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toolsSome Words From AAFD On Cuppy's Coffee and Elite Manufacturing
Bob Purvin, Chair of the American Association of Franchisees and Dealers, Speaks About AAFD's Relationship with Cuppy's Coffee and Elite Manufacturing
First, I would like to say at a personal level – especially as the first franchise authority to expose abusive franchise practices in my book The Franchise Fraud in 1994- that I am delighted that Sean Kelly has now got religion. Many of you know that the AAFD was born out of a realization that the practice of franchising was seriously amiss – facts well documented in my book.
But the AAFD doesn't exist just to complain about franchisor practices. We recognize that many franchise systems do offer fair and collaborative practices – but their franchise agreements or contracts don't reflect this. The AAFD's Fair Franchising Standards seeks to correct, supplement and at times outright change a franchise system's culture.
Second, let me offer a few facts and observations about the AAFD handling of the 5-6 complaints about Cuppy's Coffee and Elite Manufacturing:
Cuppy’s Coffee and Elite Manufacturing Complaints
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The AAFD takes all complaints aired to us seriously, and we act fairly to all concerned, the franchisor, the franchisees and the ex-franchisees. We have not yet determined if Cuppy’s or Elite has violated either the AAFD's Fair Franchising Standards or our licensing agreement, but we are continuing to work with all parties.
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Cuppy’s has earned AAFD Accredited Contract Status for adopting a franchise agreement that substantially conforms to the AAFD’s Fair Franchising Standards. This means the company offers one of the fairest franchise agreements in the marketplace today. AAFD Accredited Contract status is not a guarantee of performance, or success, or a good business model, but it is an assurance of accountability. And as far as we can ascertain, Cuppy’s is prepared to hold itself accountable.
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Elite Manufacturing readily confirmed that it made refund promises to applicants who were unable to secure financing for a Cuppy’s franchise. It is the AAFD's understanding that these 5-6 prospective franchisees were approved as franchisees and Cuppy's assumed that third party financing would be forthcoming. But the third party financing failed to materialize.
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I read today on one of the posts that an alleged victim claimed he had been promised that his deposit would be escrowed by Elite Manufacturing (Cuppy’s affiliate). Not one of the complaints registered with the AAFD made that contention, and none of the documents shared with us have documented such a claim. This is important information to know, and I invite anyone with evidence, if such exists, of this to contact the AAFD.
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Elite has now stepped forward to agree to escrow future deposits, but this prudent commitment, which the AAFD has urged, is above and beyond any written contractual commitment as far as we can determine.
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But an important point is being missed: If the Cuppy's agreement hadn’t been negotiated by the AAFD to qualify for AAFD Accredited Contract Status, the promise of a refund would not have existed! Literally, the complaining individuals possess a breach of contract claim because of the efforts of the AAFD.
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Further, all of the Cuppy’s franchisees who have complained through the AAFD have had their complaints aired through the AAFD, and all have been offered a refund plan by Cuppy’s and an offer of mediation of their claims by the AAFD. Cuppy’s has agreed to mediation, but none of the claimants have responded to our offer of mediation.
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Cuppy’s has not once denied its obligation to make refunds, and has admitted to financial pressures due to the current banking and credit crisis.
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The AAFD has not received one complaint from a Cuppy’s franchisee in business.
While some have demanded the AAFD to behead Cuppy’s, and “get tough”, the AAFD is most concerned about investigating the claims, mediating solutions, negotiating refunds, protecting a brand, and acting fairly for all parties concerned.
The AAFD prefers to act responsibly rather than to join what we believe to be reckless cries for vengeance. I am certainly not condoning the failure of anyone to promptly make good on a promise, but I suggest that some of our critics go rent the movie, “It’s a Wonderful Life” and advance to the scene in which George Bailey responded to a run on the Bedford Savings and Loan.
George couldn’t return all the depositors money in just one day, but he acted in a manner to save his clients and his business in the long run. Cuppy’s, who has already bailed out Java Jo’z licensees, deserves the same opportunity.
Regarding the AAFD’s Role
I have been puzzled by some responses, or concerns raised, about the AAFD. Numerous collectively bargained franchise agreement spawned and negotiated by the AAFD have greatly benefited thousands of franchise owners nationwide.
The thousands of man hours and millions of donated dollars that have been invested in negotiating Fair Franchising Standards now lay the groundwork for major reform.
All that is needed is the long ago assumed groundswell of franchisee malcontent to surface and support a strong trade association to truly arm itself as the voice of franchisees.
The AAFD is about to celebrate its 16th Anniversary—we have now tripled the longevity of the next best hope for franchisee advocacy.
But let me close with this: The AAFD is not, and has never been pro-franchisee or anti-franchisor – never was, and under my watch, never will be. I believe that balanced collaborative franchising can deliver all of the enormous promise of the franchise model of product and service distribution.
The AAFD has helped spawn dozens of franchisee associations that were dedicated to building great relationships based upon fair agreements within their franchise systems.
The AAFD has created the only true accreditation for a franchise agreement and franchise system. The AAFD Fair Franchising Standards are truly a work of enormous potential for our community.
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Related readings:
- Cuppy's Coffee Franchise Allegations Are Disturbingly Familiar by Sean Kelly, Founder of Franchise Pick
- Some Words From AAFD On Cuppy's Coffee and Elite Manufacturing by Bob Purvin, Chair of AAFD
- Cuppy's Coffee: Some Words from AAFD Raises More Questions by Sean Kelly, Founder of Franchise Pick
- Fair Contract Is No Guarantee of Fair Play, Op-Ed by Chris Schmitz, President of Meineke Dealers Association
- Cuppy's Coffee: Some Words from AAFD Raises More Questions
Comment Away
"According to Bob Purvin's blog (can't make a comment on there)"
Oops. Did I do that? Sorry. Comment function is back on.
Mr. Blue MauMau
Editor
Simple Solution
According to Bob Purvin's blog (can't make a comment on there), there are 5-6 people that complained to the AAFD (who knows how many decided to take payment plans), but there is a simple solution to this, and I've mentioned it before.
Hibbing, Morgan and the Elite Pres can take out a home equity loan and make a loan to the company to pay back these people in a quick fashion. We're talking $80k for each of these three people. It would simplify these headaches.
I still think there are many unanswered questions. If the AAFD investigates something do they make the findings public in detail or is it kept silent like most arbitration proceedings?
Just out of curiousity, why are they requiring a deposit to Elite before any financing is approved? Why are they meeting with Elite representatives prior to meeting with Cuppy's representatives? Don't these people have to be disclosed in the UFOC if they are part of the sales process?
Question for Bob/Michael/AAFD
My understanding is the AAFD is an advocacy group for fair franchising. Would it be fair to ask that the AAFD act is the same manner as a government agency and inact a system similar to the 'Freedom of Information Act'.
People on this website have said that the UPS store has one of the worst franchise agreements. Why is that? Where did Cuppy's get their .5 marked off at? I think this is relevant to people assuming they think the AAFD is relevant.
Maybe a standard that within your own website, any and all complaints made against one of your seal recipients are made public with the initial complaint and a response from the company, with no retribution to the complaintant. I think that is fair.
Cuppy's and AAFD- is someone getting paid to get good new said?
Is Cuppy's paying the AAFD? What is the AAFD smoking? I thought they were about fair franchising and standards, obviously they are not doing their share of search on the internet. Both companies are a waste of anyone's time. Please go to a "Reptuable Coffee Company"
Sounds like they are in it for themselves, not the franchisee.
Confidential: Mediation v Arbitration
jd; Typically, a mediation is completely confidential because the negotiation process involves making concessions, which are not binding if the negotiation doesn't resolve into a deal.
An arbitration which involves written reasons is more like a court process. The transcripts may be available and reasons published.
My understanding is that the AAFD has offered mediation, but not arbitration to the Cuppy's people.
Michael Webster PhD LLB
Franchise News
Purvin's Blog
I have asked Bob to turn on the comments on his blog: my guess is that this is an inadvertent choice rather than deliberate.
You make some excellent points about the sales process. My particular concern is how Cuppy's insured compliance with standard 15.2, which requires that the franchisee perform due diligence.
I am not sure how the process will play out: it would make a lot of sense to have the unapproved commentary on 6.1, which talks about having franchise fees in escrow, and 15.2 which requires franchisee due diligence on the Standards Agenda for the May meeting.
Michael Webster PhD LLB
Franchise News
Franchisees Do Not Want to Support Protection
"All that is needed is the long ago assumed groundswell of franchisee malcontent to surface and support a strong trade association to truly arm itself as the voice of franchisees." - Bob Purvin, AAFD
Bob Purvin is right. Franchise owners give little for their own protection in independent franchisee associations. We don't hear a peep from them nor do we see money contributions to protect their future until it is too late, when they go broke.
Franchisee associations are almost always poor.
Very funny
Ha! Ha!
Grading of Contracts
The public grading of contracts is a good idea and we started to look into last fall.
Generally, disputes are between the IndFA and the franchise system. This process is not covered by any existing standards -may it should be?
Cuppy's does not have an IndFA so the complaints were made directly to the AAFD.
Michael Webster PhD LLB
Franchise News
IndFA's and Support
Darnelle, IndFA's like any other supplier to franchisees have to demonstrate that they have something of value. The current models, subscription or sponsorship from suppliers, are simply inadequate as business models.
My own view is that nationalizing local advertising on the web is the way for any IndFA to add value, interest and new members. Only the IndFA has access to enough user generated content to drive traffic.
Be nice if they got on board with this idea.
Michael Webster PhD LLB
Franchise News
Question for Mr. White
If franchisee associations are almost always poor, then what would you suggest that franchisees do in lieu of an association? At present, the Quiznos structure is not working for the extreme majority of franchisees. Solutions to problems are what is needed. We need to put our heads together and find solutions to these problems.
Re: Confidentiality
I again state that if the AAFD wants any relevance, they need to make this public as to what the concessions were. I hope they realize that people are being hurt financially here and Cuppy's/Elite/Medina aren't hurting because they have the money, and they don't have to build anything for these people.
If the AAFD/Cuppy's/Medina/Elite don't make it public, they are no better than UPS/Quizno's etc that require confidentiality statements signed so that people will get some money back. Elite stole this money for 20-30 months, nothing else.
No offense, but who is to say that the AAFD will be here in two years when all of this is done. Their financial situation isn't any better than Cuppy's. The negative $255,xxx of net assets as of their 2006 tax return doesn't prove that they will be here too much longer without members' help.
In fair disclosure, how much money did the AAFD receive from Cuppy's and their affiliates during the last year and a half??
Re: Grading of Contracts
Michael,
I imagine that this is an ever-evolving process. Maybe all of these should be talked about at the national meeting in May (and I would recommend Cuppy's not be allowed in these discussions since they are the ones causing these situations).
Maybe a meeting should be held with AAFD representatives, Cuppy's representatives and an independent representative (someone like Sean or someone else that is independent of the situation and could report on it and not 'spin' it in one way or the other).
Have you ever had any of the AAFD seal recipients or their affliliates act in a complete breach of contract like this?
jd
Grading of Contracts 2
A subcommittee of the Standards committee will review the AAFD's grading.
A report will be generated, and this it is this report or parts of it that could be made public.
The accredited status contracts presents a problem, in general, that the AAFD has to solve or give up granting accredited status.
In the Seal situation, the AAFD relies upon reports from the IndFA and franchisees as to compliance with the overall spirit and standards between review periods. The AAFD is not actively overseeing compliance after the seal is granted. The IndFA should be doing that.
But in the accredited status situation, there is no IndFA or only one that has just started. There is no group of franchisees to monitor the practices of the franchisor to ensure not only formal compliance but actual compliance.
Yes, this should be on the agenda for May. But, I would not bar Cuppy's from presenting their side.
jd, isn't a bit ironic -perhaps understandable- that the AAFD as the licensor of the "accredited status" to the licensee Cuppy's is acting in a collaborative manner, not rushing to judgment. On the other hand, the abusive franchisors we complain about would have simply terminated Cuppy's license with no further hearing.
Michael Webster PhD LLB
Franchise News
Making Lemonade from a Turnup
It is Ms. White, not Mister. Darnelle is an Irish name, a female version of Darren - or so I've been told.
First some truths:
At that point, associations cannot do much to help.
Independent franchisee associations look out for their own. They are not general franchisee advocacy groups, and they aren't in a position to help people who are not franchisees that have gotten themselves in trouble with franchisors. Associations do not charge general taxes to the population or receive government grants to receive support.
Franchisee associations are poor because they aren't well supported by franchisees. And they aren't supported because they cannot convince franchisees that their services are worth the cost of angering their franchisors.
Where can associations that want to stick up for the little guy - who is often too busy or scared to give them the time of day, let alone money - get revenue?
Let's at least be honest with ourselves.
The money is with the franchisor association. Now those guys have the money to get things done for franchisors. It stops unfriendly franchisee litigation and legislation. It sponsors legal seminars in which franchisor lawyers learn ways to take care of their clients. And on it goes.
The irony is that its rich coffer is lined with money from franchisors that in turn are paying a part of their earnings received from their franchisee base.
Re: Grading of Contracts 2
Michael,
I didn't explain it right, but when if any possible penalty would be determined by the AAFD, Cuppy's should not be in that discussion. They can make their case, but since Doug is on a sub-committee of yours, he shouldn't be included in that penalty discussions.
Also, is it fair to ask what standards you require of someone on your subcommittee? If franchise violations occurred would they be dismissed.
Also, one point that I'd like to make that during the discussion franchisepick, a prospective franchisee stated that they wanted to verify the 'refundable deposit' clause and that Elite/Cuppy's at that time thought that it would be starting the relationship on the 'wrong foot'. That happened a couple of weeks ago, and now Bob is commending Elite/Cuppy's on requiring the money be escrowed. Good job taking the advice of postings made on franchisepick that only seemed logical three weeks ago.
I'm sorry, I just don't see the pro-active stance that maybe you are seeing, because pro-active would be accomplished by the 'simple solution' post I made earlier today. I doubt anyone would have an argument with that posting.
Procedural Due Process
--Both "JD" and Webster have valid points as to the nature of the AAFD discussion. My thought would be that AAFD's Standards Committee have an open session in which all concerned parties are able to speak, and at the conclusion the Committee would go into closed session and then issue a decision.
This is a process which is commonly followed in legislative hearings, as well as in corporate governance proceedings.
Paul Steinberg
Franchisee Attorney, New York City, Ph: 212-529-5400
AAFD marketing restrictions?
Michael:
A suggestion for the committee is to consider providing strict guidelines for how FRs can use the accreditation award in their marketing, and the possibility of required disclaimers. One of the disconnects here is that the AAFD might think in terms of the narrow criteria it has established, but FRs are going to use it as proof of their credibility, fairness and endorsement by the AAFD.
Bob says the award is not for "fairness" or "good deeds." But franchisees are asking "can I trust these guys" and the FR assures them with the award.
Shouldn't it be made clear that the AAFD is presenting the award to a stack of papers, not the company, that there are still 101 clever ways they can shaft you, and that you should be skeptical of companies that must seek external badges of credibility to overcome ongoing bad press, controversy and a cone of silence that descends, eventually, on all detractors?
Franchise Pick
Website: FRANCHISE PICK
Lemonade Virtues
Darnelle;
I like a lot of this, but I think that you have missed out on something fundamental.
As a group, franchisees posses more knowledge than the franchisor -otherwise they would be replaced by employees. This doesn't mean that the franchisor is not important, only that the knowledge resides in the entire system.
When enough franchisees stop call the franchisor "corporate" or "head office" and see the group's knowledge, that is when you can get a real IndFA.
Liked your comments, may steal some of the lines.
Michael Webster PhD LLB
Franchise News
Due Process
You make a useful point Paul. The May meeting looks to be pretty interesting.
Michael Webster PhD LLB
Franchise News
Guidelines on Marketing
I think that this is an excellent suggestion, but usually the Seal goes to a Franchise with an active IndFA which monitors and interacts with the Franchisor - it is really at the request of the IndFA that the Seal is awarded.
Accredited Status is given to franchise contracts, with too short an operating history to have a fully formed IndFA.
It could be that the monitoring costs are too high for the Accredited Status to work out. I just don't know at this point.
Michael Webster PhD LLB
Franchise News