en RE/MAX Co-Founder Dave Liniger Hands over Reins to Co-CEO Adam Cantos <!-- google_ad_section_start --><p><img alt="" src="" style="height: 180px; width: 320px; margin-left: 5px; margin-right: 5px; float: right;" width="320" height="180" />RE/MAX board of directors announced last week that their co-founder and co-chief executive officer Dave Liniger has stepped down from his position, allowing Adam Contos to be the sole CEO of the Denver-based real estate giant franchise company. Liniger will now become a non-executive chairman of the RE/MAX Holdings Board.</p> <!--break--><!--break--><p>The transition comes following reports last November that a special committee of independent directors had been appointed by the RE/MAX board to investigate the actions of certain members of the company&#39;s senior management. That caused the board to announce it was &quot;indefinitely withholding its third quarter earnings results due to an internal investigation regarding an undisclosed $2.38 million loan CEO Liniger provided to his then co-CEO Adam Contos, as well as other claims of wrongdoing in employment practices and conduct. The November 2, 2017 SEC filing newswire also stated, &quot;These matters could constitute violations of the Company&#39;s codes of ethics and business conduct and policies.&quot;</p> <p>Adam Contos, who joined the company in 2004 in its mountain state region, became the co-CEO with Liniger last May, with the hint that Contos&#39; position would be part of an eventual CEO transition. Dave Liniger, who founded the company in 1973 with his wife Gail, lead RE/MAX in what became a global franchisor of real estate brokerages 44 years ago, according to a Denver Post report. Bringing Contos in allowed Liniger to focus on &quot;strategic initiatives&quot; and furthering the company&#39;s leadership position in the real estate industry. With Contos&#39; experience at RE/MAX, first as vice president of region development in 2013, senior vice president of marketing in 2015, and then as chief operating officer in 2016, the real estate brokerage arm with 110,000 agents worldwide and Motto Franchising, LLC, which the company describes as &quot;a fast-growing network of mortgage brokerages,&quot; he was well-positioned to step in as the sole CEO.</p> <p>In RE/MAX (<a href="">NYSE:RMAX</a>) announcing the management change, Contos said, &quot;I am honored to lead RE/MAX Holdings at this important time in our history. As we head into this next chapter, I am excited about the prospects for continuing our successful momentum, driven by our outstanding business model, brand strength, competitive advantages, and the most dynamic brokers and agents in the industry.&quot;</p> <p>Dave Liniger, after 45 years of running his 115,000-agent real estate company, said, &quot;We are number one in the world and I&#39;m confident that under Adam&#39;s leadership, RE/MAX Holdings will continue to thrive and reach even greater heights through his unwavering dedication and commitment to this great company, our brands and our networks.&quot;</p> <p><strong>-- </strong></p> <p><strong>Related Reading: </strong></p> <ul> <li><a href="" target="_blank"><strong>RE/MAX Launches Internal Investigation on an Undisclosed Loan by CEO Liniger</strong></a><strong> </strong></li> <li><a href="" target="_blank"><strong>RE/MAX Holdings Launching New Mortgage Business, Motto Mortgage</strong></a></li> </ul> <!-- google_ad_section_end --> Leadership change CEO Adam Contos LLC Motto Franchising Re/Max founders Dave and Gail Liniger Mon, 19 Feb 2018 23:47:58 +0000 Janet Sparks 16319 at Jollibee Foods Now Majority Owner of Smashburger in $100M Deal <!-- google_ad_section_start --><p><img alt="" src="" style="height: 180px; width: 320px; float: right; margin-left: 5px; margin-right: 5px;" width="320" height="180" />Smashburger announced this week that Jollibee Foods Corporation has agreed to acquire an additional 45 percent of the Smashburger brand for $100 million, bringing its ownership stake to 85 percent.</p> <!--break--><!--break--><p>The Denver-based hamburger chain had entered into a strategic partnership with Jollibee Foods (JFC) in October 2015. Smashburger, then at 335 corporate and franchised units, said it had a definitive agreement to sell 40 percent of the company to Jollibee, which valued Smashburger at a $335 million. The announcement stated, &quot;Approximately 60 percent of Smashburger is company owned and operated. Smashburger continues to grow at a rate of 20 percent annually.&quot;</p> <p>Jollibee Foods (PSE:JFC) operates a large food service network in the Philippines. As of December 31, 2017, it had 2,875 restaurant outlets in the country under various brands; for example: Jollibee, Chowking, Greenwich, Red Ribbon, and Mang Inasal to name a few. Jollibee operates 924 restaurants abroad, bringing its total to 3,799 stores for the JFC Group&#39;s entire network.</p> <p>&quot;Jollibee has been an invaluable strategic partner to date,&quot; said Tom Ryan, co-founder and CEO of Smashburger. &quot;Our momentum in 2017 around improved guest experience, iconic and record-setting product launches, and innovative marketing provide JFC a tremendously strong brand to enter the North American market. Our entire team couldn&#39;t be more excited to grow the Smashburger brand and share the great tastes of Smashburger with the world.&quot;</p> <p>The burger chain says Jollibee&#39;s majority stake positions the brand for continued growth. CFO Bradford Reynolds explained, &quot;This reinforced strategic partnership with JFC will allow Smashburger to continue to focus on growth in both existing and new markets including the opportunity to bring our great tasting burgers, fries and hand-spun shakes to Southeast Asia. We look forward to building upon our successful relationship to further bolster the brand as an international leader in the better burger segment.&quot;</p> <h3><span style="color:#800000;"><strong>Smashburger&nbsp;wants to grow, grow, grow </strong></span></h3> <p>Smashburger began in 2007 in Colorado &quot;with the vision of Rick Schaden and funding by Consumer Capital Partners, a private equity firm that Rick Schaden and his father Richard own, the company press release said.&quot; It added that Smashburger currently has 360 corporate and franchise restaurants operating in 38 states and nine countries.</p> <p>In November 2011, Forbes magazine interviewed founder Tom Ryan, asking the question, &quot;Does the world really need another burger joint,&quot; pointing to all the other brands that &quot;clog strip malls and highways.&quot; Ryan eagerly responded saying the hamburger is American&#39;s favorite food and, in the midst of a severe recession, his company will have grown to 143 locations (half company-owned, half franchisee-owned) and $54 million in annual revenue by the end of 2011. Ryan said another 450 franchise agreements were already on the books.</p> <p>That commitment to &quot;such torrid expansion&quot; earned Smashburger top honors on Forbes list of America&#39;s Most Promising Companies, &quot;privately held up-and-comers with compelling business models, strong management teams, notable customers, strategic partners and precious investment capital.&quot;</p> <p>Smashburger announced in April 2015 that it was looking to boost its marketing program. In an email to Ad Age, it said, &quot;With our continued growth of adding new restaurants at about 25 percent annually, we are also looking to increase our marketing efforts.&quot; At that time, Technomic rated it as the 20<sup>th</sup> largest burger chain in the U.S., and estimated systemwide sales of $268.1 million, up nearly 25 percent from the prior years. At the end of 2014, it had an estimated 280 units in the U.S., a 16.7 percent increase from the unit count in 2013. Smashburger touted, &quot;In total, the company founded in 2007, has more than 310 locations in 34 states and seven countries. Then in June 2015, the hamburger chain announced that it had added three franchise partners that planned to open 61 new restaurants in Florida, New York and North Carolina.</p> <p>But growth was slow to come and Smashburger&#39;s management team seemed to be caught in a revolving door at the company&#39;s headquarters in Denver. The company was constantly shuffling top executives from one position to another, and in May 2016, Smashburger announced that Tom Ryan would be at the helm of the company as CEO/president, as the company &quot;continues making moves to evolve its business and grow more aggressively.&quot;</p> <p>According to franchise disclosure documents (FDD), Smashburger has not reached its goals. As of the end of its <strong>2014 fiscal year</strong>, there were <strong>288 </strong>Smashburger restaurant in operation in the U.S., of which <strong>166 were company-owned and 122 were franchisee-owned.</strong> As of the end of its <strong>2016 fiscal year</strong>, there were <strong>355</strong> Smashburger restaurants in operation in the U.S., of <strong>which 209 were company-owned and 146 were franchisee-owned.</strong> (FDD 2017 pg. 56).</p> <p>Because Richard &quot;Rick&quot; Schaden and his father Richard F. Schaden are on the Smashburger board of directors, Smashburger&#39;s FDDs continue to list in its <strong>Item 3, Litigation</strong>, all pending and completed lawsuits for the required period of time, not only for Smashburger, but also Quiznos and its other brands.</p> <p>The only pending litigation listed is <strong>Avenue Capital Management II, L.P., et al vs. Richard F. Schaden, et al</strong>, a civil lawsuit filed in district court for the City and County of Denver, filed January 12, 2017. Avenue Capital alleges Quiznos and the named executives, including Rick Schaden and Tom Ryan and others, violated the Colorado Securities Act, aided and abetted fraud and engaged in a civil conspiracy to deceive Avenue Capital plaintiffs by making or facilitating certain misrepresentations and omissions on which the plaintiffs relied in deciding to consummate certain investments and debt restructuring they made in the Quiznos entities in January 2012.&quot; The claims in the case arose from part of the reorganization plan approved in the bankruptcy proceedings filed by various Quiznos entities. It states, Quiznos defendants intend to defend against the allegations. (Click: <a href=""><strong>Smashburger FDD 2017</strong></a><strong>) </strong></p> <p>Smashburger has been operating for over ten years and has not increased its number of franchisee locations, now at 146. Its Smashburger website discloses, &quot;Currently, the following states in the United States regulate the offer and sale of franchises: California, Hawaii, Illinois, Indiana, Maryland, Michigan, New York, North Dakota, Oregon, Rhode Island, South Dakota, Virginia, Washington, and Wisconsin. If you are a resident of one of these states, we will not offer you a franchise unless and until we have complied with applicable pre-sale registration and disclosure requirements in your jurisdiction.&quot;</p> <hr /> <p><strong>Related Articles: </strong></p> <ul> <li><a href="'s_latest_casualty">CEO Nolan Is Smashburger&#39;s Latest Casualty</a></li> <li><a href=""><span style="color:#f76800; font-family:Arial; font-size:10pt; text-decoration:underline"><strong>Smashburger CMO Josh Kern Resigns</strong></span></a></li> <li><a href=""><span style="color:#3a5195; font-family:Arial; font-size:10pt; text-decoration:underline"><strong>Tom Ryan Named Chief Brand Officer at Smashburger</strong></span></a></li> <li><a href=""><span style="color:#3a5195; font-family:Arial; font-size:10pt; text-decoration:underline"><strong>Smashburger Appoints Gregg Koffler as New Serior VP of Franchise Sales, Administration</strong></span></a></li> <li><a href=""><span style="color:#3a5195; font-family:Arial; font-size:10pt; text-decoration:underline"><strong>As Smashburger CEO Crane Leaves, Long Live Chief Nolan</strong></span></a></li> <li><a href=""><span style="color:#3a5195; font-family:Arial; font-size:10pt; text-decoration:underline"><strong>Smashburger appoints new CEO, Prokupek leaves</strong></span></a></li> <li><a href="" target="_blank"><span style="color:#3a5195; font-family:Arial; font-size:10pt; text-decoration:underline"><strong>Smashburger CEO Scott Crane forges ahead with chain&#39;s growth</strong></span></a></li> <li><a href="{655E6136-17C0-439C-8815-704B91D31962}"><strong>Smashburger FDD 2017</strong></a><strong> </strong>Minnesota Amended July 14, 2017<strong> </strong></li> <li><a href="javascript:__doPostBack('ctl00$MainContent$gvDocumentList$ctl03$btnDownload','')"><span style="color:#005580; font-family:Times New Roman; font-size:10pt; text-decoration:underline"><strong>Smashburger FDD 2017 </strong></span></a> California August 31, 2017</li> </ul> <!-- google_ad_section_end --> Mergers & Acquisitions aided and abetted in fraud CEO Tom Ryan Consumer Capitl Partners Jollibee Foods Corporation Quiznos litigation Richard F. Schaden Rick Schaden Smashburger strategic partnership violation of Colorado Securities Act Fri, 16 Feb 2018 16:54:16 +0000 Janet Sparks 16318 at In a Growing Economy, U.S. Restaurant Outlets Decline <!-- google_ad_section_start --><div class="photoright"><img alt="Empty boxes in an empty, shuttered bakery" src="" style="width: 320px; height: 213px;" /> <div class="caption">Empty cash drawer &amp; boxes&nbsp;inside&nbsp;a&nbsp;shuttered&nbsp;QSR</div> </div> <p>The U.S. restaurant count reached 647,288 units in the autumn of 2017. That is a&nbsp;2 percent decrease in the number of restaurant outlets from a year ago. </p> <!--break--><!--break--><p> The primary source of the decline in U.S. restaurant units was a three percent drop in independent restaurant units compared to a stable count of restaurant chains, reports global researcher The NPD Group in its Fall 2017 census of commercial restaurant locations in the United States.</p> <p>Restaurant chain counts grew to 301,183 units, a 982 unit increase, which kept the total chain count flat compared to fall 2016. The total number of independent restaurants declined to 346,105 units, a decrease of 10,952 units from last year.&nbsp;&nbsp;</p> <p>Quick service restaurants&nbsp;declined by 1 percent to 353,121 units. Fast casual chains, which are a restaurant sub-category under quick service restaurants, increased units by four percent to a total of 25,118.</p> <p>Full service restaurant units, which include casual dining, family dining, and fine dining restaurants, stood at 294,167 units in fall 2017, a two percent decline, according to NPD, which includes in its fall 2017 census all restaurants open as of September 30, 2017.&nbsp;&nbsp;&nbsp;</p> <p>According to the researcher, total U.S. restaurant traffic ended 2017 flat. Had it not been for a 1 percent increase in quick service restaurant visits, an increase primarily driven by marketing initiatives by chains, restaurant traffic would have declined.</p> <p>The decline in the count of restaurant outlets is in contrast to what is happening to the U.S. economy.&nbsp; Gross Domestic Product in America grew by 2.3 percent in 2017, according to a preliminary estimate in January by the U.S. Department of Commerce&rsquo;s Bureau of Economic Analysis. America&rsquo;s number of mouths grew too. America&rsquo;s population grew by roughly 0.7 percent in 2017, according to the latest tabulations from the U.S. Census Bureau.</p> <p>&ldquo;The U.S. restaurant count is reflective of what&rsquo;s happening in the foodservice industry today overall,&rdquo; says Bonnie Riggs, NPD&rsquo;s restaurant industry analyst. &ldquo;To expand or not expand units is a calculated decision on the part of restaurant operators. Chains simply have more monetary resources to grow units whereas independents do not.&rdquo; &nbsp;&nbsp;</p> <!-- google_ad_section_end --> Trends Wed, 14 Feb 2018 19:02:25 +0000 Don Sniegowski 16316 at Graphic Sexual Harassment Charges Filed against IHOP, Applebee’s Franchisees <!-- google_ad_section_start --><p><img alt="" src="" style="width: 670px; height: 377px;" />Two of DineEquity&#39;s restaurant chains, IHOP and Applebee&#39;s, are at the center of sexual harassment complaints that were filed by sixty employees of franchised restaurants in eight states. They have filed federal lawsuits against the franchisees. According to one media report, this is the highest number of federal sexual harassment lawsuits filed against any restaurant chain.</p> <!--break--><!--break--><p>One EEOC complaint filed against an IHOP (International House of Pancakes) franchise owner names 2098 Restaurant Group, LLC and 2103 Restaurant Group, LLC as defendants in its lawsuit that was filed on September 19, 2017 in the district court of southern Illinois. The action is under Title VII of the Civil Rights Act of 1964 and Title I of the Civil Rights Act of 1991, which corrected unlawful employment policies and practices on the basis of sex and provided appropriate relief to a class of female employees of the Glen Carbon, Illinois IHOP restaurant.</p> <p>Khalid Ramadan, the IHOP franchisee, is the sole owner of a number of restaurants under various entities. He owns franchise units in Glen Carbon, Illinois, Alton, Illinois, Decatur, Illinois, O&#39;Fallon, Illinois, Kansas City, Missouri, O&#39;Fallon, Missouri, Saint Peters, Missouri and Wentzville, Missouri. Prior to January 2016, he and his brother Rami Ramadan had a 50 percent ownership in some of the restaurants until January 2016. Rami and a cousin, Bassam Samuel, both worked in the restaurants, which employed at least 15 workers.</p> <p>The franchisee oversaw the operations and employees of all his locations. He adopted and implemented the personnel policies for each restaurant, including the sexual harassment policy. He was also responsible for their enforcement. The complaint states that Khalid and Rami Ramadan failed to prevent or correct the unlawful sexual harassment at the locations.</p> <h3><span style="color:#800000;"><strong>EEOC describes egregious acts by IHOP employees </strong></span></h3> <p>Eleven employees are named in the September 2017 lawsuit as alleged victims of the sexual assault, including two who claimed to be forced to resign as a result of the sexually hostile work environment at the Glen Carbon IHOP. The employee plaintiffs also seek relief for one male employee at the Alton, Illinois IHOP restaurant, which names the general manager as the culprit. The complaints give graphic details of the sexual behavior of superiors and coworkers, aggressively groping and propositioning the employees, some underage, for sexual favors, while those in charge looked the other way.</p> <p>The lawsuit highlights one EEOC complaint filed in December 2011. It describes how a 16-year old girl from suburban St. Louis landed her first job as a waitress at the local IHOP restaurant at Glen Carbon. To complete the co-op program and graduate as planned, she was required to remain employed for one year.</p> <p>The complaint asserts that the general manager, Rami Ramadan, began making &quot;frequent, unwelcome and offensive sexual comments to the employee and her female coworkers, telling them &quot;they were sexy and their pants looked good.&quot; The young girl told him to stop making such comments, but he continued. Rami Ramadan was the highest-ranking management employee at that location.</p> <p>Rami Ramadan&#39;s conduct became more egregious and intimidating. The complaint states that he began sending her sexually provocative and threatening text messages such as &quot;You are really playing to (sic)</p> <p>hard to get girl, loosen up a little;&quot; &quot;Don&#39;t make me get violent babe, and take what I want;&quot; &quot;Or we can meet and have sex somewhere that would be fun;&quot; &quot;I wasn&#39;t asking I was telling your (sic);&quot; and &quot;Your (sic) going to cooperate one way or the other.&quot;</p> <p>The lawsuit states that after the 16-year-old repeatedly told Rami Ramadan to stop his sexually harassing conduct, he continued. Shortly before Thanksgiving 2012, Rami Ramadan approached her from behind. &quot;In early November 2012, R. Ramadan called Redacted into his office, pushed her against the closed door, pressed up against her and placed his hands on her buttocks. Although he refused to allow her to leave, Redacted resisted his advance and managed to open the office door and escaped,&quot; the complaint states.</p> <p>Rami Ramadan then put a steak knife to her throat and told her that he didn&#39;t like to be told no. He then released her, and the worker left the restaurant. While he held the knife to her neck, the worker feared Ramadan &quot;would have injured or sexually assaulted her. She testified she was frightened and shaking. She said she told no one because she was afraid she would be fired, fail the course and not be allowed to graduate as planned.</p> <p>In December 2012, the teenager told her parents about her supervisor&#39;s behavior, and the police were notified. She was forced to resign as a result of the hostile, intimidating and abusive environment, the lawsuit alleges.</p> <p>Count I alleges that sexual harassment by Rami Ramadan, the restaurant&#39;s general manager, and cooks Ernesto Xivir, aka Garrison/Gerson, and Humberto Cudena/Caldena &quot;were severe&quot; and some altered the terms and conditions of employment, and created a hostile and abusive work environment. Despite Ramadan&#39;s knowledge of the sexual harassment, all defendants failed to investigate or take effective corrective action. Instead, they condoned it, the complaint says.</p> <p>Count II alleges the sexual harassment by Rami Ramadan and others created an abusive, intimidating and sexually-hostile environment that adversely affected the terms and conditions of the aggrieved female employees&#39; employment and &quot;was so intolerable&quot; that female employees were forced to resign. Count III alleges that while employed at the Alton IHOP, the male worker was subjected to egregious and unlawful harassment &quot;because of his sex by the restaurant&#39;s general manager Bassam (Samuel) Ramadan.&quot;</p> <p>The detailed sexual harassment accounts of each employee at different restaurants named in the lawsuit are given in the legal complaint. It states that the unlawful employment practices at the IHOP locations &quot;were committed with malice or with reckless indifference to the federally-protected rights of the aggrieved female employees.&quot;</p> <p>DineEquity was created from a foundation established by IHOP and brought Applebee&#39;s into its system in November 2007. Today, it operates 2,000 Applebee&#39;s in 50 states, Puerto Rico, Guam and 14 other countries, and 1,752 IHOP restaurants also in 50 states and many other countries. IHOP was founded by Al and Jerry Lapin in 1958.</p> <h3><span style="color:#800000;"><strong>7,000 sexual harassment reports filed with EEOC in 2017 </strong></span></h3> <p>The above federal lawsuit detailing complaints of alleged sexual harassment are just a few of the nearly 7,000 complaints filed with the U.S. Equal Employment Opportunity Commission. The Center for American Progress conducted a report stating that from 2005 to 2015, hotel and restaurant workers filed at least 5,000 sexual harassment complaints with the EEOC, &quot;more than any other industry.&quot;</p> <p><em>Vox</em> media recently reported on the study. It states, &quot;In the wake of #MeToo, the restaurant industry has been forced to grapple with the hostile work culture that has flourished in American dining establishments, with high-profile chefs like Mario Batali and John Besh brought down by allegations of sexual misconduct. But the movement has yet to sweep into the less glamorous, lower-paid sectors of the restaurant industry &mdash; family and chain restaurants that millions of Americans visit each year.&quot;</p> <p>The report by<em> Vox</em> media also states that two federal lawsuits are pending against IHOP restaurants in New York, Illinois and Nevada. One in New Mexico has been settled. Another against an Alabama IHOP has been moved to arbitration. It added, &quot;Two lawsuits are pending against Applebee&#39;s restaurants in South Carolina and New York. Two others, in North Dakota and Florida, were settled.&quot;</p> <p>The<em> Vox</em> report said its review did not include lawsuits filed in state courts. And it did not include claims against restaurants that require workers to sign mandatory arbitration agreements, &quot;which essentially bars workers from suing their employers and instead forces them to resolve disputes privately.&quot;</p> <hr /> <p><strong>Related Articles: </strong></p> <ul> <li><a href="" target="_blank">More Than 60 Women have Filed Sexual Harassment Complaints against IHOP, Applebee&#39;s Restaurants</a></li> <li><a href="" target="_blank">Massage Envy Chain Gropes with Client Sexual Assault Lawsuits</a></li> <li><a href="" target="_blank">EEOC Complaint</a></li> </ul> <!-- google_ad_section_end --> Legal claim & allegation Applebee's Bassam Samuel Ramadan DineEquity EEOC complaints IHOP Khalid Ramadan Rami Ramadan sexual harassment claims against franchisees Wed, 14 Feb 2018 05:17:03 +0000 Janet Sparks 16314 at One Cannabis Ready to Roll Out Franchises amidst Challenges with Feds <!-- google_ad_section_start --><div class="photoright"><img alt="" src="" style="height: 180px; width: 320px; float: right; margin-left: 5px; margin-right: 5px;" width="320" height="180" /> <div class="caption">Photo: One of many pot shops on Colorado streets</div> </div> <p>As more states across the country are looking to legalize recreational marijuana, Green Man Cannabis dispensaries hopes to expand its brand through its franchising entity, One Cannabis.</p> <!--break--><!--break--><p>The company said that industry annual revenues are currently at $6 billion. It wants to share its expertise with others who will compliantly operate their companies to its rules, without them having to learn the expensive lessons of growing a marijuana business.</p> <p>Christian Hageseth, the seasoned entrepreneur behind Green Man Cannabis, touts his dispensaries to be the best in the nation. He says Green Man is well known for its connoisseur grade craft cannabis and many Cannabis Cup wins. The business owner says he is now focused on building the world&#39;s most powerful cannabis business franchise system under his new brand, One Cannabis. He touts that he has more than 20 years of experience in the business world and nine years in the cannabis industry.</p> <p>&quot;Those looking to open their own dispensary can be on the forefront of the nascent industry with complete confidence by tapping into the expertise of our award-winning team and the proven systems we&#39;ve perfected over the years,&quot; said&nbsp;Hageseth. He says that One Cannabis is interested in expanding nationally through strategic franchise partnerships. The brand seeks prospective entrepreneurs interested in breaking into the industry, as well as people who have already obtained a dispensary license and independent cannabis dispensary owners who seek guidance and ongoing support from a trusted industry source.</p> <p>One Cannabis, based in the founder&#39;s home state of Colorado, expects to have 50 locations within the next 36 months. While the franchise currently has opportunities for new locations with retail sites already identified in Denver and Frisco, a majority of its Colorado franchises will be with independent dispensary owners. The owner states, &quot;Many independent dispensaries are generating revenues far below the industry average. That&#39;s why we&#39;re offering to convert them into One Cannabis. Joining our franchise [system] allows these entrepreneurs to learn from our best practices and benefit from our relationships so they can truly see their business&#39;s potential.&quot;</p> <p><em>High Times </em>magazine named CEO Hageseth as its &quot;Industry Trailblazer.&quot; It said the founder authored <em>Big Weed: An Entrepreneur&#39;s High-Stakes Adventures in the Budding Legal Marijuana Business</em>, a chronicle of his journey in the cannabis industry. One article reported that when CEO Hageseth was starting his cannabis operation in Colorado, he was robbed five times before hiring a security company to collect his money and take it to a safe location.</p> <p>One Cannabis touts that its company has hundreds of reliable partners. Vice president John Darwin, said, &quot;Many suppliers steer clear of working with businesses in the cannabis industry, since it is not federally legal, which makes it challenging for those new to the industry. As a One Cannabis franchisee, you don&#39;t need to figure out how to talk to a landlord or secure a bank account because we know the best partners to work with. We have hundreds of vetted business relationships, so you only need one, us.&quot;</p> <p>Blue MauMau unsuccessfully requested an interview with CEO Christian Hageseth through the company&#39;s public relations firm Pink Tree Creative, hoping to ask the chief executive what he envisions to be his biggest challenges in constructing a franchise system in the marijuana industry. As of today, Hageseth has not responded to the interview request.</p> <h3><span style="color:#800000;"><strong>Federal government is the biggest challenge for businesses in the pot industry</strong></span></h3> <p>In reviewing the current marijuana industry, most cannabis businesses understand what their biggest challenges will be in the near future. Topping the list, is that federal banks are not allowed to conduct business with marijuana-related companies. That begs the question, what do marijuana businesses do with all the cash they collect on sales? How do they pay required taxes, social security, Medicare and employee tax withholding?</p> <p>A <em>Wall Street Journal </em>article this week explained the banking situation saying, &quot;A significant chunk of the financial system&mdash;including most credit-card companies and all banks that have access to the Fed&#39;s payments highway&mdash;is regulated by the U.S. government, which considers distribution and use of marijuana a crime. As a result, marijuana dispensaries have had to rely mainly on cash, raising security and logistical concerns.&quot;<strong> </strong></p> <p><em>The Wall Street Journal </em>reported that under the Obama administration, the Justice Department issued legal guidance indicating that its priorities in combating illegal drug trafficking didn&#39;t include the sale and purchase of state-legalized marijuana. &quot;It said it would crack down on the marijuana industry only in cases tied to other criminal activities, such as distribution to minors, firearm violence or trafficking of other drugs,&quot; the report said.</p> <p>Now, the Trump administration is considering removing the Obama-era protocol that permitted banks to open accounts for cannabis-related businesses without being considered in violation of law. Attorney General Jeff Sessions has now put fear into the marijuana industry, in his move to overturn the Cole Memo, which &quot;had previously laid a hands-off federal policy towards state marijuana policy,&quot; according to a <em>Truth In Media</em> report. It explains that federal prosecutors &quot;will now be allowed to decide how to prioritize enforcing federal cannabis prohibition in relation to possession, cultivation or distribution in states that have legalized the drug.&quot;</p> <p>Yesterday, following years of litigation, the Federal Reserve Bank of Kansas City gave conditional approval to Colorado-based Fourth Corner Credit Union to service cannabis-related businesses. There is one catch. In order to secure that approval, the credit union had to agree that it would not serve any business that directly handles funds from cannabis sales or any state-licensed dispensaries.</p> <p><em>Truth In Media</em> explained that &quot;originally, in 2014, the credit union was awarded a charter by the State of Colorado to serve state-legal canna-businesses, but the Federal Reserve Bank of Kansas City refused to honor Fourth Corner&#39;s request for a master account on the grounds that federal law prohibits banks from serving businesses that handle funds related to an illegal substance. Without a master account, which allows access to the banking system, the credit union would not be able to operate.&quot;</p> <p>A judge dismissed a lawsuit filed by The Fourth Corner Credit Union, seeking federal approval for the first credit union for marijuana in Colorado. District Judge R. Brooke Jackson said that allowing it &quot;would facilitate criminal activity.&quot;</p> <h3><span style="color:#800000;"><strong>Cannabis franchises also face legal uncertainties </strong></span></h3> <p>Recreational marijuana has now been legalized in Colorado, California, Alaska, Oregon, Washington, Nevada, Maine and Massachusetts. Washington, D.C. also allows the recreational use of marijuana. Franchises are regulated by both the U.S. Federal Trade Commission and by various state agencies. Forbes addressed some of the drawbacks of marijuana franchises in 2015. Below is a brief summary.</p> <ul> <li>Cannabis may be decriminalized in some states, but it is still illegal under federal law. A franchise selling cannabis could be shut down at any time by federal authorities.</li> <li>Franchising is based on the premise that franchise opportunities are tested and proven successful over a period of time. That doesn&#39;t apply for marijuana franchises.</li> <li>Marijuana franchises do not offer the value of name recognition, economies of scale, as traditional franchises do.</li> <li>Profit levels are also uncertain. While all businesses have an element of uncertainty, cannabis prices are volatile and taxes on cannabis are very high.</li> </ul> <p>The American Bar Association has also address some of the problems related to marijuana franchises, as reported by <a href="">Americas Best Franchises</a>. The ABA states that these franchisors cannot be expected to guide new franchisees through the legal complexities. Other cannabis franchisors are putting language in their franchising agreements that put the burden of legal issues squarely on the franchisees, specifying that the franchisees have the responsibility to follow all laws in their area and that the franchisor is not responsible for legal issues.</p> <hr /> <p><strong>Related Articles:</strong></p> <ul> <li><a href="" target="_blank">Fed Backs Marijuana-Focused Credit Union</a> (WSJ $)</li> <li><a href="" target="_blank">Attorney General Jeff Sessions Marijuana Enforcement</a></li> <li><a href="" target="_blank">New Bank Could Save the Pot Industry</a></li> <li><a href="" target="_blank">Marijuana Sales Totaled $6.7 Billion in 2016</a></li> <li><a href="" target="_blank">Pot Problem: Banks Still Don&#39;t Want This Cash</a></li> <li><a href="" target="_blank">Meet the Family Behind the Legal Weed Industry&#39;s First Credit Union</a></li> <li><a href="" target="_blank">I Bought Pot Legally and It Was Weird</a></li> <li><a href="" target="_blank">Pot-Marijuana Banking, CNN</a></li> <li><a href="" target="_blank">Marijuana Franchising: Don&#39;t Let This Happen to You</a></li> <li><a href="" target="_blank">Red Flags for Entrepreneurs Considering a Legal Cannabis Franchise</a></li> <li><a href="">Grow with One Cannabis: New Retail Franchise Opportunity in $6B Industry</a></li> </ul> <!-- google_ad_section_end --> Retail Attorney General Jeff Sessions CEO Christian Hageseth Federal Reserve Bank of Kansas City Fourth Corner Credit Union Green Man Cannabis Justice Department legal marijuana Fri, 09 Feb 2018 03:49:59 +0000 Janet Sparks 16311 at Franchisee Seeks $9.5M, Alleges Roasting Plant Used Fake Representations to Defraud <!-- google_ad_section_start --><p>A franchisee of two Roasting Plant coffee locations in the Detroit area filed a federal lawsuit last week seeking $9.5 million, alleging the franchisor failed to provide him the required-by-law state and federal disclosure documents prior to his purchase, and committed &quot;racketeering activities&quot; throughout its fraudulent scheme in selling franchises.</p> <!--break--><!--break--><p>Michael Shedadi asserts in his complaint that he was first induced by <a href="">Roasting Plant</a> and its founder/CEO Michael Caswell and chief sales and marketing officer Thomas Hartocollis in November 2015 when he entered discussions regarding the purchase of a franchise or a joint venture opportunity. He alleges that company officials made multiple representations of material fact, including an excel spreadsheet entitled &quot;U.S. Store PL Simulation, showing how successful stores across North America could perform.</p> <p>The data Shedadi was given showed $1,100,000 in revenue per year; a 25.4% EBITDA; $513,182 in total operating expenses; and $699,406 in build-out costs. Relying on the veracity of the representations made by Roasting Plant, Shedadi signed a &quot;letter of intent&quot; to purchase the location in Detroit and the right to &quot;license&quot; six other stores, four of which came into existence under the names Roasting Plant of Dearborn Heights, LLC, Roasting Plant of Ann Arbor, LLC, Roasting Plant of Dearborn, LLC, and Roasting Plant of Southfield, LLC.</p> <p>Roasting Plant later made multiple representations, first on a certain location labeled as &quot;Ann Arbor Proforma&quot; showing $1.400,000 per year in revenue; a 28.1% EBITDA; $602,272 in operating expenses; and $849,419 in build-out costs. Again, relying on the veracity of the pre-agreement representation, Shedadi signed entered into a Roasting Plant Coffee Development Agreement with the franchisor.</p> <p>On August 29, 2016, Roasting Plant executed the &quot;RP Retail Unit License Agreement Addendum to Development Agreement&quot; approving the DH [Dearborn Heights] location, also granting Shedadi&#39;s company the exclusive right and license to develop seven retail units, and the license to use Roasting Plant system and trademarks. By way of the agreement, Roasting Plant was given the right to control numerous practices and operations of the franchisee entity, including employee training, and the right to require it to remodel, renovate and modernized its stores.</p> <p>Roasting Plant was also given the right to require the franchisee on marketing and promotion efforts, and on its site locations, as well as on overseeing &quot;all methods and operations of stores, including . . . supplies, products, menu items, product sources, hours of operation, advertising efforts and content, computer systems and software, and management system,&quot; to name a few.</p> <p>Upon execution of the agreement, Shedadi paid a $90,000 fee to Roasting Plant by wire transfer. And the franchisee was required to pay $150,000 by wire transfer as a down payment on three JavaBots ($50,000 per roasting machine), as required in the agreement. Two other leases were then executed for additional stores, and in October 2016 construction began on the two new locations. Shedadi then paid two license fees for the new locations, $20,000 each, again by wire transfer.</p> <p>Over the course of 2016, the franchisee entity was required to pay $450,000 by wire transfer to cover the remainder of the costs for the JavaBots machines.</p> <p>To date, under the agreement, Shedadi asserts that he has been forced to expend at least $3,172,311.55, including other costs, and buildout and construction costs, all to his detriment. At the time Shedadi was presented with all the corporate representations regarding projections on revenue and expenses, he believed the numbers were true. Since that time, he alleges that he and his company have learned that most, if not all, of the forecasts Roasting Plant made were materially false.</p> <p><strong>Crux of the litigation </strong></p> <p>Franchisee Michael Shedadi, represented by Jordan S. Bolton and Karl J. Edward Fornell of Birmingham, Michigan, filed his lawsuit against franchisor Roasting Plant and its officers in U.S. District Court, Eastern District of Michigan. They are asking for a principal judgment in the amount of $3,172,311.55, plus all consequential and incidental damages.</p> <p>The lawsuit alleges seven counts against Roasting Plant defendants. In addition to claiming violations of Michigan&#39;s franchise investment law and fraudulent violations against the Federal Trade Commission Act, for failure to make any of the disclosures required by both, and other counts, the franchisee plaintiffs allege fraud against all Roasting Plant defendants asserting they made false representations of material facts prior to entering the license agreement.</p> <p>The franchisee is also asking for trebled judgment in the principal amount of at least $9,516,934.65, for defendants&#39; violation of the RICO Act (Racketeer Influenced and Corrupt Organizations Act). As an &quot;enterprise&quot;, the Roasting Plant defendants &quot;associated together for the common purpose of defrauding plaintiffs by presenting a fraudulent scheme to obtain and retain funds from plaintiffs (franchisee entities).&quot; The perpetrated scheme alleged by the franchisee includes providing false financial forecasts, misrepresent ting the legality of the agreement, misrepresenting the legal form of the franchisees, and attempting to avoid compliance with the Michigan franchise laws and FTC act. And all Roasting Plant defendants have a financial interest in the success of the &quot;enterprise&quot; and share in the profits.</p> <p>A <em>Detroit Free Press</em> report on the litigation stated that Roasting Plant owners have vowed to &quot;vigorously defend themselves&quot; against the lawsuit by Michael Shehadi, calling the claims &quot;frivolous&quot; and &quot;without merit.&quot; It adds that the company founder, Mike Caswell, was also a defendant in a 2015 lawsuit, again filed in U.S. District Court in Michigan. Elizabeth Rose, owner of a downtown Detroit Roasting Plant location, sued the franchisor and Caswell, seeking repayment of nearly $2 million in loans. She alleged that &quot;Michael Caswell oppressed minority stakeholders through a course of conduct that has made Roasting Plant insolvent.&quot;</p> <p>Roasting Plant countered with its lawsuit claiming franchisee Rose had &quot;conspired with members of the company&#39;s board of directors to serve her own financial interests and drive international expansion.&quot; <em>Detroit Free Press</em> said the lawsuits concluded with a confidential settlement.</p> <p>As a side note, the article also reported that actor Hill Harper, known for his role in the television show &quot;CSI: NY&quot; &quot;<a href="" target="_blank">purchased the downtown Detroit Roasting Plant location</a> last May, with intentions to use it to support programming for his youth-focused nonprofit Manifest Your Destiny Foundation. According to a press release issued by&nbsp;Roasting Plant Inc.&nbsp;at the time, Harper&nbsp;also invested in the parent company, where he would also serve as advisor and brand ambassador.&quot; It said Harper&nbsp;was not named in Shehadi&#39;s lawsuit.</p> <hr /> <p><strong>Related Articles: </strong></p> <ul> <li><a href="" target="_blank">Franchisee Sues Roasting Plant Coffee for $9.5M, Alleging Fraud</a></li> <li><a href="" target="_blank">Roasting Plant Franchise Owner Sues Parent Company, Alleges Fraud</a></li> <li><a href="" target="_blank">Owner of Downtown Detroit&#39;s Roasting Plant Sues Parent Company over $2 Million in Loans</a></li> </ul> <!-- 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=" Plant Lawsuit Complaint.pdf">Roasting Plant Lawsuit Complaint.pdf</a></td><td>6.3 MB</td> </tr> </tbody> </table> Legal claim & allegation Ann Arbor Profroma CEO Michael Caswell JavaBots Marketing Officer Thomas Hartocollis Michael Shedadi misrepresentations racketeering activities RICO charges Roasting Plant franchisee litigation Sun, 04 Feb 2018 16:50:56 +0000 Janet Sparks 16309 at Sentinel Capital Sells Franchisor Huddle House <!-- google_ad_section_start --><p><img alt="A Huddle House franchised casual diner" src="" style="width: 320px; height: 180px; float: right; margin-left: 5px; margin-right: 5px;" />A private equity firm that invests in lower mid-market companies, Sentinel Capital Partners, announced yesterday that it has sold franchisor Huddle House Inc. for an undisclosed amount. The buyer was not disclosed.</p> <!--break--><!--break--><p>In the last year Sentinel divested itself of hamburger franchisor Checkers/Rally&rsquo;s, while it acquired seafood restaurant franchisor Captain D&rsquo;s. Atlanta-based Huddle House was acquired by the New York City-based private equity firm in 2012.</p> <p>Jim Coady, a partner at Sentinel, positioned the buy and sale of the chain as a nice turnaround and win for Huddle House&rsquo;s franchisees. &ldquo;Throughout our ownership, Huddle House has achieved impressive, system-wide operational results that have increased efficiency and improved productivity at the individual restaurant level. Average unit volume increased by 14 percent on our watch, which reflects the commitment and dedication to excellence of the entire Huddle House team.&rdquo;</p> <p><img alt="Decline of Huddle House Outlets in America" src="" style="width: 380px; float: right; margin-left: 5px; margin-right: 5px; height: 380px;" width="380" height="380" />But Huddle House, with its declared 30 company-owned and 328&nbsp;franchises at the end of 2016, occupies a space in the troubled casual dining sector, which has been hard hit with traffic losses. As guests have left casual dining, the chain has also lost outlets over the years (see chart). &nbsp;Sentinel stated&nbsp;in its&nbsp;press release of February 1, 2018, that Huddle House&nbsp;Inc.&nbsp;now oversees just 349 casual dining restaurants.</p> <p>In 2016 the franchisor declared in its disclosure document provided to potential franchise buyers that restaurant-level EBITDA margin (Earnings before Interest, Taxes, Depreciation and Amortization &divide; Revenue) for its franchised restaurants was 7.3 percent for its middle 60 percent of franchised restaurants that had not yet remodeled to a newer design and 10.6 percent for its middle 60 percent of those that had.</p> <p>&ldquo;Sentinel has been a great partner to Huddle House and over the past six years, has helped us set and achieve meaningful strategic milestones,&rdquo; said Michael Abt, CEO of Huddle House. &ldquo;Our customers, franchisees, operators, and employees are super excited about Huddle House&rsquo;s future.&quot;</p> <!-- google_ad_section_end --> Mergers & Acquisitions EBITDA franchise-level cash flow non-GAAP performance measure outlet decline store profits Fri, 02 Feb 2018 16:05:40 +0000 Don Sniegowski 16308 at Choice Hotels Completes Acquisition of Franchisor WoodSpring Suites <!-- google_ad_section_start --><div class="photoright"><img alt="WoodSpring Suites in Seattle Everett" src="/sites/default/files/resize/WoodSpring%20Suites%20room-320x213.jpeg" style="width: 320px; height: 213px;" width="320" height="213" /> <div class="caption">WoodSpring Suites room in Everett, WA. (photo/Choice)</div> </div> <p>Choice Hotels International, Inc. (NYSE:CHH) announced today that it has completed its acquisition of WoodSpring Hotels LLC. The intent to buyout the franchising firm that oversees 240 extended-stay hotels was announced a month and a half ago. </p> <!--break--><!--break--><p> Choice Hotels acquired the WoodSpring Suites brand, including franchise operations, marketing and development, for&nbsp;$231 million.</p> <p>The chain represents an asset-light franchising model for Choice. WoodSpring joins Choice&rsquo;s existing extended-stay hotel brands MainStay Suites and Suburban Extended Stay. Choice says that WoodSpring hotel units on average experienced a 21 percent growth in RevPAR over the last three years.</p> <p>&quot;I&#39;m thrilled to officially welcome the WoodSpring Suites brand and its franchisees and owners to the Choice family. WoodSpring developers represent some of the best in the nation, and we look forward to introducing them to Choice&#39;s powerful platform of technology and resources, helping to create further return on their investments,&quot; said&nbsp;Patrick Pacious, president and CEO, Choice Hotels. &quot;Choice has a strong pipeline for its new construction brands, including Cambria, Sleep Inn, MainStay, and Comfort, and this acquisition offers another new construction brand for our growth-oriented developer community. More importantly, the acquisition enables us to incorporate best practices from WoodSpring&#39;s proven model across our extended-stay brands, and further strengthens Choice&#39;s position as a leader in both hospitality and franchising.&quot;</p> <!-- google_ad_section_end --> Mergers & Acquisitions Thu, 01 Feb 2018 23:49:28 +0000 Don Sniegowski 16307 at