Rebuttal: Franchisor Blunders? Not in This Case

After posting the OpEd yesterday, Franchisor Blunders, No Wonder Buyers Don't Read FDDs, PR consultant Lorne Fisher, representing law firm Cheng Cohen and franchisor Smashburger, contacted Blue MauMau reporter Janet Sparks to say the column was factually incorrect. He stated that he and his clients were "very frustrated by the misrepresentations" in the story, that "it almost said" they [his clients] were "irresponsible," and they found the article to be "disparaging."

Fisher explained that a correction was obviously necessary, but even more so, an apology. He expressed that as a reporter, Janet Sparks should have called the Minnesota Department of Commerce to question why the FDD contained certain pages of Smashburger's FDD and the remaining pages of FUSA Inc. FDD. Or she should have called Cheng Cohen to report the error and get an explanation.

Today, Cheng Cohen's explanation of the FDD blunder is that the amended franchise disclosure document (FDD) not being recorded on Minnesota CARDS website and then being recorded incorrectly was a clerical error made by a new clerk in the regulator's office. Fisher said the clerk had received the FDDs of Smashburger and FUSA Inc. and when he/she scanned the two documents they somehow merged together into one FDD.

When reporter Sparks asked why the amended Smashburger FDD was still not recorded on Minnesota's website, Fisher said, "They are working on it."

Blue MauMau stands by Ms.Spark's column. However, Mr. Fisher was told that he or his clients could post their view in a comment to the reporter's OpEd, or they could publish it as a rebuttal Opinion piece.

Below is Cheng Cohen attorney Micheal Daigle's rebuttal.

Franchisor Blunders? Not in This Case

On January 13, 2017, I received an email from a lawyer representing a franchisor called FUSA, Inc. He told me that he'd received from the MN Commissioner an order of registration for Smashburger's amended FDD that I had filed on December 29, 2016. He asked if I'd perhaps received the order related to his client's filing by mistake. It turns out that—as a result of a simple clerical error in how the MN Commissioner scanned and then posted Smashburger's and FUSA's filings—FUSA's FDD came up when one clicked on the link to Smashburger's amended FDD. I understand from the MN Commissioner that it removed the Smashburger link from the CARDS website so its clerical mistake could be fixed, and the link will be back up once they've corrected their error. That's what happened.

I've seen lots of errors, misstatements and misquotes made by the press in my nearly 40-year legal career (33 in the franchise industry), and I've always chosen to let the reporter do the right thing. But this article written under the guise of an Op Ed piece by Ms. Sparks – a self-proclaimed "investigative journalist" who tackles "complex issues that impact the franchise industry" - is so inaccurate, it simply cannot go unanswered or unchecked. How can a reporter with Ms. Sparks' experience and a publication that touts itself as the "franchise owner's most trusted source," in good conscience, publish an article (opinion or otherwise) so full of errors, misstatements, and intentionally disparaging untruths?

What "investigative journalist" doesn't actually investigate what she's writing about? It would have been so easy in this case – she need only have picked up the phone and asked me. Since she didn't want to go to the trouble of verifying her claims, let me tell her what she would have learned has she merely asked. She asserts that Smashburger was "required by state and federal franchise regulators to amend its franchise disclosure documents." In fact, no regulator – state or federal – required Smashburger to do anything of the sort. She also asserts unequivocally that we didn't file Smashburger's amended FDD with Minnesota at the same time we filed it with California. We did, and we have the filing receipt to prove it. I would have gladly provided her a copy if she had only asked. Ms. Sparks' fundamental carelessness is evident throughout the piece – from referring to "perspective" franchisees (it's "prospective" franchisees), to stating that FDDs are required to be filed with the Federal Trade Commission (they aren't; they're filed only with the states that require registration). There is absolutely no excuse for these mistakes from a reporter having a purported 30 years' experience covering the franchise industry and being a self-proclaimed investigative journalist "tackling complex issues that impact the franchise industry."

For reasons only Ms. Sparks can explain, she conjured up a story that simply didn't exist. She made, and based her "Op Ed," on what were purported to be factual statements but were, in fact, nothing but her own conjecture and speculation and without any basis in reality. The smallest amount of investigation on her part would have revealed the truth. Shame on her for such irresponsible reporting and shame on Blue Mau Mau – the "franchise owner's most trusted source" - for publishing such a factually incorrect article without a single attempt to go the subject of the allegations made to fact-check a single claim made in the article. Ms. Sparks' irresponsible reporting in this instance does the entire franchise community – franchisors and franchisees alike - a disservice.

Ms. Sparks says that Smashburger and we "got it all wrong." We didn't, but she certainly did. She has been asked to correct her reporting and to apologize for inappropriately disparaging Smashburger and Cheng Cohen. We'll see if she gets it right this time.

Michael R. Daigle
Partner, Cheng Cohen LLC

Comments

Not far enough

These FDD's don't disclose what is really behind a franchisor's business:

1. They can do almost anything they want because your only recourse is arbitration that is stacked against you,
2. Courts of law back up these tactics due to arbitration clause,
3. They believe the equity you have built up in your business through sweat and tears is theirs and they will leverage that by going after your balance sheet with mandated capital expenditures they get kickbacks from,
4. Their decisions are based on how much THEY will make off the franchisees with disregard to how it impacts the franchisees,
5. They are on a mission to create as much cash flow into their business in order to cash out at some date with dunkin donuts money.

Mike Daigle

So Daigle's comment is the State made the error.

Does the State say that? Doesn't the highly paid Mr. Daigle have responsibility to go to the website and check the filing?

Lastly, Daigle (he of bloodsucker Quizno's fame) didn't reveal whether FUSA was also a Cheng Client and whether there was some issue with FUSA that also required Smashburger disclosure?

Mr. Daigle is old but he is a franchisor attorney for sure.

Different law firms for Smashburger & FUSA FDD

<p>&quot;Daigle...didn&#39;t reveal whether FUSA was also a Cheng Client and whether there was some issue with FUSA that also required Smashburger disclosure?&quot; -- Visitor</p>

<p>--</p>

<p>I just looked it up. In the franchisor&#39;s Minnesota registration documents, which is available online, a San Diego law firm, and not Cheng Cohen, handles Fixed Auto USA&#39;s registration.</p>

<p>If you search FUSA&#39;s FDD for the word Smashburger, there is no mention of the firm. It looks like there is no relationship, although I understand the suspicion since&nbsp;FUSA&#39;s and Smashburger&#39;s&nbsp;FDDs were mixed in together. Since FUSA is evidently handled by another law firm, maybe Daigle is right that a Minnesota government clerical error, and not his law firm, mixed the documents together when scanning the disclosure.</p>

<p>Having said that, with the amount of money that franchisors pay Cheng Cohen to file valid FDDs for them, you would think that Daigle would check for his clients to make sure what their documents look like once they were publicly available. Even if the hired&nbsp;law firm did not&nbsp;catch such a big mistake, at the end of the day the buck stops at Smashburger. When there is trouble, the franchisor&nbsp;will be the one on the receiving side of a blunt stick.</p>

<p>Sincerely,<br />
Donna B. Slahpea</p>