en AAFD Chairman Purvin: Power of Franchisees in Bargaining and Cooperatives in Reducing Costs <!-- google_ad_section_start --><div class="photoright">&nbsp; &nbsp;&nbsp;<img alt="AAFD chairman Bob Purvin working on the words of a fairer franchise contract" src="/sites/default/files/resize/Purvin2-670x377.jpeg" style="width: 670px; height: 377px;" width="670" height="377" /> <div class="caption">Purvin leads franchisees &amp; their franchisor to craft a fairer contract</div> </div> <p>In this interview, part 3 of a series, Bob Purvin,* founder and chairman of the 25-year-old&nbsp;American Association of Franchisees and Dealers (AAFD),&nbsp;speaks about the early years when his organization&nbsp;began to form franchisee chapters by brand. He also speaks about the importance of franchisee-owned cooperatives taking on&nbsp;national brand functions.</p> <!--break--><!--break--><p><strong>SNIEGOWSKI</strong>: How did the American Association of Franchisees and Dealers get started?</p> <p><strong>PURVIN: </strong>AAFD came into existence in 1993. Our initial mission was to bring fairness to franchising. We were all about legislative advocacy. Early on a man who had been our original legislative director, Dean Sager, a friend of mine from college days, and I realized that our ability to move the legislative needle was almost nonexistent. The IFA had a $5 million legislative fund and we had a $1.50.</p> <p><strong>SNIEGOWSKI</strong>: I would just say that it is amazing what franchisees can do with that $1.50. But yes, I hear you. It is expensive to lobby.</p> <p><strong>PURVIN</strong>: We were able to introduce a [federal fair franchising] bill. We had hearings on Capitol Hill on the bill. But that is as far as it went.</p> <p>Something happened in that first bill that led me to a place of great learning. When we were introducing the bill, the head of the Republican side of the House of Representatives Committee on Small Business said to Dean and me, &quot;What I don&#39;t understand about the bill is that you are mandating all these rights that we think are matters of contract. Why doesn&#39;t the bill follow the National Labor Relations Act and just create a right of association for franchisees to organize and be certified?&quot; This came from a Republican.</p> <p>That got me thinking. First, we don&#39;t have money. Second, what we really want is to have more ability for franchisees to negotiate.</p> <p>The other thing that happened early on was that <a href="" target="_blank">Congressman LaFalce</a> asked me to bring together all of the leaders of franchisee associations that we could find. Dean and I worked together for six months. In 1992 we were able to identify 30 organizations. Half of them were franchisee advisory councils, and not independent franchisee associations. We were successful in gathering them to an event that he called a &quot;listen-in&quot; in which he could listen to franchisee leaders and their issues.</p> <p>We needed to create more associations. The AAFD made that its center point. We were going to make it easy for groups to organize by creating chapters. Our business model followed Rotary International&#39;s, where we were going to create chapters. They were not going to be a Kentucky chapter or San Diego chapter, but rather they were going to be trademark specific. We helped a group of franchisees organize. In 1994, 1995, we created our first chapter called TechCare Enterprises.</p> <p>That group of franchisees two years later bought out their franchisor. They were unhappy with the way things were being run. They came together. They put their dollars together and bought out the company. They still own the franchising company today as a franchisee co-operative.</p> <p>Those events were an early influence on the thinking of the AAFD. In 1996 we published our fair franchising standards.</p> <p>The International Franchise Association bought a hundred copies of our standards when they first came out. The president of the IFA at the time, Don Debolt, circulated our standards to its leaders. He said we would receive feedback from the IFA on our standards. He reported back to me.</p> <p>About six months later we figured out that we were going to be in Chicago at the same time and that provided an opportunity for us to come together. The reports that he received from his membership was that we did a hell of a job with our standards with one exception. The AAFD says that all franchise agreements should be collectively bargained. That is probably real, but the words &quot;collective bargaining&quot; sent shivers through IFA members. [It sounded too much like a labor union.]</p> <p>Sitting down at breakfast, Don Debolt and I came up with another term. I said, &quot;Why don&#39;t we call it &#39;total quality franchising&#39;&nbsp;&quot;? I was borrowing from a popular business principle at the time of total quality management, which is a collaborative management enterprise. So the president of the IFA and the president of the AAFD came together and invented the term &quot;total quality franchising.&quot;</p> <p>This became our signature.</p> <p><strong>SNIEGOWSKI</strong>. The AAFD focused on creating franchisee chapters to collectively negotiate better contracts with franchisors and to lead franchisors to have a more collaborative relationship with their franchisees.</p> <p><strong>PURVIN</strong>: We are celebrating 25 years of collaboration. But it was in 1996 that we addressed what it means to do total quality franchising. The AAFD defined it. We have had seminars on it and further explored what that entailed. We have defined it as a relationship in which the franchisor interests and the franchisee interests are respected in a collaborative effort to drive a great brand. We have done this now for 25 years, building associations that have been able to move the needle.</p> <p>We have not been that successful in passing laws, although recently we have had some small involvement in some.</p> <p>With some 4,000 franchise systems out there, the AAFD has had 50 or 60 chapters. We have 18 franchise systems that have earned our fair franchising seal. We need 4,000 franchise systems to earn our seal before we have accomplished our goal, but when I turn and look over my shoulder, I see from&nbsp;where we have come. I see that we have a franchise community where franchisee rights are discussed, where franchisee associations are achieving negotiated agreements.</p> <p>From what I can see, contracts in franchise systems where there are no associations continue to get worse. Franchisors have continued to figure out ways each year to push the envelope [in maximizing franchisor control of a franchise while minimizing the franchisor&#39;s liability when calling the shots].</p> <p>The biggest challenge of my existence is convincing franchisees that they need me and that I am not just another person trying to take advantage of them. The guy who feels he was gypped in his $500,000 franchise purchase is the hardest guy to convince to pay $350 to join a franchisee association because he&#39;s already been burned once.</p> <p><strong>SNIEGOWSKI</strong>: Some franchisee associations, frankly, seem banded together merely as an excuse for a class-action lawsuit against the franchisor to resolve a grievance, or at least the threat to the franchisor of one.</p> <div class="photoright"><img alt="AAFD chairman and founder Bob Purvin" src="" style="float: right; height: 320px; width: 320px; margin-left: 5px; margin-right: 5px;" width="320" height="320" /> <div class="caption">Robert Purvin</div> </div> <p><strong>PURVIN</strong>: Sadly, that is too often the case.</p> <p>If a lawsuit is the only reason for a franchisee association to exist, it will disappear five years after its startup or until the next round of franchise contract negotiations. The successful associations do more.</p> <p>The Griswold Healthcare Franchise Association [GHFA] is an example. Franchisees created a fabulous task force on best practices that worked with the company to put on seminars each month. They have great turnouts for their seminars, which are done by webinar. They are now getting involved in lobbying, especially around the issue of caregiver wages. Their legal fund is dedicated to working with various state and local agencies over the rights of caregiver business owners.</p> <p>Griswold created a products committee, where the franchisee association is now getting involved in the supplier side in a collaborative way. It is not just the franchisor that is cutting a deal with this supplier [getting kickbacks] and mandating that franchisees use that product to enrich the franchisor.</p> <p>Associations can be more about the supply side than about renegotiating the franchise agreement.</p> <p>Associations are usually formed by franchisees coming together to protect their contractual rights. But if an association does not have any wherewithal beyond that, that association will eventually fold. Too often we start a chapter&nbsp;and&nbsp;they address the [legal] crisis. It is resolved and then the franchisees and their association chapter go away until the next crisis. And then they have to start all over again.</p> <p>That has been my biggest regret. An association folds because its members and leadership did not have the will and talent to take the chapter to the next level.</p> <p><strong>SNIEGOWSKI</strong>: What should a franchisee reasonably expect of their association if they join?</p> <p><strong>PURVIN</strong>: A successful association that has earned a collaborative relationship with its franchisor is going to provide representation over issues that are beyond the contract. If the system faces challenges that the contract does not deal with, the association should work together with the franchisor to figure out a way to fix it for everyone&#39;s mutual benefit. A good association will have a mentoring arm. They will deal with their own specific operating issues, whether it be a training or supplier issue. There may be a unique problem with the company for which the association will have a grievance process built into the relationship that the franchisor must address.</p> <p>The holy grail of an association is managing the supplier side. When I say that is the holy grail, in my mind the biggest grievance and abuse in the franchise culture is the abuse of the supplier element of the franchise relationship. It is the most difficult. You are hearing a lot of franchisees advocate that they individually want to source product.</p> <p>To me&nbsp;that is throwing the baby out with the bath&nbsp;water. Franchisees want the buying power of the group to get them the best possible deal, the best margins. What a franchisee does not want is for the franchisor to abuse that function. Where a franchisee association can really come into its own is to&nbsp;engage in collective purchasing through a cooperative.</p> <p>Getting the best prices, scoring the best rebates&nbsp;and scoring training fees and economic support of the owners association&#39;s annual meetings benefit the whole system. Some of the beautiful examples of this are purchasing bodies or franchise cooperatives &ndash; for example, a Burger King cooperative, a Subway purchasing cooperative.</p> <p>Some may not see these cooperatives as franchisee associations,&nbsp;but they are. In Subway&#39;s case the franchisees control the supply chain and purchase of the food. In contrast, in the much troubled Quiznos sandwich shop system, the franchisor controls food purchases.</p> <p>In these two brands with very similar products, one has a great margin for franchisees and the other one has had poor prices. I know that years ago Blue MauMau published failure rates of franchisees by brand, according to their Small Business Administration sponsored loans. Quiznos franchisees had some of the highest failure rates among all franchise concepts.</p> <p><strong>SNIEGOWSKI</strong>: That&#39;s right.</p> <p><strong>PURVIN: </strong>I would point out that the reason&nbsp;that the Subway owners have a better profit margin isn&#39;t just because of its size. It is better because Subway franchisees own their own national supply chain management firm, while Quiznos franchisees are getting raked because of all the hidden rebates and perks of buying that the franchisor receives from vendors.</p> <p>Franchisees usually go through years of war with their franchisor to take over purchasing.</p> <p><strong>SNIEGOWSKI</strong>: Besides purchasing cooperatives, what about advertising associations that franchisees own?</p> <p><strong>PURVIN: </strong>Advertising cooperatives are essentially the same as purchasing cooperatives. Instead of the franchisee owning a piece of the national purchasing cooperative firm, he or she owns the advertising trust that decides and manages national advertising campaigns.</p> <p>The cooperative dollars are going to a different purpose &ndash; advertising.</p> <p>I am not sure I know the reason why, but in the evolution of the franchise culture over the last 50 years, marketing was the first place that franchisors let franchisees onto the grounds to peek under the tent and then come inside the tent to direct how the franchisees&nbsp;advertising fees were being spent.</p> <p>McDonald&#39;s led the way. McDonald&#39;s has regional franchisee marketing cooperatives that give some local flexibility and they also have a national advertising cooperative that is led and owned by franchisees. There are a lot a franchise systems that have successfully adopted that model.</p> <p><strong>SNIEGOWSKI</strong>: So what is next for AAFD?</p> <p><strong>PURVIN</strong>: In May we will be celebrating what AAFD has accomplished and brought to franchisees. At our conference&nbsp;we will be honoring great behavior both by franchisors and franchisees. Our goal is to promote great relationships more than great franchising, although promoting great franchising is part of it.</p> <p><em>*Robert&nbsp;Purvin&nbsp;is busy nowadays preparing the&nbsp;AAFD&nbsp;for a franchisee leadership summit from April 30 to May 3 in Indian Wells, California.&nbsp;Besides being an attorney representing franchisees for some 40 years,&nbsp;Purvin&nbsp;is also the author of The Franchise Fraud: How to Protect Yourself before and after You Invest. He has been a tireless advocate for franchisees and their rights for decades.</em></p> <p><em>The&nbsp;AAFD&#39;s&nbsp;raison&nbsp;d&#39;&ecirc;tre&nbsp;is to help franchisees with a brand to collectively improve their franchise contracts by educating them and bringing them to the bargaining table. It does so by building strong independent franchisee associations.</em></p> <hr /> <ul> <li>Part 1 of the AAFD&nbsp;chairman interview:&nbsp;<a href="" target="_blank">Why independent franchisee associations are critical to franchise owners</a></li> <li>Part 2 of the AAFD chairman&nbsp;interview: <a href="">Key protections that should be in a franchise contract</a></li> </ul> <p>More to come in this series of articles featuring Robert&nbsp;Purvin&nbsp;and the&nbsp;AAFD.</p> <!-- google_ad_section_end --> Franchisee rights AAFD independent franchisee associations Robert Purvin Sun, 26 Feb 2017 06:54:21 +0000 Don Sniegowski 15771 at Apricot Lane Franchisee Leaves Franchise, Judge Disallows Franchisor to Lease Space <!-- google_ad_section_start --><p><img alt="Apricot Lane" src="" style="width: 319px; margin-left: 5px; margin-right: 5px; float: right; height: 180px;" width="319" height="180" />A nine-unit franchisee of the Apricot Lane chain of women&#39;s boutiques has broken away from the franchise, and a federal court has denied the franchisor the right to take over the lease at a franchised location.</p> <!--break--><!--break--><p>The franchisee, Joli Grace, LLC, sued the franchisor, Country Visions, Inc., last May in federal court in Sacramento, seeking a declaration that the franchisor&#39;s non-compete clauses were not enforceable and that the franchisor had breached the franchise agreements, freeing the franchisee of its contractual obligations. Country Visions counterclaimed, alleging that, among other things, the franchisee had stopped paying royalties in June for all nine outlets. The franchisor also raised claims against Joli Grace&#39;s owners and affiliated companies, claiming that they had caused and participated in the breaches, and were seeking to have the franchisees break away to join the affiliate&#39;s brand, Blu Spero.</p> <p>Joli Grace raised the stakes in September, and converted all nine stores to the Blu Spero name. Country Visions then sought a preliminary injunction to compel the franchisee and Blu Spero to turn over the lease at a location in Hattiesburg, Mississippi, to cease operating as Blu Spero and to cease using the Apricot Lane trademarks. After a hearing in November, the court dismissed all of the claims against the owners and Blu Spero affiliate, and denied the preliminary injunction in all respects. On the lease turnover, the Court noted that Country Visions was asking for a &quot;mandatory injunction,&quot; and had failed to meet the higher standards required for that relief. Country Visions argued that the Hattiesburg landlord would accept an assignment of the lease to it, but, the judge noted, &quot;The Hattiesburg landlord is not before the court,&quot; and that without the landlord, the court could not compel the assignment. The court denied the request that Blu Spero cease operating, since it had been dismissed it from the suit, and denied the request to enjoin use of the Apricot Lane trademarks because there was no record evidence of infringing use.</p> <p>&quot;The case raises the question of whether a system that has little in the way of uniformity or value for the franchisee has anything to protect,&quot; said Michael Garner, counsel to the franchisee. &quot;Apricot Lane stores are free to stock whatever they want, there&#39;s no national advertising, no unique product lines, and support comes mainly from other franchisees.&quot; Country Visions&#39; 2016 FDD showed that 46 stores had &quot;ceased operations for other reasons&quot; since 2014.</p> <p>Garner added that since the court&#39;s decision, the Blu Spero stores have filed for Chapter 11 for unrelated reasons.</p> <p>Apricot Lane Boutique was founded in 2007 by Ken Petersen, and its 75 franchised retail stores are supported by franchisor Country Visions, Inc. The parent company opened its first retail gift store in August 1991 in Vacaville, California.&nbsp;&nbsp;&nbsp;&nbsp;</p> <!-- google_ad_section_end --><table id="attachments" class="sticky-enabled"> <thead><tr><th>Attachment</th><th>Size</th> </tr></thead> <tbody> <tr class="odd"><td><a href=" Memo &amp; Order to Mot to Dismiss 1st Amended CC &amp; Mot PI (Filed 11-30-16).pdf">Memo &amp; Order to Motion to Dismiss 1st Amended CC &amp; Mot PI (Filed 11-30-16).pdf</a></td><td>213.01 KB</td> </tr> </tbody> </table> Legal judgment & dispute resolution Apricot Lane lawsuit Blu Spero breach of franchise agreement Country Visions Joli Grace non-compete clause Thu, 23 Feb 2017 04:48:46 +0000 Janet Sparks 15766 at Restaurant Brands to Buy Popeyes for $1.8B <!-- google_ad_section_start --><p><img alt="Popeyes" src="" style="width: 320px; height: 180px; float: right; margin-left: 5px; margin-right: 5px;" />After leaks over the last few days that Popeyes was in negotiations to be bought, then subsequent reports that it wasn&#39;t, Restaurant Brands International Inc. (RBI), the parent firm of franchisors Burger King and Tim Hortons, announced this morning that it has reached an agreement&nbsp;to&nbsp;acquire Popeyes Louisiana Kitchen Inc. [NASDAQ: PLKI] for $1.8 billion.</p> <!--break--><!--break--><p>RBI will finance the deal with cash on hand and financing commitments from the J.P. Morgan and Wells Fargo banks. The deal awaits regulatory approvals and the successful completion of the tender offer. The company expects to close by early April 2017.</p> <h3><span style="color:#A52A2A;"><strong>A push to consolidate administrative and franchise support? </strong></span></h3> <p>For American franchise owners, restaurant unit economist John Gordon warns, &quot;Restaurant Brands paid 19 times EBITDA for Popeyes. That is expensive.&quot; He thinks that the high acquisition price of Popeyes will produce long-term economic pressure for cost savings by&nbsp;its new owners. Gordon, the&nbsp;principal of San Diego-based Pacific Management Consulting Group, points out that the majority shareholder of Restaurant Brands, Brazilian private investment firm 3G Capital, has a history&nbsp;of reorganizing and shrinking&nbsp;supporting administrative personnel in companies they acquire.</p> <p>Founded in New Orleans in 1972, the relocated Atlanta, Georgia-based Popeyes is the franchisor of almost 2,559 franchised restaurants as of its 2016 third quarter report. About 3 percent of the restaurants in its chain are company-owned.</p> <p>&quot;RBI has observed our success and seen the opportunity for exceptional future unit growth in the U.S. and around the world,&quot; said Cheryl Bachelder, who has served as Popeyes CEO since November&nbsp;2007. &quot;The result is a transaction that delivers immediate and certain value to the Popeyes shareholders,&quot;&nbsp;she stated.&nbsp;Bachelder&nbsp;has helped turn the formerly troubled chain to its current lofty heights.</p> <h3><span style="color:#A52A2A;"><strong>Strong industry demand for Popeyes leaders </strong></span></h3> <p>Gordon thinks Bachelder&#39;s days could be numbered. Schwartz of 3G Capital quickly took over the CEO duties of its past acquisitions. &quot;After the purchase by 3G, the then-existing chief executive of Tim Hortons, who was a new CEO, and Burger King&#39;s chief executive exited,&quot; says Gordon of 3G&#39;s takeover history. &quot;Will Schwartz be the CEO for now a third brand, Popeyes? That would be too much for one leader,&quot; comments Gordon.</p> <p>The company made no indication today that Popeyes CEO would be going anywhere.</p> <p>&quot;Whatever happens to the CEO, the future is very bright for Cheryl Bachelder,&quot; observes analyst Gordon. He points out that there are a number of troubled systems that could use her leadership and turnaround skills. &quot;For example, the CEO of troubled DineEquity just resigned,&quot; says the restaurant analyst. The casual dining franchisor is urgently searching for the right chief executive to lift its IHOP chain and turn Applebee&#39;s&nbsp;around.</p> <p>The unit financial analyst also speaks about how Popeyes has recruited top-notch information technology leaders to migrate from many point-of-sales platforms to a unified, pioneering point-of-sales system in the future. He thinks these leaders will easily find new opportunities.</p> <p>&quot;There is high demand in the industry for such technology leadership,&quot; says Gordon.</p> <h3><span style="color:#A52A2A;"><strong>Opportunities abroad </strong></span></h3> <p>Restaurant Brands International [NYSE:QSR] stated that Popeyes will be managed independently in the United States. It plans to continue expanding the brand not only in the mature U.S. market, but also in international markets.</p> <p>&quot;With this transaction, RBI is adding a brand that has a distinctive position within a compelling segment and strong U.S. and international prospects for growth,&quot; says&nbsp;Daniel Schwartz, chief executive officer of RBI, about the acquisition. &quot;As Popeyes becomes part of the RBI family we believe we can deliver growth and opportunities for all of our stakeholders, including our valued employees and franchisees. We look forward to taking an already very strong brand and accelerating its pace of growth and opening new restaurants in the U.S. and around the world.&quot;</p> <p>Franchisees are likely to see a shift to an international focus, according to Pacific Management&#39;s Gordon. He sees some synergy between Popeyes&nbsp;and Burger King&#39;s international developers. &quot;Now there is an additional brand for the development wants of Burger King&#39;s existing international licensees,&quot; says Gordon.</p> <hr /> <p><strong>Related reading</strong>:</p> <ul> <li><a href="" target="_blank">Former Popeyes CMO joins Church&#39;s Chicken</a> | QSR magazine, Feb 22, 2017</li> <li><a href="">Burger King, Tim Hortons in Final Talks to Buy Popeyes: Note to Franchisees</a></li> </ul> <p>&nbsp;</p> <!-- google_ad_section_end --> Mergers & Acquisitions Tue, 21 Feb 2017 22:27:44 +0000 Don Sniegowski 15762 at Jury Awards Widow of Subway CEO Fred DeLuca $2.9M-plus in Failed Florida Land Deal <!-- google_ad_section_start --><p>After seven and a half hours of deliberation, a Palm Beach County jury in Florida awarded $2.9 million to the widow of the late Fred DeLuca, co-founder and CEO of Subway sandwich chain, over a failed real estate deal with Delray Beach developer Anthony Pugliese III.</p> <!--break--><!--break--><p>The month-long multi-million-dollar trial was described by the media as one where the two business titans took turns blasting the morals of each other through aggressive attorneys. Rick Hutchison of Holland &amp; Knight, lead counsel for the DeLuca estate, asserted Pugliese &quot;is a liar, a thief and a fraudster.&quot; He claimed Fred DeLuca lost $43 million in the &quot;green community development&quot; project south of Orlando, dubbed as Destiny, because Pugliese was over his head, &quot;he did not know what he was doing,&quot; citing the purchase of &quot;useless swamp land.&quot;</p> <p><img align="right" alt="" src="" width="182" height="192" />Pugliese lead counsel Willie Gary argued that DeLuca was a deceitful and conniving businessman who would do anything to get his way. &quot;Anthony Pugliese is entitled to every dime he would have made had DeLuca not breached the contract,&quot; Palm Beach Post reported. It said, &quot;Both sides used bare-knuckle tactics during their last pleas to the jury. One of the slides Hutchison used to drive home his point about Pugliese&#39;s mishandling of the project was titled: Pugliese Lies Again. Another slide, displayed on a screen in front of jurors, was labeled simply: T.I.E.&quot;</p> <p>Hutchinson quipped, it was an acronym for Pugliese&#39;s business tactics. &quot;Theft, incompetence, ego.&quot;</p> <p>Tricia C.K. Hoffler of Edmond, Lindsay &amp; Hoffler, had argued that their client &quot;was entitled to every dime he would have made had Deluca not breached the contract&quot; the two parties had committed to. During the trial, DeLuca attorneys presented a videotape deposition taken prior to DeLuca&#39;s death in September 2015 at age 67, after his battle with a rare form of leukemia. The Subway founder talked about his growing distrust of Pugliese saying he thought he was doing a terrible job on the real estate project in Florida.</p> <p>Palm Beach Post said shortly before DeLuca passed away, Pugliese pleaded no contest to conspiracy to commit an organized scheme to defraud and grand theft for sending roughly $2.9 million in phony invoices to DeLuca to pay. &quot;Pugliese served four months of a six-month jail sentence and repaid DeLuca $1.2 million.&quot; Pugliese&#39;s business manager, Joseph Reamer also pleaded guilty to the same conspiracy charge and was placed on probation.</p> <p>Willie Gary downplayed Pugliese&#39;s criminal conviction, the Post reported, stating, &quot;Standing behind Pugliese with his hands on his client&#39;s shoulders, Gary described him as a good man who cares about people.&quot;</p> <p>Although Willie Gary did not offer jurors a specific dollar amount of what they claim Fred DeLuca owed Pugliese, he told them, &quot;Just do the right thing.&quot; Gary did make it clear that the right thing would be to award Pugliese &quot;an eye-popping amount equal to the billions DeLuca himself once claimed he would make on the sprawling Destiny project,&quot; Palm Beach Post reported.</p> <p>Gary told jurors Pugliese had already paid for his wrongdoing by going to jail and repaying DeLuca $1.2 million. He said, &quot;They got over $1 million for it and they want you to punish him again.&quot;</p> <p>Attorneys for widow Elisabeth DeLuca say the award will be tripled to $8.7 million because the jury also agreed Pugliese committed civil theft. And she may be entitled to another $2.9 million because the jury ruled Pugliese breached the contract &quot;as well as committed other misdeeds that cause the multi-billion-dollar land deal to collapse,&quot; attorney Rick Hutchison explained.</p> <p>The DeLuca family told the SunSentinel that they were pleased with the verdict and very grateful for the jury&#39;s service.</p> <p>Anthony Pugliese&#39;s lawyers vowed to appeal the jury&#39;s decision. His appeal is expected to focus in part on more than a dozen claims that the court prohibited from the trial. He told reporters, &quot;I&#39;m ready for the next fight.&quot;</p> <hr /> <p><strong>Related Articles: </strong></p> <ul> <li><a href="">Jury Denies Delray Developer Pugliese in Trial over Failed Land Deal with Subway Co-Founder</a></li> <li><a href="">Late Subway Founder Triumphs in Suit against Delray Developer</a></li> <li><a href="">Trial Pitting Delray Developre vs. Subway Founder Goes to Jury Friday</a></li> <li><a href="">Late Subway&#39;s Late CEO Fred DeLuca Testifies at Trial via Videotape</a></li> <li><a href="" target="_blank">Millions at Stake as Pugliese Testifies Today</a></li> <li><a href="" target="_blank">Trial Begins over Subway Founder&#39;s and Delray Developer&#39;s Failed Bid</a></li> <li><a href="" target="_blank">Fraud,Breach Accusations Fly as Trial Begins over Ruins of Land Development Deal</a></li> <li><a href="" target="_blank">Subway Founder Fred DeLuca Sued for $5 Billion</a></li> <li><a href="" target="_blank">Subway&#39;s DeLuca Diagnosed with Leukemia</a>&nbsp;&nbsp;</li> </ul> <!-- google_ad_section_end --> Legal judgment & dispute resolution Tue, 21 Feb 2017 21:25:03 +0000 Janet Sparks 15761 at With a Turnaround Needed, DineEquity’s CEO Julia Stewart Resigns <!-- google_ad_section_start --><p>Faced with disappointing results of its fourth quarter and full year for 2016, DineEquity Inc. (NYSE:DIN) announced yesterday the resignation of its chairman and chief executive officer Julia Stewart, effective March 1. Richard Dahl, the lead director on the firm&#39;s board of directors, will take Stewart&#39;s place as interim chief executive officer and chairman.</p> <p>The board has begun a search for a permanent replacement. Upon completion of the chief executive officer search, the DineEquity board of directors intends to separate the chairman and chief executive officer roles.</p> <p>Dahl has served on DineEquity&#39;s board of directors since February 2004. He has more than 35 years of experience in senior management of public and private companies, including positions of chief executive officer, chief operating officer and chief financial officer. The board has appointed Caroline Nahas as its lead director, replacing Mr. Dahl. Douglas Pasquale will succeed Dahl in his previous role as chairman of the audit and finance committee.</p> <p>DineEquity is the parent company of IHOP and Applebee&#39;s Neighborhood Grill &amp; Bar restaurant brands, two concepts in the troubled casual dining sector that is experiencing a downturn in traffic. The Applebee&#39;s restaurants are operated a hundred percent by franchisees, while the IHOP chain is 99 percent franchised. IHOP reported a decline of 2.1 percent in domestic same-restaurant sales for its fourth quarter of 2016 compared to the same period in 2015, while reporting a decline of only 0.1 percent for the entire year.</p> <p>Applebee&#39;s fared much worse. Its domestic same-restaurant sales dropped by 7.2 percent for the fourth quarter, while for 2016 Applebee&#39;s restaurants had a drop of 5 percent.</p> <p>Mark Kalinowski, restaurant analyst for Nomura Securities, commented how results were worse than expected. &quot;Fourth-quarter same-store sales for Applebee&#39;s declined by 7.2%, the worst performance for any of the top 25 largest restaurant chains in the U.S., as measured by domestic systemwide sales,&quot; emailed the restaurant analyst to investors. IHOP&#39;s figures were far from impressive as well. Regarding DineEquity&#39;s turnaround prospects, Kalinowski wrote: &quot;The challenges remain large and likely won&#39;t be fixed easily or quickly, particularly at Applebee&#39;s.&quot;</p> <p>Incoming interim CEO Richard Dahl sounded resolute and determined to hang on to both restaurant brands. &quot;DineEquity&nbsp;will continue to invest in the long-term success and growth of both IHOP and Applebee&#39;s. I will be working very closely with the Applebee&#39;s franchisees to improve performance,&quot; said Dahl. &quot;While a turnaround of Applebee&#39;s will not happen immediately, the results of a comprehensive diagnostic conducted by a world class management consulting firm has enhanced our understanding of what has driven our recent sales trends.&nbsp; More importantly, we have a go forward plan to improve performance, and have worked with the same firm to validate our initiatives and identify additional creative strategies to expeditiously return Applebee&#39;s to growth.&quot;</p> <!-- google_ad_section_end --> Leadership change Fri, 17 Feb 2017 19:37:22 +0000 Don Sniegowski 15756 at AAFD Chairman on Key Protections that Should Be in a Franchise Contract <!-- google_ad_section_start --><div class="photoright">&nbsp; &nbsp;&nbsp;<img alt="AAFD chairman Bob Purvin working on the words of a fairer franchise contract" src="" style="width: 320px; height: 180px;" /> <div class="caption">Purvin leads franchisees &amp; their franchisor to craft a fairer contract</div> </div> <p>Robert Purvin, founder and chairman of the American Association of Franchisees and Dealers (AAFD), spoke at length with this journal. Purvin is busy nowadays preparing the AAFD, a non-profit trade association that represents the rights and interests of franchisees, for a franchisee leadership summit from April 30 to May 3 in Palm Springs, California. The association will celebrate its 25th anniversary.</p> <!--break--><!--break--><p>Besides being an attorney representing franchisees for some 40 years, Purvin is also the author of a book that is essential reading to any would-be franchise buyer or existing franchisee&ndash;The Franchise Fraud: How to Protect Yourself before and after You Invest. He has been a tireless advocate for franchisees and their rights for decades.</p> <p>The AAFD&#39;s raison d&#39;&ecirc;tre is to help franchisees with a brand to collectively improve their franchise contracts by educating them and bring them&nbsp;to the bargaining table. It does so by building strong independent franchisee associations.</p> <p>In this interview&nbsp;Bob Purvin speaks about some of the key protections that a good franchisee contract should have. The AAFD chairman cites crucial&nbsp;areas from its newest negotiated franchise contract&nbsp;with Griswold Health Care franchise owners.</p> <p><strong>SNIEGOWSKI</strong>: Give me an example of what franchisees can accomplish if they collectively negotiate. For example, one of your chapters is the GHCFA, or Griswold Home Care Franchise Association. Can you tell me what specifically Griswold franchisees obtained from their own independent franchisee association to collectively bargain with their franchisor instead of each business individually doing so?</p> <p><strong>PURVIN</strong>: Griswold has a unique way of operating a home care business that has made them very competitive in a very crowded industry.</p> <p>Griswold is a business that interviews and recommends independent contract caregivers to their clients. It manages the caregiver representation&nbsp;without being the employer of the caregivers. That distinguishes it from most of its competitors. If you go to a Bright Star franchise, all the caregivers that they send out are employees of the franchisee.</p> <p>The home care sector has probably more than a dozen franchisors&mdash;such as Comfort Keepers, Visiting Angels, and Bright Star. The AAFD has four chapters with four home care brands alone. Griswold and Bright Star are two of them.</p> <p>Griswold introduces people to caregivers who are not just independent, but who also manage the care process the way Griswold tells them to. Griswold interviews the franchisees. They make recommendations to customers. The customer pays the [franchisee] caregiver directly and pays a separate fee to [franchisor] Griswold in order to manage that relationship. As a consequence of this arrangement, Griswold does not incur the costs associated with an employer. They have been able to undercut the competition in a way that the Department of Labor was not happy with because the government was not only unable to collect taxes from those in the past who would be employees, but also there was the concern that the [franchisee] caregivers were not being properly compensated [in employment wages and benefits].</p> <p>A lot of the pressure over the last few years has been over minimum wage and wage and hour laws as it applies to [franchisee] caregivers, who were putting pressure on Griswold to hunker down and become like everyone else. But all of Griswold&#39;s franchise agreements had set up an independent contractor relationship. The company wanted to offer what they called a full employment model. Griswold tried to mandate some changes that did not go over well with franchisees. In that process a group of franchisees came to AAFD, formed a Griswold chapter of the association, and did everything according to our rule&nbsp;book and our recommended strategy. Franchisees simply wanted to be respected by the franchisor. They did not want their franchisor to think that they were coming to kill the brand. They weren&#39;t.</p> <p>Over a process that took years, Griswold franchisees changed their franchisor. It was not done overnight. In the end, it was changed through new management who realized that the company needed to listen to its franchisees and be more collaborative. We got to the place where franchisees realized, &quot;We have the wherewithal to stand up for our rights.&quot; This association has grown to represent about 80 percent&nbsp;of franchisees under the Griswold system. For the first three or four years, the chapter only represented about 30 percent of the owners. About 80 percent of the members are supporting the legal fund, which has now raised about a quarter of a million dollars. The company finally understood that this group of franchisees had the wherewithal to stand up for themselves. But the franchisor never, until recently, was willing to engage the association, even though they had to acknowledge them because of the Federal Trade Commission&#39;s rule that requires the franchisor to disclose the existence of a franchisee association in its Franchise Disclosure Document.</p> <p><strong>SNIEGOWSKI</strong>: Right. I heard with my own ears the FTC&#39;s franchise regulator specifically say that rule, where a franchisor has to disclose a franchisee association in its Franchise Disclosure Document, came from the AAFD&#39;s efforts. That change in federal law was a vision of yours from long ago.</p> <div class="photoright"><img alt="AAFD chairman and founder Bob Purvin" src="" style="float: right; height: 320px; width: 320px; margin-left: 5px; margin-right: 5px;" width="320" height="320" /> <div class="caption">Robert Purvin</div> </div> <p><strong>PURVIN</strong>: Correct. One of the things I am very proud of is that AAFD is the only organization that is actually named in the FTC&#39;s Franchise Rule. There is a footnote that mentions that AAFD&#39;s chapters qualify as independent associations.</p> <p>What happened in Griswold&#39;s case was that the franchisor showed that it was not going to recognize the association, but it would sit down and have a dialog with individual association members over the changes in its business model and the rewriting of its franchise agreement. It was a franchise agreement committee, to which franchisees could elect their representatives. All of the representatives that were elected were also leaders within the independent franchisee association. Everybody knew it. In that way&nbsp;the company took the first baby steps and unofficially recognized the association.</p> <p><strong>SNIEGOWSKI</strong>: Isn&#39;t it typical for franchisors to at first not want to recognize the existence of independent associations that represent franchise owners?</p> <p><strong>PURVIN</strong>: Yes. It is very common that a franchisor will start out by not recognizing an independent franchisee association. But I would remind franchisees that they need to earn the right of recognition, which the Griswold association did.</p> <p>By the end of the negotiation there was a specific recognition of Griswold Home Care Franchise Association that was written into the franchisees&#39;&nbsp;new agreement that we are so proud of. So franchisees went into the negotiation rounds without recognition of their association by the franchisor, but came out of the negotiations with full recognition.</p> <p>Right now the relationship has been strengthened and both franchisees and franchisor are happy to be in business with each other. That is always the goal. That follows our philosophy of what the AAFD calls Total Quality Franchising. It is a franchise culture in which legitimate business needs of both the franchisor and franchisee are being met in a collaborative process that serves the brand.</p> <p>I told Griswold franchisees that they need to go to the franchising company and ask about a common mission. That common mission would be something that both sides cherished &ndash; the success of the Griswold brand for their mutual benefit. And then they needed to agree to guiding principles that help to get to the common mission. I provided them with some language, which was embraced by all parties. The common mission is to the brand. The guiding principles are that the franchisees agree that Griswold gets to define what the system looks like with input from the franchisee association. Griswold agrees that they will respect the franchisees ongoing concerns about the value of their individual franchises. That means that the franchisor has a duty under the contract to support franchisees&#39; profits. That is an affirmative duty. It is no longer an implied duty of good faith and fair dealing.</p> <p>The law presumes and implies under every contract there is a duty of good faith. The idea behind the implied duty of good faith is that when people enter a contract they have the right that the other party is not going to inhibit their success. It is implied that both are going to work hard to make it work. But that implied duty cannot create rights. It can only protect the rights written into the agreement. An affirmative duty of good faith says that I am bound to seek your success. That is what we have written into the Griswold franchise contract. Previously&nbsp;the AAFD was also able to insert that into our Homes &amp; Land agreement [another franchise chapter]. We have similar things, although not quite as abundant, in other agreements that AAFD has helped negotiate for franchisee associations.</p> <p><strong>SNIEGOWSKI</strong>: That reminds me of an ex-franchisee of an ice cream chain from years ago. He advocated all franchisees leave the brand. But if there are no franchisees, there is no franchise brand. That, in essence, is burning down the house. It is abandoning the brand and the chain. It leaves no common ground with the franchisor for negotiation if their opponent wants to destroy them and all they have built. Your point of view is different than that ex-franchisee. You say the franchisor needs to be reminded that it and its employees are not alone in wanting to preserve and build the brand. The long-term success of the brand builds value in the franchisees&#39; own holdings.</p> <p><strong>PURVIN</strong>: I understand your viewpoint on that ex-franchisee. However, the AAFD has had systems that deserved to be blown up. Systems that&nbsp;have been fraudulent schemes in which the franchise system was built like a Ponzi scheme that we helped expose. It needed to be gone. In those circumstances, franchisees have also come to the AAFD and collectively just wanted out, even though they recognized that they likely would not make it on their own.</p> <p>In other circumstances, we can set up franchisees to run the franchise chain. The AAFD actually operates a franchise chain called Kiva Juice. The franchisees had come to AAFD and we discovered that it was a totally fraudulent package. The franchisor sold 60 franchises. Rather than go to jail, he ended up assigning the franchising firm to the independent franchisee association, which is a chapter of the AAFD. All of the intellectual property rights&mdash;all of the franchise agreements, the trademarks and trade names &ndash; were assigned to the association. That chapter of the AAFD now runs that enterprise. It is a group of franchise owners who came to us, where their issue was to get out from under the man that was bilking them.</p> <p>But that is not the norm. The typical situation is with franchisees that love the brand and have made a huge investment in it. Our job is to convince the franchisor that we do not have a death wish. If we work together collaboratively, we will accomplish a whole lot more together then if we are always battling each other.&nbsp;The really great franchise systems have done just that. That is what we are always hopeful of achieving.</p> <p>With Griswold we accomplished a right of ownership. We obtained an affirmative duty of good faith [from the franchisor]. Griswold recognized the owners&nbsp;association as a representative body through which collaboration occurs with franchisees. In most franchise agreements&nbsp;the franchisor carves out something called sole discretion. A big area of franchise law right now is when does a franchisor have sole discretion. In the Griswold agreement&nbsp;there is reasonable discretion and there is sole discretion. In every instance except for one item, the company agrees that even when they exercise sole discretion they must do so with consultation, which is defined in the agreement as sitting down with the franchise association delegate and discussing it. The franchisor does not give up its right to select a buyer of a franchisee&#39;s license, but it does give up its right to select without having consultation and agreement.</p> <p>The other big thing to come out of this is that Griswold restored a recognition of ownership. The whole franchise industry has evolved to a point, thanks to our friends at McDonald&#39;s, in which many do not recognize that a franchisee owns their business and has equity in its business. To some franchisor advocates, franchisees are just operators and equity renters. For example, McDonald&#39;s calls their franchisees operators, which is why McDonald&#39;s has gotten itself into this joint employer problem because the franchisor has evolved in a way in which they control and own the franchise.</p> <p>We could spend a whole new session just on this one topic of the pickle that franchisors have gotten themselves into in now being considered as <a href="">a joint employer with the franchisee</a>. That topic may go away with the new administration [President Trump&#39;s] and the new Secretary of Labor Andy Puzder [CKE Restaurants CEO, who withdrew his nomination after this interview. Yesterday the President nominated Alexander Acosta, who has served in the National Labor Relations Board].</p> <p>We have recorded in the Griswold franchise agreement a recognition that a franchisee owns its business. What comes with that are protections of equity &ndash; the right to stay in business, the right to renew the franchise. In the Griswold agreement, if the franchise is in compliance [with the franchise agreement and operating standards], it has the right to renew the contract. That protection is not typical in most franchise contracts.</p> <p>There is not an aspect of this agreement in which we did not achieve collaboration. I&#39;ll give you an example: Most franchise agreements that you see have a statement&nbsp;that the franchisee agrees that the franchisee will protect the confidentiality of whatever the franchisor has communicated with them. That gag includes stuff that the franchisee may have developed itself. It is the franchisee that promises to maintain confidentiality, but in contrast the franchisor makes no such promise. For the franchisor, what is yours is mine, and what is mine is mine. The Griswold agreement turns that on its head. The parties mutually agree to maintain the confidentiality of the information.</p> <p>The franchisees are also recognized to have some goodwill in their businesses, which is almost unheard of.&nbsp; When franchisees sell their franchise, they are entitled to recover the goodwill of their business.</p> <p>By the way, it was not a sellout by the franchisor. The franchisor renewed the loyalty of its franchise owners and strengthened a dedication to make the brand better. The franchise agreement should not be an agreement that the franchisee is sorry to sign. It is an agreement which all parties should feel vested in. Both parties take ownership of that contract.&nbsp;It makes for a happier brand because people are proud of what they are accomplishing together.</p> <p><em>This article is Part 2 of a series. More to come.</em></p> <hr /> <p>Read Part 1 of the interview with AAFD&#39;s chairman: <a href="" target="_blank">Why independent franchisee associations are critical to franchise owners</a></p> <!-- google_ad_section_end --> Franchisee rights AAFD American Association of Franchisees and Dealers cure period franchise association recognition franchise equity franchise termination franchisor's affirmative duty of good faith gag clause Griswold Home Care Franchise Association independent franchisee association joint employer renewal right Fri, 17 Feb 2017 12:40:18 +0000 Don Sniegowski 15751 at Andy Puzder Withdraws Nomination as Secretary of Labor <!-- google_ad_section_start --><div class="photoright"><img alt="Andrew Puzder" src="/sites/default/files/resize/1174px-Andrew_Puzder_by_Gage_Skidmore_1-320x180.jpg" style="width: 320px; height: 180px;" width="320" height="180" /> <div class="caption">Andy Puzder. ( <a href="">Photo</a> by Gage Skidmore, <a href="" title="Creative Commons Attribution-Share Alike 3.0">CC BY-SA 3.0</a>)</div> </div> <p>Andy Puzder withdrew as a nominee today for Secretary of Department of Labor in President Trump&#39;s administration.</p> <!--break--><!--break--><p>&quot;I am withdrawing my nomination for Secretary of Labor,&quot; tweeted Puzder today shortly after 1 p.m. EST.</p> <p>Originally a commercial trial lawyer, Puzder is the chief executive officer of CKE Restaurants&nbsp;Inc., the holding company of burger franchisors Carl&#39;s Jr. and Hardee&#39;s.</p> <p>The International Franchise Association, who came out in strong support of Puzder, was disappointed. &quot;Andy Puzder always saw the bigger picture, so his decision to withdraw is just another example of his character as someone willing to put himself aside on behalf of the greater good,&quot; said CEO and president of the IFA, Robert Cresanti. &quot;From his humble beginnings, Andy worked to make a difference and that&#39;s precisely why he would&#39;ve been a great addition to President Trump&#39;s Administration.&quot;</p> <p>The Hill, a news site that covers politics and policy on Capitol Hill, <a href="">reported</a> that Puzder was under intense pressure &quot;for admitting he hired an illegal immigrant as a housekeeper and past allegations that he abused his ex-wife and treated employees poorly.&quot; It elaborated that the Oprah Winfrey Network had provided a copy of a 1990 episode of the Oprah show that had been circulated among Congress members. The Hill reported, &quot;Puzder&#39;s ex-wife, Lisa Fierstein, reportedly appeared in disguise to speak out as a domestic violence victim. She discussed allegations of physical abuse against her former husband on the show. Fierstein has since retracted her allegations, including in a recent letter to the Senate Health, Education, Labor and Pensions Committee, Politico&nbsp;<a href="" target="_blank">reported</a>.&quot;</p> <div class="photoright"> <blockquote class="twitter-tweet" data-lang="en"><p dir="ltr" lang="en">I am withdrawing my nomination for Secretary of Labor. I&#39;m honored to have been considered and am grateful to all who have supported me.</p> <p>&mdash; Andy Puzder (@AndyPuzder) <a href="">February 15, 2017</a></p></blockquote> <script async src="//" charset="utf-8"></script></div> <p>The IFA&#39;s Cresanti stated that he thinks Puzder&#39;s approach to managing the Labor Department would have reversed job-killing regulations implemented by the Obama administration. &quot;Regardless of where he is, Andy will continue his dedicated pursuit towards advancing growth for&nbsp;all workers as the leader of one of America&#39;s great franchises and everything this business model represents,&quot; said Cresanti.</p> <p>Bob Purvin, chairman of the American Association of Franchisees and Dealers had a different take from&nbsp;the IFA about the withdrawal of Puzder as the Secretary of Labor nominee. His views were mixed. &quot;There are many issues, particularly in relation to pay and labor, in which Puzder has been a friend of franchisee owners. But on other issues Puzder has not been a friend,&quot; stated the leader of the 25-year-old national franchisee organization. Puzder has argued against laws that increased minimum wage and changed overtime regulation, with many franchise owners agreeing with him. However, Purvin points out that nominee Andy Puzder would likely come down strongly against an ongoing joint-employer ruling that would allow franchisors to have control of franchise owners&#39; businesses&nbsp;while ensuring little to no franchisor liability on what a franchisor instructs franchise owners to do with their businesses. &quot;It is here that franchisees felt trepidation,&quot; Purvin concluded.</p> <!-- google_ad_section_end --> Politics Wed, 15 Feb 2017 23:51:15 +0000 Don Sniegowski 15749 at Multiunit Franchisee Atour Eyvazian Named Restaurant Association’s 2017 Convention Chairman <!-- google_ad_section_start --><p><img alt="Jack int the Box multiunit franchise owner Atour Eyvazian" src="" style="float: right; height: 321px; width: 320px; margin-left: 6px; margin-right: 6px;" width="320" height="321" />The National Restaurant Association announced on Tuesday that it has appointed franchisee Atour Eyvazian as its Restaurant Hotel-Motel Show convention chairman for 2017. Eyvazian is a multiunit owner of 107 Jack in the Box restaurants in Houston and San Antonio.</p> <!--break--><!--break--><p>In 1984 Eyvazian fled war-torn Iran and Turkish prison to arrive in Los Angeles. Not speaking any English, the new immigrant started his first American job &ndash; a janitor at Jack in the Box. After he learned English, he became a Jack in the Box restaurant manager. Taking advantage of a tuition reimbursement program that the Jack in the Box company offered its employees, he earned a baccalaureate degree and then a master of business administration.</p> <p>In 2005, he bought 10 Jack in the Box restaurants in Sacramento, California, and has expanded his restaurant empire over ten-fold.</p> <p>&quot;Eyvazian&#39;s 25-year journey from his arrival to the United States, unable to read or speak in English, to now owning 107 Jack in the Box restaurants is a real life story about the achievement of the American dream and will serve as inspiration and provide insight for our attendees,&quot; said Dawn Sweeney, president and CEO of the National Restaurant Association.</p> <p>The NRA Show 2017 is scheduled from May 20 to 23, 2017 at Chicago&rsquo;s McCormick Place.</p> <!-- google_ad_section_end --> People Wed, 15 Feb 2017 18:15:28 +0000 Don Sniegowski 15748 at