Parcel Service settles False Claims Act </a>(Whistleblower Lawyer News)</li> <li><a href=";rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=1&amp;cad=rja&amp;uact=8&amp;sqi=2&amp;ved=0CC8QFjAA&amp;;ei=fUpfVZ6BMoaayATDqIG4BQ&amp;usg=AFQjCNGVAP532HqnczRg-UEvMS9XxTHdJQ">UPS tells employees to lie, overcharge customers </a></li> <li><a href=";rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=1&amp;cad=rja&amp;uact=8&amp;ved=0CB4QFjAA&amp;;ei=0PFgVcr9Ica3ogTim4KAAg&amp;usg=AFQjCNHrYa9YIQtj-If2z_HRJbqC3JBbeQ">Probe Sheds Light on The UPS Store Gouging Consumers&nbsp;</a></li> <li><a href=";sa=U&amp;ei=835fVcnEL82tyASEv4DICw&amp;ved=0CAUQFjAA&amp;client=internal-uds-cse&amp;usg=AFQjCNFJwoRlSaRY5PlFVpwoJ-52cXUeNg" target="_top">The&nbsp;<strong>UPS Store</strong>&nbsp;Franchise System Is Massive Fraud, Say Former</a><span style="color:#660099"> </span></li> <li><a href="">UPS Agrees To Forfeit $40 Million in Payments from Illicit Online Pharmacies</a></li> <li><a href="'s%20Day"><strong>UPS Could Be Overcharging You This Mothers&#39; Day</strong></a></li> <li><a href=";sa=U&amp;ei=835fVcnEL82tyASEv4DICw&amp;ved=0CA0QFjAD&amp;client=internal-uds-cse&amp;usg=AFQjCNELcov7mVYJGu_zUTGVDcF2FQ23_A" target="_top">States Scrambling on&nbsp;<strong>UPS</strong>&nbsp;Dim&nbsp;<strong>Weight</strong>&nbsp;Debacle (BlueMauMau)</a></li> </ul> <!-- google_ad_section_end --> Legal claim & allegation The UPS Store Sun, 24 May 2015 15:17:11 +0000 Janet Sparks 14493 at McDonald’s Workers Swarm HQ to Demand $15 Wage <!-- google_ad_section_start --><div class="photoright"><img alt="McDonald's workers protest at its worldwide headquarters before its stockholder's meeting" src="" style="width: 680px; height: 384px;" /> <div class="caption">Workers march Wednesday at McDonald&rsquo;s HQ. (photo: Berlin Rosen)</div> </div> <p>OAK BROOK, Ill.&mdash;The Service Employees International Union announced that it had organized the largest protest in history against McDonald&#39;s (NYSE:MCD). According to the union, 5,000 cooks, cashiers and workers marched Wednesday afternoon on McDonald&#39;s corporate office in Oak Brook, Illiniois. </p> <!--break--><!--break--><p> Chanting &quot;We work, we sweat, put $15 in our check,&quot; the marchers flooded the street ahead of McDonald&#39;s annual shareholder&#39;s meeting, which is scheduled to take place Thursday.</p> <p>At roughly noon central time, thousands of McDonald&#39;s workers called on the fast-food giant to pay $15 an hour, respect workers&#39; rights to a union and not force employees to survive on public assistance. McDonald&#39;s, which has&nbsp;barred reporters&nbsp;from the annual meeting for the second consecutive year, shut the building in anticipation of the protest and removed Golden Arches flags from the property. It also closed a restaurant adjacent to the headquarters.</p> <p>SEIU president Mary Kay Henry, alongside employees who work under the Golden Arches, called for McDonald&#39;s to pay a living wage.</p> <div class="photoright"><img alt="North Carolina McDonald's workers show a mockup of their weekly paycheck" src="" style="width: 450px; height: 338px;" /> <div class="caption">Kansas City workers show what their weekly paycheck looks like (Photo: Berlin Rosen)</div> </div> <p>&quot;We&#39;re here to tell McDonald&#39;s and its shareholders to invest in the company and its workers instead of wealthy hedge fund managers and executives,&quot; said Kwanza Brooks, a Fight for 15 National Organizing Committee member and mother of three from Charlotte, NC, who is paid $7.25. &quot;We&#39;re tired of relying on food stamps to feed our own families. We need $15 and the right to form a union and we need it now.&quot;</p> <p>Cooks and cashiers will return to the Oak Brook streets at 7 am Thursday. When the shareholder&#39;s meeting begins at 9 am, workers will deliver more than 1 million petition signatures calling on McDonald&#39;s to raise pay and respect union rights. This year&#39;s march comes a year after 101 McDonald&#39;s workers were arrested during the 2014 shareholder meeting.</p> <p>The march follows a <a href="" target="_blank">paper in the Harvard Business Review</a>&nbsp;earlier this month by William Lazonick, a University of Massachusetts Lowell economist. Lazonick details nearly $30 billion that McDonald&#39;s has spent on share buybacks in the last decade. Lazonick and two co-authors argue that McDonald&#39;s should have spent that money raising worker pay, or invested it in the company, instead of using it to &quot;manipulate&quot; its stock price and enrich executives and short-term investors. In fairness to McDonald&#39;s, the company announced several weeks ago that it would increase its starter wages a dollar above minimum wage for its company-owned restaurants, which is roughly 10 percent of the restaurants flying the Golden Arches flag and dwindling. The corporation added that it couldn&#39;t control the pay practices of its franchises. However, critics say that the franchising firm could have lowered its fees to franchise owners to give franchisees a better chance to raise wages for their workers.</p> <p>Several institutional investors with major holdings in McDonald&#39;s spoke out about the company&#39;s penchant for buying back its own stock. In addition, New York City Comptroller Scott M. Stringer, New York State Comptroller Thomas P. DiNapoli, Chicago Treasurer Kurt A. Summers, and California Controller Betty T. Yee <a href="" target="_blank">released a joint letter</a> highlighting their concerns about the overuse of buybacks at portfolio companies, including McDonald&#39;s.</p> <p>&quot;McDonalds is facing serious performance challenges,&quot; the letter reads. &quot;But despite a recently announced and much needed turnaround plan, the company continues to direct capital towards an aggressive share buyback program.&quot;</p> <div class="photoright"><img alt="SEIU leader Mary Kay" src="" style="width: 330px; height: 330px;" /> <div class="caption">SEIU President Mary Kay Henry &amp; Rev. William Barber II of the Moral Mondays march</div> </div> <p>Speaking at the protest, Service Employees International Union President Mary Kay Henry told the workers that their movement was changing the country and urged McDonald&#39;s to listen to workers&#39; demand for $15 and union rights. &quot;It&#39;s time for McDonald&#39;s to respect the workers on the front lines as much as they have respected shareholders by putting $30 billion in their pockets over the last 10 years,&quot; Henry said.</p> <p>The protest occurred the same day a wage board convened by New York governor Andrew Cuomo held a first meeting to decide on a law to hike minimum wages for fast food workers. The protest came a day after elected officials in Los Angeles voted to raise minimum wages to $15.</p> <p>Earlier this week, SEIU&nbsp;<a href="" target="_blank">petitioned the Federal Trade Commission</a>&nbsp;to launch an investigation into the nation&#39;s $800 billion franchise industry, calling the dramatic imbalance of power between franchisors and franchisees, &quot;abusive and predatory.&quot;</p> <p>All is also not well with McDonald&#39;s business practices overseas. The company is being accused by a coalition of trade unions and the UK-based NGO War on Want of avoiding more than &euro;1 billion in taxes (roughly US$1.1 billion) over the last five years. The European Commission&#39;s Directorate of Competition launched a preliminary investigation to find out whether McDonald&#39;s entered into an illegal deal with Luxembourg that allowed it to avoid taxes. A new report this week by PSI and the International Union of Foodworkers detailed McDonald&#39;s global tax avoidance strategy and revealed how McDonalds has taken advantage of corporate tax loopholes to avoid paying up to US$1.8 billion in taxes, including AU$497 million (US$391 million) in Australia.</p> <p>In Brazil, a coalition of trade unions has filed two lawsuits accusing the company of <a href="" target="_blank">widespread and systematic labor</a> and <a href="" target="_blank">health and safety violations</a>. One of the suits accuses McDonald&#39;s of &quot;social dumping,&quot; an anti-competitive practice that drives standards down for workers across the country, and seeks to prevent the company from opening new stores unless it complies with Brazilian law. Also, McDonald&#39;s agent in Latin America and the Caribbean, Arcos Dorados, <a href="" target="_blank">has come under scrutiny</a> in recent weeks, with an investor group asking the New York Stock Exchange to review the company&#39;s corporate governance. And in Japan, an investor group is <a href="" target="_blank">calling on McDonald&#39;s Japan</a> to dismiss internal directors and replace them with external ones.</p> <!-- google_ad_section_end --> food $15 minimum wage minimum wage NYSE:MCD SEIU Service Employees International Union Wed, 20 May 2015 20:46:47 +0000 Don Sniegowski 14486 at Consumers Afraid of Bird Flu Food Outbreak <!-- google_ad_section_start --><div class="photoright"><img alt="" src="" style="width: 330px; height: 330px;" /> <div class="caption">Hens (photo by <a href="" target="_blank">Matt MacGillivray</a>)</div> </div> <p>CHICAGO &ndash; Consumers in the United States are concerned about avian flu in food, reports a major foodservice researcher. Over 50 percent of American consumers say they have some level of concern about avian flu, since the USDA first reported more than 160 cases that involved three deadly strains of avian flu (bird flu) last December.</p> <!--break--><!--break--><p>More than 8 percent of the 300 million-plus layer hen population across 16 states has been affected by avian flu. The hen population died or was destroyed as a result. This past April, the Avian flu was discovered in Iowa. Because of the spread of the disease to nearly 25 million, or 40 percent of Iowa&#39; egg-laying hens, the governor declared a state of emergency. According to the United States Centers for Disease Control and Prevention (CDC), the risk from avian flu is generally low to most people. The viruses do not usually infect humans.</p> <p>51 percent of U.S. consumers expressed some level of concern about avian flu and the health hazard it poses in the food they might eat in the next month, according to NPD&#39;s Food Safety Monitor. Nearly 17 percent say they are extremely or very concerned. Remaining consumers are somewhat or slightly concerned. Awareness and concern levels of food safety outbreaks can correspond with the amount of news coverage on a specific outbreak.</p> <p>&quot;When there were outbreaks in the past, we have seen concerns rise among consumers coinciding with the increased coverage,&quot; says Darren Seifer, NPD food and beverage industry analysts. &quot;Food manufacturers and retailers can help allay unfounded fears about the outbreak by keeping consumers well-informed either specific to your products or overall.&quot;</p> <hr /> <p><strong>Related Reading</strong>:</p> <ul> <li><a href="" target="_blank">Bird Flu is Slamming Factory Farms but Sparing Backyard Flocks. Why?</a> | Mother Jones</li> <li><a href="" target="_blank">Is the Bird Flu Outbreak Really Impacting Egg Prices?</a> | Fox Business</li> <li><a href="" target="_blank">Hormel Foods says avian flu likely to hurt turkey sales till 2016</a> | Reuters</li> </ul> <!-- google_ad_section_end --> food avian bird flu food disease food virus Wed, 20 May 2015 16:58:46 +0000 BMM 14485 at SEIU Petitions FTC to Investigate Franchisors' Predatory Abuse of Franchisees <!-- google_ad_section_start --><div class="photoright"><img alt="Man tames commerce, franchisee bridles wild franchisor" src="" style="width: 680px; height: 455px;" /> <div class="caption">Statue in front of Federal Trade Commission of man taming the wild horse of commerce. photo/sniegowski</div> </div> <p>WASHINGTON, D.C. &ndash; The Service Employees International Union yesterday&nbsp;petitioned the Federal Trade Commission, the regulatory body for franchising, to launch an investigation into the $800 billion franchise industry on predatory abuses by franchisors of franchisees.</p> <!--break--><!--break--><p>What is SEIU&#39;s motive? In organizing fast-food workers and other low-wage earners to protest worldwide for nearly three years against McDonald&#39;s Corp. and other giants in the franchise sector, the SEIU is questioning why it is finding profound evidence of contractual abuse of power that favors the franchisor. And why that imbalance places franchisees in a financially precarious situation of not being able to pay their employees benefits and a higher minimum wage.</p> <p>The 32-page detailed petition calls on the FTC to invoke its authority to issue civil investigative demands that would compel top franchise companies to turn over information about their relationships with franchisees.</p> <p>SEIU, which represents two million workers, filed its petition with an appendix that detailed its review of the contract terms of 14 leading franchise system. The document reported on the prevalence of one-sided provisions favoring franchisors. SEIU did its homework in reviewing franchise agreements of the top business format franchisors, by unit count. It also explains how it chose the top 14 systems using material from the International Franchise Association, a trade group that franchisors formed some fifty years ago to lobby for their interests. The chains are the following:</p> <ul> <li>7-Eleven</li> <li>Ameriprise Financial Services</li> <li>Applebee&#39;s Neighborhood Grill &amp; Bar</li> <li>Burger King</li> <li>Comfort Inn</li> <li>Dunkin&#39; Donuts</li> <li>Great Clips</li> <li>Holiday Inn</li> <li>Jackson Hewitt Tax Service</li> <li>Jazzercise</li> <li>McDonald&#39;s</li> <li>Pizza Hut</li> <li>Subway</li> <li>Taco Bell</li> </ul> <p>SEIU states that the 14 chains comprise a total of over 94,000 franchised units, representing nearly 14 percent of the franchised units in the country. In its research, SEIU examined termination provisions in all 14 franchise agreements, determining overall franchisors are allowed to terminate franchisees virtually at will. The petition gives detailed information on each company, not only on terminations but also on franchisee renewals, transfers and sales.</p> <p>The petition request for investigation details five franchisor practices that are particularly harmful and appear endemic to the sector:</p> <ul> <li>Incomplete or misleading financial performance representations made to prospective franchisees;</li> <li>Unreasonable capital expenditure demands tied to renewal of franchise agreements;</li> <li>Retaliation against operators who join franchisee associations;</li> <li>Unfair termination or nonrenewal of franchise agreements;</li> <li>Arbitrary denial of franchisees&#39; requests to sell or transfer their business</li> </ul> <p>Blue MauMau&#39;s call to Craig Treguillus, franchise program director of FTC&#39;s Bureau of Consumer Protection, resulted in an answer from the Commission&#39;s press office. Frank Dorman said he hadn&#39;t been able to confirm that the Commission received the petition. He did say, &quot;Beyond that, we can&#39;t say anything about what happens next, if anything [does happen]. But we do take things like this seriously.&quot;</p> <h3><span style="color:#800000;"><strong>IFA responds: <span data-scayt-word="SEIU">SEIU</span> petition &quot;manufactures a crisis&quot;</strong></span></h3> <p>International Franchise Association CEO and president Steve Caldeira gave his take yesterday on the <span data-scayt-word="SEIU">SEIU</span> petition. &quot;Once again, the Service Employees International Union is manufacturing a crisis as part of its increasingly expensive public relations campaign, now estimated to be more than $33 million, to destroy the time-tested franchise model in order to fill in its own depleted membership.&quot;</p> <p>Calderia was quick to point out that America&#39;s 780,000 franchises make significant contributions to the U.S. economy, growing faster than the U.S. economy for five consecutive years and employ nearly 8.9 million workers. He added, &quot;<span data-scayt-word="SEIU's">SEIU&#39;s</span> petition amounts to nothing more than asking the FTC to develop a solution for a problem that doesn&#39;t exist.&quot;</p> <p>The CEO said for 40 years, the FTC&#39;s Franchise Rule has been a strong defense against abuses that may occur in pre-contractual disclosure to prospective franchisees. He stressed that franchisees are highly satisfied and have a high level of trust in their franchisors, knowing they have remedies in place through their &quot;mutually-agreed upon contracts, through the courts and through many state laws if and when issues may arise between the parties.&quot;</p> <h3><strong><span style="color:#800000;">Franchisees support SEIU petition</span></strong></h3> <p>Various franchisees have shared their stories with SEIU, describing how their experiences in the franchise sector underscore the urgent need for balance and fairness in the industry. Yesterday, Jos&eacute; Quijano, a former vice president at McDonald&#39;s Corp. and current McDonald&#39;s franchisee from Puerto Rico, spoke on behalf of all Puerto Rican McDonald&#39;s operators. He told how McDonald&#39;s franchisees on the island collectively lost control of their businesses overnight in 2007 after the company unilaterally installed the South American investment firm Arcos Dorados as the region&#39;s new sub-franchisor, empowered to make its own rules in place of McDonald&#39;s while also actively competing as a franchise operator itself by adding its own new stores in the market.</p> <p>Another franchisee, Luis Moyett, had recently voiced his concerns. &quot;We enjoyed a good relationship with McDonald&#39;s until we developed the Puerto Rican market and it became very profitable,&quot; said the franchise owner who opened his first store in Puerto Rico in 1981. He added, &quot;McDonald&#39;s then broke off its contact with us, and inserted a foreign sub-franchisor that makes its own rules. That company degraded services, abandoned the advertising cooperative, stopped paying to the joint advertising fund, opened its own restaurants close to ours and took our customers away.&quot;</p> <p>Moyett had also asserted, &quot;McDonald&#39;s decided to make a financial experiment in Puerto Rico at our expense. We don&#39;t know whether we are a pilot plan for things to come in the U.S. mainland, but this experiment is destroying our livelihoods.&quot;</p> <p>Jas Dhillon, a 7-Eleven franchisee from Los Angeles and member of the Coalition of Franchisee Associations, echoed concerns raised by McDonald&#39;s franchisees regarding the unchecked power of franchisors. Dhillon described how South Asian immigrant franchise operators at 7-Eleven have been targeted for abuse by the company, facing threats and intimidation, with many ultimately losing their business altogether after the company decided to resell their stores in a churning program revealed by a management whistleblower to other higher-paying operators.</p> <p>&quot;The franchise sector bills itself as a path to the American Dream, but the truth is that franchisors like 7-Eleven and others have made this business into a trap,&quot; Dhillon explained to SEIU. &quot;Franchisors hold all the power, and so they can churn through one operator to the next, leaving us with nothing while their profits continue to soar.&quot;</p> <p>Kathryn-Slater Carter, a former McDonald&#39;s operator from California, described losing her business last year after she spoke out about the need to reform the franchise industry.</p> <p>&quot;Just like that, McDonald&#39;s took away a business that my husband and I had spent our lives building together,&quot; said Slater-Carter. &quot;We had nowhere to turn &ndash; we were voiceless. Companies like McDonald&#39;s have left franchisees no choice but to stand together and demand change and that&#39;s why I am supporting the call for an FTC investigation. The industry needs reform now.&quot;</p> <p><strong><em>May 20 UPDATE:</em>&nbsp;CFA responds to the SEIU&#39;s&nbsp;petition for the Federal Trade Commission to investigate predatory abuses of franchisees by franchisors</strong></p> <p>The Coalition of Franchisee Associations (CFA), representing some of the largest franchisee associations, released the&nbsp;following&nbsp;statement about the SEIU petition to the FTC:</p> <blockquote><p>The CFA board of directors has received a copy of the petition and is reviewing it. The CFA&#39;s primary focus is franchise relationship legislation that is enacted by elected officials in a public process and open to participation by&nbsp;all of franchising&#39;s stakeholders. Should the Federal Trade Commission decide to take any action regarding the petition, CFA will actively participate in good faith to serve the interests of franchisees and to protect the critically important business model of franchising.</p> </blockquote> <hr /> <p><strong>Related Articles</strong>:</p> <ul> <li><a href=";rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=2&amp;cad=rja&amp;uact=8&amp;ved=0CCcQqQIwAQ&amp;;ei=BDhSVZHQBYmQoQSG7oGIDw&amp;usg=AFQjCNGC8LQuLEQ0igjnXKep8wCy1f796w">SEIU Petition</a></li> <li><a href=";rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=2&amp;cad=rja&amp;uact=8&amp;ved=0CCcQqQIwAQ&amp;;ei=BDhSVZHQBYmQoQSG7oGIDw&amp;usg=AFQjCNGC8LQuLEQ0igjnXKep8wCy1f796w">Loss Widens for McDonald&#39;s Franchisee Arcos Dorados</a></li> <li><a href=";rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=11&amp;ved=0CGMQFjAK&amp;;ei=BDhSVZHQBYmQoQSG7oGIDw&amp;usg=AFQjCNGUf-XEBVeqGBDeRPtJFbf8z95PQw">Arcos Dorados Launches McMio across Mexico, Offering ...</a></li> <li><a href=";rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=7&amp;cad=rja&amp;uact=8&amp;ved=0CEUQFjAG&amp;;ei=BDhSVZHQBYmQoQSG7oGIDw&amp;usg=AFQjCNGLvqiCGGWyatLq9mOEQS1_tp3JrA">Investor Calls For NYSE Investigation Into McDonald&#39;s Largest Franchisee</a></li> <li><a href=";rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=31&amp;cad=rja&amp;uact=8&amp;ved=0CB0QFjAAOB4&amp;;ei=AX9TVaHJIoP2oASGn4GgDA&amp;usg=AFQjCNHXOWHLc7HywUOi28MAqLtY9bRmbg">CORRECTED-Brazil unions sue McDonald&#39;s operator on pay, rules</a></li> <li><a href=";rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=6&amp;cad=rja&amp;uact=8&amp;ved=0CDwQFjAF&amp;;ei=BDhSVZHQBYmQoQSG7oGIDw&amp;usg=AFQjCNHy5_68AckE1XcdcyJRYcpshpQzJw">Largest McDonald&#39;s franchisee prepares IPO -</a></li> <li><a href=";rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=8&amp;cad=rja&amp;uact=8&amp;ved=0CEsQFjAH&amp;;ei=BDhSVZHQBYmQoQSG7oGIDw&amp;usg=AFQjCNEQiweRx2O0jh_9SvnMAQcLBl-VGA">Arcos Dorados IPO Creates First McDonald&#39;s Billionaire</a></li> <li><a href=";rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=10&amp;cad=rja&amp;uact=8&amp;ved=0CFsQFjAJ&amp;;ei=BDhSVZHQBYmQoQSG7oGIDw&amp;usg=AFQjCNGFJ4muhX0umQE-FpnQlgJqVQmiRQ">This McDonald&#39;s Franchisee Is Growing Like a Weed</a></li> <li><a href="">McDonald&#39;s Franchisee CEO Faulted as NYSE Investigation Sought</a></li> <li><a href="">ArcosDorados 1st Quarter 2015 Report.</a></li> <li><a href="">Woes Worsen for McDonald&#39;s Largest Franchisee Worldwide</a></li> </ul> <!-- google_ad_section_end --> franchisee rights Federal Trade Commission franchise relationship franchise rule post-sales franchise regulation pre-sales disclosure Tue, 19 May 2015 19:23:11 +0000 Janet Sparks 14483 at Woes Worsen for McDonald’s Largest Franchisee Worldwide <!-- google_ad_section_start --><div class="photoright"><img alt="Labor protests against McDonald&#039;s franchise in Brazil, Arcos Dorados" src="" style="width: 680px; height: 382px;" width="680" height="382" /> <div class="caption">Workers protest against McDonald&#39;s in Sao Paulo, Brazil after&nbsp;unions&nbsp;filed&nbsp;lawsuit. photo/Berlin Rosen</div> </div> <p>NEW YORK &ndash;Arcos Dorados Holdings Inc., McDonald&#39;s largest franchise owner worldwide in terms of systemwide&nbsp;sales and number of restaurants,&nbsp;is in a mess of trouble. Not only did the publicly traded company declare this week that its first-quarter loss was widening, it also revealed that it is out of compliance with McDonald&#39;s Corporation&#39;s franchise agreement covenants. </p> <!--break--><!--break--><p> Now the company may also be investigated by the New York Stock Exchange regarding its governance, which could lead to Arcos being delisted. And to make things worse, the Brazilian unions have sued Arcos for labor violations.</p> <p><a href="">Arcos Dorados</a>, translated as &quot;golden arches&quot; in Spanish, owns and operates approximately 2,121 restaurants in South America, with 95,000 employees who serve 4.3 million customers a day. The franchise company, headquartered in Buenos Aires but domiciled in the British Virgin Islands, became publicly traded on the New York Stock Exchange in April 2011, when Brazil&#39;s economy was favorable for an IPO. Investors were enthused that Arcos had the rights to own one of the world&#39;s favorite brands. But when the commodities boom ended, it weighed heavily on Latin America&#39;s economy. Arcos has said that it was hurt by the impacts from weaker Latin American currencies, mainly in Brazil and Argentina.</p> <p><a href=";rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=2&amp;cad=rja&amp;uact=8&amp;ved=0CCcQqQIwAQ&amp;;ei=BDhSVZHQBYmQoQSG7oGIDw&amp;usg=AFQjCNGC8LQuLEQ0igjnXKep8wCy1f796w">The Wall Street Journal</a> said this week that Arcos Dorados reported a loss of $28.2 million, 13 cents a share, compared with last year&#39;s loss of $20.6 million, 10 cents a share. Arcos reported a US$7.8 million write-down of its assets in Venezuela. The WSJ report said the firm&#39;s revenue decreased 15 percent to $775.1 million.</p> <p>John Gordon of Pacific Management Consulting confirmed to Blue MauMau that Arcos is out of compliance with McDonald&#39;s franchise agreement covenants. Gordon said the company&#39;s debt is too high. McDonald&#39;s has given them a six-month waiver and now another three-month extension. The analyst said this is the first time McDonald&#39;s Corporation has disclosed it.</p> <h3><span style="color:#800000;"><strong>Investor asks for investigation into Arcos Dorados</strong></span></h3> <p>News reports stated this week that CtW Investment Group, which manages and advises union pension funds, addressed its concerns in a letter to the New York Stock Exchange. CtW explained that Arcos Dorados&#39; CEO/founder Woods Staton may be using another company he owns to drain money from Arcos, which could be detrimental to shareholders. Last month, CtW analyst Michael Pryce-Jones told Bloomberg that CEO Staton had drained about US$80 million from Arcos since 2011. CtW&#39;s clients own a combined $250,000 of Arcos Dorados shares and $2.5 million of McDonald&#39;s shares.</p> <p>&quot;Under Arcos Dorados share structure, Staton controls 76 percent of the British Virgin Islands-domiciled company&#39;s voting rights while holding 40 percent of outstanding shares,&quot; the CtW letter states. The franchisee company&#39;s shares slumped 41 percent this past year to $5.99, and Arcos posted losses of $109.3 million. Its net income was reported to be $53.9 million in 2013.</p> <p>Arcos Dorados&#39; most serious problem at this time is Axionlog, a supplier of food and paper products distribution, which was spun off from Arcos in 2011. Axionlog is fully owned by Arcos CEO Staton and continues to work with the South American McDonald&#39;s franchise system. A BuzzFeed reporter stated last month that CtW claims Arcos &quot;swallowed a $13.3 million loss in 2014,&nbsp;<a href="" target="_blank">after it adjusted the exchange rate of money owed to Axionlog</a>&nbsp;as the U.S. dollar strengthened against the bolivar, a monetary unit of Venezuela. Arcos canceled the receivable at the end of 2014.</p> <p>CtW further explained in its complaint letter, &quot;Publicly available information suggests that the arrangement between Arcos and Axionlog is very advantageous for Axionlog.&quot; The <a href=";rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=7&amp;cad=rja&amp;uact=8&amp;ved=0CEUQFjAG&amp;;ei=BDhSVZHQBYmQoQSG7oGIDw&amp;usg=AFQjCNGLvqiCGGWyatLq9mOEQS1_tp3JrA">BuzzFeed report</a> said some fees paid to Axionlog jumped 27 percent between 2011 and 2014, despite a decline in the value of the product received. By 2014 the ratio jumped to 29 percent, when Arcos bought $155 million worth of supplies and paid $45 million in fees.</p> <p>CtW is not the only firm concerned about the governance of Arcos. BuzzFeed said a proxy advisory firm, Institutional Shareholder Services (ISS), which advises large investors in how they should vote their shares, has also complained. For the past three years, it had recommended shareholders withhold their votes for some directors. Now the group is recommending they withhold votes for Arcos&#39; CEO and chairman, Woods Stanton, for &quot;failing to establish a board on which a majority are independent directors.&quot;</p> <h3><strong><span style="color:#800000;">Union problems erupt for Brazilian franchisee</span></strong></h3> <p>As if McDonald&#39;s largest franchisee doesn&#39;t have enough problems, it is now in litigation with Brazil&#39;s largest unions for violating Brazil&#39;s labor laws. According to a <a href=";rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=31&amp;cad=rja&amp;uact=8&amp;ved=0CB0QFjAAOB4&amp;;ei=AX9TVaHJIoP2oASGn4GgDA&amp;usg=AFQjCNHXOWHLc7HywUOi28MAqLtY9bRmbg">Reuters report</a>, the allegations, if proven, could lead to fines of up to 30 percent of annual sales.</p> <p>The unions claim a variety of violations. This includes some that could amount to &quot;social dumping&quot; related to helping McDonald&#39;s Corporation to illegally undercut competitors and boost its profits. In regard to the accusation of social dumping, the suit asks the court to refer the case to CADE, Brazil&#39;s anti-trust regulator, on grounds that the company&#39;s labor practices violate competition laws.</p> <p>The lawsuit also accuses Arcos of unwholesome and unsanitary working conditions, time clock fraud and failure to pay mandatory unemployment and retirement insurance. The lawsuit is backed by two of Brazil&#39;s largest labor federations, as well as the Washington, D.C.-based Service Employees International Union (SEIU).</p> <p>The Reuters report stated&nbsp;that Arcos Dorados&nbsp;claims&nbsp;in a statement that it abides by agreements with Brazilian labor prosecutors over past labor law violations. The company said &quot;it is absolutely confident in its labor practices.&quot;</p> <hr /> <p><strong>Related Articles</strong>:</p> <ul> <li><a href=";rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=2&amp;cad=rja&amp;uact=8&amp;ved=0CCcQqQIwAQ&amp;;ei=BDhSVZHQBYmQoQSG7oGIDw&amp;usg=AFQjCNGC8LQuLEQ0igjnXKep8wCy1f796w">Loss Widens for McDonald&#39;s Franchisee Arcos Dorados</a></li> <li><a href=";rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=11&amp;ved=0CGMQFjAK&amp;;ei=BDhSVZHQBYmQoQSG7oGIDw&amp;usg=AFQjCNGUf-XEBVeqGBDeRPtJFbf8z95PQw">Arcos Dorados Launches McMio across Mexico, Offering ...</a></li> <li><a href=";rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=7&amp;cad=rja&amp;uact=8&amp;ved=0CEUQFjAG&amp;;ei=BDhSVZHQBYmQoQSG7oGIDw&amp;usg=AFQjCNGLvqiCGGWyatLq9mOEQS1_tp3JrA">Investor Calls For NYSE Investigation Into McDonald&#39;s Largest Franchisee</a></li> <li><a href=";rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=31&amp;cad=rja&amp;uact=8&amp;ved=0CB0QFjAAOB4&amp;;ei=AX9TVaHJIoP2oASGn4GgDA&amp;usg=AFQjCNHXOWHLc7HywUOi28MAqLtY9bRmbg">CORRECTED-Brazil unions sue McDonald&#39;s operator on pay, rules</a></li> <li><a href=";rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=6&amp;cad=rja&amp;uact=8&amp;ved=0CDwQFjAF&amp;;ei=BDhSVZHQBYmQoQSG7oGIDw&amp;usg=AFQjCNHy5_68AckE1XcdcyJRYcpshpQzJw">Largest McDonald&#39;s franchisee prepares IPO -</a></li> <li><a href=";rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=8&amp;cad=rja&amp;uact=8&amp;ved=0CEsQFjAH&amp;;ei=BDhSVZHQBYmQoQSG7oGIDw&amp;usg=AFQjCNEQiweRx2O0jh_9SvnMAQcLBl-VGA">Arcos Dorados IPO Creates First McDonald&#39;s Billionaire</a></li> <li><a href=";rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=10&amp;cad=rja&amp;uact=8&amp;ved=0CFsQFjAJ&amp;;ei=BDhSVZHQBYmQoQSG7oGIDw&amp;usg=AFQjCNGFJ4muhX0umQE-FpnQlgJqVQmiRQ">This McDonald&#39;s Franchisee Is Growing Like a Weed</a></li> <li><a href="">McDonald&#39;s Franchisee CEO Faulted as NYSE Investigation Sought</a></li> <li><a href="">ArcosDorados 1st Quarter 2015 Report.</a></li> </ul> <!-- google_ad_section_end --> Legal claim & allegation Arcos Dorado international master franchisee NYSE:MCD subfranchisor Fri, 15 May 2015 23:46:36 +0000 Janet Sparks 14481 at Ex-Smashburger CEO Lawsuit Dismissed, Hardly Over <!-- google_ad_section_start --><p>DOVER, Del. - After the former Smashburger CEO filed a lawsuit last July against the chain and owners Consumer Capital Partners for deceptively cheating him out of millions of dollars in stock, a Delaware court granted Smashburger&#39;s motion to dismiss the lawsuit last December.</p> <!--break--><!--break--><p>But it is far from over. Now the parties must decide, with the help of an independent firm, what the valuation and payment of the former CEO&#39;s interest should have been, according to Smashburger&#39;s limited liability agreement.</p> <p>The litigation triggered lawsuits from both sides to determine what David Prokupek&#39;s payout should be. Prokupek filed a second lawsuit asking the court to allow him access to Smashburger&#39;s financials in order to find out if the company met certain performance benchmarks that would entitle him to more shares in the company. But in its ruling, the Court of Chancery denied his request, stating Prokupek, as a former member of the company, lacked standing to pursue inspection of Smashburger&#39;s books and records for a valuation to be determined.</p> <p>Prokupek began his career as Smashburger&#39;s chief executive when he was first hired by owner Richard &quot;Rick&quot; Schaden when the chain first started in 2007. The CEO was credited with elevating the company to have &quot;the fastest growth in quick-service restaurant history,&quot; according to the Denver Business Journal. Under Prokupek&#39;s leadership, Smashburger also became the country&#39;s second-largest &quot;better burger&quot; franchise, second to Five Guys.</p> <p>Prokupek&#39;s lawsuit was kindled after Rick Schaden and his equity team asked him to groom the privately-held hamburger chain for an equity sale in 2013. In doing so, Smashburger executives required him to give up certain rights under his employment contract in exchange for arranging a potential sale or public offering. Prokupek said he was told by Schaden&#39;s group that the arrangement would add value to the company and grow his stake in Smashburger.</p> <p>But after the auction process began in August 2013 to sell the company, Prokupek abruptly left Smashburger in November without explanation. News reports surfaced telling that the chain&#39;s ownership team had fired Prokupek, offering him a severance package with fewer shares than his employment contract stipulated. The stock price fell below what was offered by several bidders.</p> <p>Prokupek had filed his lawsuit against the chain and its owners in July 2014, followed by a second legal action, which asked for access to Smashburger&#39;s financials &quot;so he can see if the company met certain performance benchmarks that would entitle him to more shares in the company.&quot; The former CEO claimed that Smashburger owners understated the chain&#39;s financial performance to minimize its contractual obligations to him.</p> <p>Allegations of financial deception against Rick Schaden, his Consumer Capital Partners and management team are nothing new. For the past decade the group has been involved in similar litigation, first with hundreds of Quiznos franchisees through class action lawsuit. Presently, Avenue Capital and Fortress Holdings, multi-billion-dollar lenders, who supported Quiznos through its financial struggle in 2012, is suing the Schaden group in Denver district court as Quiznos continues its bankruptcy process. The lenders allege Schaden and others conspired to overvalue the sandwich chain in the 2012 restructuring of the company.</p> <h3><span style="color:#800000;"><strong>Ongoing litigation to determine valuation of payoff</strong></span></h3> <p>The <a href="">Court of Chancery ruled</a> on December 30, 2014 that Smashburger exercised the right under its limited liability company agreement, to redeem all of Prokupek&#39;s equity interests in Smashburger. Prokupek was provided a notice of redemption and paid by check for the fair market value of his equity interest as determined by Smashburger&#39;s manager.</p> <p>The court further ruled that because Prokupek demanded to inspect financials of the company after he &quot;ceased to be a member,&quot; and after he received notice and was paid off, he was not entitled to that information.</p> <p>In order to determine the valuation of and payment for Prokupek&#39;s interest in Smashburger, under the LLC agreement, the parties requested on January 7, 2015 the court allow an independent &quot;Special Master&quot; to make a final ruling. Vice Chancellor John W. Noble stated in his <a href="">letter of opinion&nbsp;</a>on March 27, regarding Smashburger Master LLC v Prokupek. The question then was how much should a judge intervene into the efforts of the independent firm and the Special Master? Noble added, &quot;In contemplating this fundamental consideration, some blind alleys were traversed.&quot;</p> <p>The chancellor said three primary issues had to be addressed: the selection of the independent firm to perform the valuation; whether discovery should be stayed; and whether Prokupek&#39;s counterclaims can survive. Noble said if the independent firm can, in its professional judgment, follow the terms of the parties&#39; agreement, it should do so.</p> <p>After the judge&#39;s detailed analysis of the process of resolving the issues, he said the attorneys for both parties were requested to confer and to submit implementing form of order. &quot;This request is made in part because counsel are likely in a better position to fine-tune some aspects of the process the Court has set forth above.&quot;</p> <hr /> <p><strong>Related Articles</strong>:</p> <ul> <li><a href="">Former Smashburger CEO Sues Chain, Schaden Owners</a></li> <li><a href=";sa=U&amp;ei=1b5MVYvdOcm2sAXfh4DQDg&amp;ved=0CBMQFjAF&amp;client=internal-uds-cse&amp;usg=AFQjCNGd3y_X0A70WcYGz02oBWeqSGTFZg" target="_top">Picking up Bad Vibes on&nbsp;Smashburger</a></li> <li><a href="">Smashburger CEO Forges Ahead with Chain&#39;s Growth</a></li> <li><a href=";sa=U&amp;ei=1b5MVYvdOcm2sAXfh4DQDg&amp;ved=0CBkQFjAH&amp;client=internal-uds-cse&amp;usg=AFQjCNFLmDtyEVbP0WwCpcCshuAmNfVCrA" target="_top">Smashburger&nbsp;Ex-CEO Takes Top Position with Jackson Hewitt</a></li> </ul> <!-- google_ad_section_end --> Legal claim & allegation better burger David Prokupek QSR quick service restaurant Richard Schaden Smashburger CEO Sat, 09 May 2015 13:52:26 +0000 Janet Sparks 14475 at Probe Sheds Light on The UPS Store Gouging Consumers <!-- google_ad_section_start --><p><img src="" style="width: 680px; height: 330px;" /></p> <p>As Mother&#39;s Day shoppers began shipping their packages to Mom last week, the New York Post decided to investigate how those customers would be charged. </p> <!--break--><!--break--><p> Its decision was prompted by recent litigation filed by The UPS Store against its largest New York franchisees after terminating them for allegedly balking at the franchisor&#39;s policy of up-charging customers.</p> <p>What the publication discovered in its probe was that customers who mailed packages from certain store locations paid much more in shipping fees.</p> <p>On Monday the<em> <a href="'s%20Day">Post</a></em> published its findings, stating that five packages, of similar size and weight, were mailed to four addresses, one from each of five The UPS Stores in Manhattan. Two of five stores charged $20 more than the lowest available price after a customer was offered the more expensive, and more profitable, air shipping option. It offered no advantage over the less expensive option.</p> <p>A spokesperson for UPS responded, &quot;<span style="color:#2e2e2f; background-color:#fbfbfb">UPS Ground is a guaranteed service and always a shipping option at UPS Store locations. To ensure customers&#39; expectations are met or exceeded they may recommend the service they think best fits the need of the customer.&quot; </span></p> <p><span style="color:#2e2e2f; background-color:#fbfbfb">Although the franchisees, </span>Robert and Thomas Hagan, had themselves<span style="color:#2e2e2f; background-color:#fbfbfb"> hired a private investigator to reveal that more than 40 UPS Stores were promoting the alleged practices of overcharging, the court last March dismissed 11 of their 12 counterclaims against The UPS Store, Inc., United Parcel Services (UPS), and various franchisees involved in the overcharging practice of shipping packages. In oral argument on the &quot;complicated&quot; case last December prior to making his decision, the judge proclaimed, &quot;This is a mess.&quot; </span></p> <p><span style="color:#2e2e2f; background-color:#fbfbfb">After the <em>Post</em> reported on the story this week, The UPS Store spokesperson stated that the franchisor believes the last counterclaim going forward is meritless.<span style="font-family:Georgia"> </span></span></p> <p><span style="color:#2e2e2f; background-color:#fbfbfb"><strong>Franchisees claim unfair termination </strong></span></p> <p>Franchisees Robert and Thomas Hagan asserted in their countersuit against The UPS Store and other defendants that UPS had also conducted an investigation, but it was on the Hagans&#39; stores prior to the franchisor terminating the franchises. The franchisor allegedly directed its agents to go undercover as customers to make purchases in the Hagan stores. The Hagans were then put on notice that company agents found a &quot;widespread pattern of improper and dishonest conduct&quot; in their locations. UPS executives told the Hagans they reserved the right to terminate their 11 franchise agreements at will if they did not become fully compliant with The UPS Store policies.</p> <p>The New York franchisees asserted that their 11 stores were then taken away from them following a meeting they had with The UPS Store executives in 2013, related to the alleged fraud of overcharging customers, connected with The UPS Store policies.</p> <p>The lawsuit drew much media attention to the case when the judge harshly chastised attorneys on both sides of the lawsuit for their overwhelming and lengthy court filings prior to his making a decision on The UPS Store&#39;s motion to dismiss the counterclaims brought by the franchisees. <a href=""><span style="background-color:#fbfbfb">Judge William H. Pauley&#39;s order</span></a><span style="color:#2e2e2f; background-color:#fbfbfb">, </span>filed in New York district court, southern district, stated that &quot;a troubling trend toward prolixity in pleadings is infecting court dockets&quot; in his district and elsewhere. &quot;Voluminous pleading is self-defeating. It chokes the docket and obscures otherwise meritorious claims and defenses,&quot; he scolded.<span style="color:#2e2e2f; background-color:#fbfbfb"> </span></p> <p>That aside, after his analysis the judge ruled that all but one of the Hagans&#39; counterclaims would be dismissed without permission to refile. Judge Pauley concluded that the Hagans did have standing to bring their ninth claim under New York General Business Law, Section 349. It is defined as making it unlawful to engage in deceptive acts or practices in the conduct of any business, trade or commence or in the furnishing of any service in New York. He said &quot;although the statute is, at its core, a consumer protection device, corporate competitors also have standing to bring a claim.&quot; The law states that the franchisees must, however, show some harm to the public. The court ruling explained that the <span style="color:#2e2e2f; background-color:#fbfbfb">Hagans adequately showed that UPS, with other New York franchisees, engaged in deceptive acts or practices. The judge also agreed that the Hagans adequately showed they were injured by UPS defendants&#39; deceptive acts. </span></p> <p><span style="color:#2e2e2f; background-color:#fbfbfb"><strong>Surprising revelation by Judge Pauley </strong></span></p> <p><span style="color:#2e2e2f; background-color:#fbfbfb">Last March Blue MauMau did its own probe on legal documents in the litigation between the Hagan franchisees and UPS. One public record we were able to obtain was the December transcript of oral argument by counsel in front of Judge Pauley. </span></p> <p><span style="color:#2e2e2f; background-color:#fbfbfb">Attorneys from Morrison &amp; Foerster, representing UPS plaintiffs, and Stephen J. Savva, representing the Hagan franchisee defendants, reiterated their arguments laid out in current motions they had filed. Leonard Rodes, representing third party defendant franchisees who were involved in the deceptive acts, was also present. </span></p> <p><span style="color:#2e2e2f; background-color:#fbfbfb">Regarding the Hagans&#39; fraud claim, Judge Pauley asked attorney Savva, even if UPS had disparaged his clients, how is that fraud? Savva explained, &quot;The agreements required them [Hagans] to engage in fraudulent, deceptive practices, to intentionally engage in overcharging.&quot; The Hagans asked how they could remedy the situation. UPS told the franchisees the franchisor did not have to provide them with remedies to resolve their situation. The Hagans were told that from that point on UPS would have zero tolerance on any mistakes they made. UPS threatened to take the Hagans&#39; stores away from them if they made one mistake. But the franchisor would not give the franchisees a way to fix the problems of a corrupt system that erroneously gouged its customers. </span></p> <p><span style="color:#2e2e2f; background-color:#fbfbfb">Savva said, to his knowledge, the agreements do not state that The UPS Store can punish or take away stores if a franchisee makes a mistake, as UPS threatened the Hagans. Savva said when the Hagans disclosed to The UPS Store the hundreds of transactions with every other franchisee in Manhattan, not only did UPS Store not act on it, the company actually gave additional franchise locations to some of those same third-party defendants. </span></p> <p><span style="color:#2e2e2f; background-color:#fbfbfb">When attorney Rodes, representing third-party defendants, spoke up regarding the General Business Law claim, he said he felt his clients were the &quot;principal defendants.&quot; He said he thought the UPS parties were alleged to be liable on a supposed aiding and abetting theory, and there was no support for that. He asked to address the section 349 claim of the law, but the judge cut him off. </span></p> <p><span style="color:#2e2e2f; background-color:#fbfbfb">Judge Pauley said he took exception with Rodes statement that there was no support for UPS&#39; involvement. Because UPS had its own laser measurement system, they knew whether or not their franchisees were overcharging. Rodes then explained that if that argument prevails, it would mean his clients are left as defendants on the 349 claim. </span></p> <p><span style="color:#2e2e2f; background-color:#fbfbfb">After more discussion, Rodes reminded the judge that the Hagans were not suing on behalf of the public, they are suing for their own damages, saying they are out of business. Judge Pauley asked, &quot;The Hagans ran around as a private attorney general, right, essentially . . . &quot; Rodes agreed saying, &quot;That&#39;s their claim.&quot; </span></p> <p><span style="color:#2e2e2f; background-color:#fbfbfb">Judge Pauley asserted, &quot;Maybe Attorney General Schneiderman should look into it.&quot; </span></p> <p><span style="color:#2e2e2f; background-color:#fbfbfb">After the judge issued his order on March 24, he instructed UPS to file an amended complaint, and the Hagans to file their answer, stripped of its surplusage and exhibits, that conforms to Federal Rule of Civil Procedure 8. According to the court docket, those documents were filed this week. </span></p> <p><span style="color:#2e2e2f; background-color:#fbfbfb">Today Mark R. McDonald of Morrison Foerster, counsel to UPS defendants, and Leonard Rodes, counsel for the third-party counterclaim franchisees, together filed their request with the court to have a pre-motion conference concerning a motion to dismiss the one remaining counterclaim against them. </span></p> <p><span style="color:#2e2e2f; background-color:#fbfbfb">The Hagans are asking for $50M in damages, restitution, treble and punitive damages, attorneys&#39; fees, and costs of the lawsuits, including post-judgment interest. If UPS is ordered to pay the Hagan franchisees $50M plus in damages for &quot;aiding and abetting&quot; liability, and if every UPS store in Manhattan must now answer for unethical practices that could be proven undeniable, UPS will have to report that on its franchise disclosure documents. And UPS, the shipping giant, no doubt, will have to disclose the judgment to its shareholders. </span></p> <p><span style="color:#2e2e2f; background-color:#fbfbfb"><strong>-- </strong></span></p> <p><span style="color:#2e2e2f; background-color:#fbfbfb"><strong>Related Articles: </strong></span></p> <ul> <li><a href="'s%20Day">UPS Could Be Overcharging You This Mothers&#39; Day</a></li> <li><a href=";rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=3&amp;cad=rja&amp;uact=8&amp;ved=0CDIQFjAC&amp;;ei=gUNKVeycFY3VoASNnICgDQ&amp;usg=AFQjCNGcjI5sIY6bkl8EjQlL7OqDL1Y2jg"><span style="color:#660099">Mother&#39;s Day Shipping: UPS</span></a></li> <li> <div style="background: white"><a href=";rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=1&amp;cad=rja&amp;uact=8&amp;ved=0CB4QFjAA&amp;;ei=NqVHVYLEKNbroASD1IDQCg&amp;usg=AFQjCNF1tqZCp5FPpRjl_J1VgnBbR3hb0Q&amp;bvm=bv.92291466,d.aWw"><span style="color:#660099">Judge Scolds Overwriting Attorneys: Business of Law</span></a><span style="color:#660099"> (Bloomberg)<span style="color:#222222"> </span></span></div> <p style="background: white">&nbsp;</p> </li> </ul> <!-- google_ad_section_end --> Legal claim & allegation franchise lawsuit franchisee allegation The UPS Store Wed, 06 May 2015 21:30:04 +0000 Janet Sparks 14473 at Arooga’s To Use Self-Service Table Tablets in Restaurants <!-- google_ad_section_start --><p><img alt="Buzztime&#039;s table tablet for Arooga&#039;s Grille House &amp;amp; Sports Bar. Photo by Arooga&#039;s" src="" style="height: 330px; width: 330px; margin-left: 4px; margin-right: 4px; float: right;" width="330" height="330" />HARRISBURG, Penn.&mdash; Arooga&#39;s Grille House &amp; Sports Bar plans to use tablets equipped with apps to entertain, attract, delight and engage customers. </p> <!--break--><!--break--><p> The tablet service, loaded with Buzztime software, enables diners to view menus that include photos, descriptions and prices of all Arooga&#39;s available menu items. It also offers trivia, cards, arcade and sports games.</p> <p>Arooga&#39;s has already launched Buzztime&#39;s self-service dining at two locations in Shippensburg and Hershey, Pennsylvania in early May. An additional eight Arooga&#39;s Central Pennsylvania based locations are expected to follow by early summer. Arooga&#39;s has nine corporate locations in Central Pennsylvania and it says it has an additional 28 locations that have signed franchise contracts.</p> <p>The menu display of the tableside tablet can change over the course of the day. Diners can customize their order, such as requesting a side substitution of beer battered onion rings or a gluten-free bun for their burger. For added convenience, tablets provide the option of ordering more drinks or dessert as well paying their bills without needing the server. Just like before, each guest will be given his or her own tablet to play games, which means they can avoid cumbersome &quot;menu sharing.&quot;</p> <p>&quot;We&#39;ve said from day one that Arooga&#39;s will excel in every aspect of our business to be the industry&#39;s next superstar,&quot; added Gary Huether, Jr., Arooga&#39;s president. &quot;This awesome new feature is just one more way that we are optimizing the guest experience.&quot;</p> <p>Bob Cooney, Buzztime&#39;s chief product officer added, &quot;Just as you wouldn&#39;t expect a party of six to share one menu, we don&#39;t force guests to share a single tablet to order food and play games.&quot; Cooney explained that an entire table can collaboratively change orders through multiple tablets before sending it to the kitchen. &quot;Patrons who have ordered an alcoholic beverage with a server also have the liberty of reordering drinks through the tablets, so they never need to wait to order the second round of beer.&quot; By connecting through locations&#39; POS systems, the company states that the tablets are designed to deliver shorter guest wait time, higher check averages, increased revenue, faster check processing and improved payment security.</p> <!-- google_ad_section_end --> food Arooga's Grille House & Sports Bar mid-scale dining self-service technology tablet technology Wed, 06 May 2015 20:30:46 +0000 BMM 14472 at Convenience Stores Take Big Bite out of Pizza Servings <!-- google_ad_section_start --><p><img alt="" src="" style="float: right; height: 246px; width: 330px; margin-left: 5px; margin-right: 5px;" width="330" height="246" />CHICAGO &ndash; Loads of pizza dough are making their way to convenience stores and into consumer stomachs. How much are convenience stores eating into traditional quick service restaurants&#39; servings? Restaurant researcher The NPD Group provides this insight: Servings of pizza ordered by convenience stores increased by over 20 percent in the year ending in February 2015 compared to the previous year.</p> <!--break--><!--break--><p>Total dollars of pizza crust and dough cases shipped from broadline distributors to convenience stores increased by over 30 percent , finds NPD&#39;s SupplyTrack, a monthly tracking service that tracks every product shipped from major broadline distributors to their foodservice operators. Complementing the increase in pizza crust and dough case shipments and dollars was a 4 percent increase of pizza box case shipments to convenience stores in the year ending February compared to year ago.</p> <p>The popularity of the pizza category at convenience stores provides evidence of the competitive threat of convenience stores to traditional quick service restaurants. The double-digit growth in pizza servings at convenience stores contrasts to flat servings at quick service pizza restaurants and a 1 percent increase at traditional quick service restaurants, finds NPD&#39;s foodservice market research. Convenience stores are also competing with traditional quick service restaurants in terms of visits. Foodservice visits at convenience stores increased by 2 percent compared to a 1 percent gain at traditional quick service restaurants for the year ending February 2015 compared to year ago. Foodservice at convenience stores is now the top category for in-store gross profit dollars and is number two for sales, according NPD&#39;s Growing in a Fragmented Market report.</p> <p>&quot;Convenience stores, particularly food forward convenience stores, are increasing their foodservice footprint and rapidly gaining share from traditional quick service operators,&quot; says Annie Roberts, vice president, SupplyTrack. &quot;Foodservice manufacturers and distributors should understand the dynamics that are currently at play between retail and traditional quick service restaurants in order to fully serve the needs of the changing foodservice marketplace.&quot;</p> <!-- google_ad_section_end --> food trends c-store convenience store trends foodservice research pizza sales QSR quick service restaurant trends The NPD Group Wed, 06 May 2015 16:45:43 +0000 BMM 14470 at Franchise Jobs Cool in April <!-- google_ad_section_start --><div class="photoright"><img alt="Masarati Manhatten Showroom" src="" style="width: 681px; height: 331px;" /> <div class="caption">A Masarati car dealership in Manhattan. Car dealerships are a hot bed of hiring. Photo/psteinberg</div> </div> <p>ROSELAND, N.J.&mdash;In a sign that the economy cooled in April, private-sector franchise jobs in the United States increased by only 15,600 during the month. Franchise jobs had an unusually soft month in April, matching the same monthly growth rate of small business hirings of 0.2%. Franchise hirings typically exceed small business monthly rates.</p> <!--break--><!--break--><p>The worst hit franchise sector in jobs, restaurants, lost 11,470 jobs in April. However, auto dealerships, which often have elements of not only product distribution franchises but also a franchisor that oversees components of a dealer&#39;s business format, hired 20,190 jobs during the month.</p> <p>&quot;Franchise job gains in April were the lowest since July of last year,&quot; said Ahu Yildirmaz, vice president and head of the ADP Research Institute. &quot;In a tale of two industries, Auto Parts and Dealers experienced a surge in hiring while Restaurants shed a large number of jobs,&quot; she added.</p> <p>Total small businesses, which are defined as firms with under 50 employees, hired individuals for 94,000 jobs, according to payroll services provider ADP in collaboration with Moody&#39;s Analytics,</p> <p><img alt="Chart and data provided by ADP" src="" style="float: right;" width="500" height="339" />In the larger economy, total nonfarm private employment in the United States increased by 169,000 jobs in April, according to researcher ADP. The gains were under 200,000 jobs for the second month in a row. Companies with 500 or more employees showed the lowest hiring growth. Manufacturers lost 10,000 jobs.</p> <p>Chief economist of Moody&#39;s Analytics Mark Zandi observed, &quot;Fallout from the collapse of oil prices and the surging value of the dollar are weighing on job creation. Employment in the energy sector and manufacturing is declining. However, this should prove temporary and job growth will reaccelerate this summer.&quot;</p> <p><center><img alt="U.S. Added 16,000 Franchise Jobs in April, According to ADP National Franchise Report " border="0" height="1598" src="" width="598" /></center></p> <!-- google_ad_section_end --> trends ADP ADP Franchise Jobs Report economy job hirings Moody's national employment rate small business employment unemployment rate Wed, 06 May 2015 13:29:42 +0000 BMM 14468 at