en Qdoba Appoints New CEO Guilbault and CFO Daggett <!-- google_ad_section_start --><p>On Wednesday San Diego-based Qdoba Mexican Eats publicly named Keith Guilbault as its newest chief executive officer and Susan Daggett as its chief financial officer. The change in leadership follows the franchisor&#39;s&nbsp;March acquisition from former parent company Jack in the Box Inc. [NASDAQ:JACK] by publicly owned investment firm&nbsp;Apollo Global Management, LLC [NYSE:APO].</p> <div class="photoright"><img alt="Qdoba&#039;s new CEO Keith Guilbault" src="/sites/default/files/QDOBA-CEO-Keith-Guilbault.jpg" style="width: 196px; height: 196px;" width="196" height="196" /><br /> <div class="caption">Qdoba CEO Keith Guilbault</div> </div> <p>Guilbault&rsquo;s appointment was effective Wednesday. The firm's newest CFO is expected to begin work at&nbsp;Qdoba on May 23. Since its exit from Jack in the Box, Qdoba stated in a release that it needs to hire positions that it once shared with Jack in the Box. It plans to add 100 full-time positions.</p> <p>Guilbault had been Qdoba&rsquo;s brand president and chief operating officer since 2016.&nbsp;</p> <p>&ldquo;Keith has been instrumental in helping to guide Qdoba through the brand&rsquo;s sale and transition into an independent company,&rdquo; said Lance Milken, senior partner at Apollo.</p> <p>Qdoba&rsquo;s newest chief financial officer, Susan Daggett, has most recently served as interim chief financial officer at Noodles &amp; Company since 2017 and vice president of finance there since August 2016.</p> <p>She also has held executive roles at Pinnacle Restaurant Group, Inc., Einstein Noah Restaurant Group, Inc., and Arby&rsquo;s Inc.</p> <p>Regarding the firm&rsquo;s new CFO, Qdoba&rsquo;s newest CEO, Keith Guilbault said: &ldquo;I believe her proven track record as a visionary leader who successfully guided the financial and accounting operations of other large restaurant organizations makes Susan a natural fit for the role.&rdquo;</p> <!-- google_ad_section_end --> Leadership change Fri, 18 May 2018 20:48:11 +0000 Don Sniegowski 16393 at Manna Buys 38 More Cafés, Now One of Panera Bread’s Largest Franchisees <!-- google_ad_section_start --><p><img alt="Panera Bread bicycle delivery" src="/sites/default/files/u9/Panera%20Bread_0.jpg" style="margin: 3px; float: right; width: 320px; height: 192px;" width="320" height="192" />Manna Development Group has acquired 38 Panera Bread caf&eacute;s in Colorado, expanding its operations to over 130 Panera Bread caf&eacute;s across seven states.</p> <!--break--><!--break--><p>CapitalSpring, a leading private investment firm focused exclusively on the branded restaurant industry, structured and led the acquisition financing and recapitalization. CapitalSpring&nbsp;says it&nbsp;currently manages assets of approximately $1.3 billion and has completed investments in over 50 different restaurant brands and more than 4,000 restaurant locations.</p> <p>Owl Rock Capital, established in 2016, served as co‐lender and lead arranger. It is a direct lender which focuses on middle-market businesses across a variety of industries.</p> <p>Manna had its start in 2003 when Paul Saber and Patrick Rogers opened their first Panera caf&eacute; in San Diego.</p> <p>&ldquo;Paul and Patrick have built an amazing culture and tremendous operational discipline throughout their organization,&rdquo; said Chad Spaulding, a managing director at CapitalSpring, and &ldquo;we are thrilled with the opportunity to invest in one of the best franchise operators in an industry‐leading fast casual restaurant brand.&rdquo; Jason Ruiz, a vice president at CapitalSpring, added, &ldquo;We have grown to admire and respect the entire leadership team and look forward to supporting Manna&rsquo;s continued expansion.&rdquo;</p> <p>&ldquo;CapitalSpring delivered a unique financing solution that allowed us to achieve our strategic goals, while maintaining ownership and control of our company,&rdquo; said Paul Saber, president &amp; CEO of Manna. &ldquo;We have enjoyed building our relationship with CapitalSpring in recent years and have been impressed not only by their ability to deliver on promises, but also their tremendous restaurant perspective and resources. We look forward to a long relationship with CapitalSpring and appreciate their support to date.&rdquo;</p> <p>Trinity Capital LLC served as financial advisor, and Snell &amp; Wilmer LLP served as legal advisor to Manna. CapitalSpring was represented by Chapman &amp; Cutler LLP.</p> <!-- google_ad_section_end --> Mergers & Acquisitions Thu, 17 May 2018 22:26:45 +0000 Don Sniegowski 16391 at NLRB May Now Decide to Use Lengthy Rulemaking to Address Joint Employer Standard <!-- google_ad_section_start --><p>As the franchise community anxiously awaited the National Labor Relations Board judge to decide on whether or not to approve McDonald&rsquo;s Corporation&rsquo;s settlement agreement to prevent it from being ruled as a &ldquo;joint employer&rdquo; with its franchisees on labor violations, the NLRB may choose an alternate route via the elongated rulemaking process.</p> <!--break--><!--break--><p>As background, the NLRB expanded the scope of joint-employment in 2015 in the NLRB <em>Browning-Ferris</em> case, but then reverted to a more rigorous showing that had been required for years in<em> Hy-Brand Industrial Contractors, Ltd.</em> But recently, under extensive political pressure, the Board vacated <em>Hy-Brand</em> due to NLRB Board Member William Emanuel&rsquo;s participation in the decision; Emanuel&rsquo;s former firm, Littler Mendelson, represented one of the unsuccessful parties in <em>Browning-Ferris</em> and was under pressure by lawmakers to recuse himself, that from the National Law Review yesterday.</p> <p>&ldquo;Since then, with cases pending before the Board and courts involving potential joint-employer liability, parties on both sides of this issue have been on the edge of their seats awaiting guidance,&rdquo; the legal report stated.&nbsp;</p> <p>The Office of Information and Regulatory Affairs last week published the NLRB&rsquo;s submission that the Board is considering rulemaking to address the standard for determining joint-employer status under the National Labor Relations Act instead of decision-making. <em>The National Law Review</em> reported that submission was &ldquo;a stark and unconventional departure from the Board&rsquo;s normal practices.&rdquo; It explained, &ldquo;This is unusual because the Board has only engaged in rulemaking a few times in its 83-year history, one of which ended badly,&rdquo; after the agency&rsquo;s attempt to require all employers to post a notice of rights under the NLRB.</p> <p>The Law Review said that &ldquo;an apparent benefit of pursuing change through the rulemaking process, rather than an adversary proceeding, is that &ldquo;there does not appear to be the same potential arguments that [NLRB] member Emanuel or any other board member must recuse him or herself based on the identities of the interested parties.&rdquo;</p> <p>This submission was prepared at the request of recently-confirmed NLRB Chairman John F. Ring, a Republican. He emphasized the importance of restoring clarity in determining joint-employer status, and he touted that proceeding down this path allows the Board to hear &ldquo;all views&rdquo; on this critical issue before reach a decision. The new chairman also promised that the Board would issue a proposed rule &ldquo;as soon as possible&rdquo; after hearing from all interested parties on the issue.</p> <p>&ldquo;The Board has formally taken the necessary steps to begin the long public comment process associated with rulemaking here. The regulatory agenda includes a proposal, but notably does not indicate the participation of Members Mark Gaston Pearce and Lauren McFerran, the Board&rsquo;s two Democratic-members,&rdquo;<em> The National Law Review</em> stated.</p> <p>If the proposed rule receives support from a majority of the five-member Board, the next step would be the issuance of a Notice of Proposed Rulemaking, which will open the process for public comment to receive at least one round of written comments on the proposed rule. The report said the Board &ldquo;may also elect to hold public hearings, which may include cross-examination, and provide additional comment periods to obtain more information.&rdquo; It also explained that although the next Board can reverse any decision made through this current process, subsequent Board members will also have to &ldquo;trudge through the arduous and prolonged formalities of rulemaking and notice-and-comment period to accomplish that objective.&rdquo;</p> <p>In closing, the<em> National Law Review</em> states, &ldquo;The Board&rsquo;s potential use of rulemaking here is quite an interesting reaction to the extensive political pressure placed by lawmakers on the Board&rsquo;s members to recuse themselves from cases involving parties currently or formerly represented by their prior firms.</p> <p><strong>Franchisee community mostly sides with franchisors on joint-employment issue&nbsp;</strong></p> <p>Taking the rulemaking route instead of decision-making will no doubt be a safer path, not only for the world&rsquo;s largest hamburger chain, but also for thousands of other franchisors, and the organization that represents them, the International Franchise Association.&nbsp;</p> <p>The NLRB charges made against McDonald&rsquo;s were first filed in November 2012, after fast-food workers and other employees began demonstrating across the country, and the globe, marching for higher wages and benefits to publicly protest working conditions, alleging that franchisors, such as McDonald&rsquo;s, had excessive control over their franchisees and should be held responsible for all labor violations in their stores. The demonstrations were organized by the Fight for $15 campaign, backed by the SEIU (Service Employees International Union).</p> <p>Franchisors have been warned since the joint employment issue raised its ugly head. Demonstrating too much control over franchisees is now one of the biggest issues for franchisors, and they are cautioned by their attorneys and in webinars put on by big franchisor law firms to back off or the franchisor will be accused of being a &ldquo;joint employer&rdquo; with their franchisees on labor violations or, in some cases like janitorial services, be ruled as the employer, not the franchisor, of their franchisees. The Federal Trade Commission has cautioned people for decades on its website about the risks of purchasing a commercial cleaning service franchise for that very reason, too much control over the franchise by franchisors.&nbsp;</p> <p>In December 2014, the NLRB consolidated 291 complaints, finding 86 of them meritorious. Eleven cases were resolved and 71 remained under investigation. That means six long years after the first NLRB actions first started on these 71 cases, nothing has been resolved. Now it looks like the same legal process will more than likely be extended again, this time through the NLRB&rsquo;s rulemaking procedure. &nbsp;</p> <p>After McDonald&rsquo;s rushed in to present its proposal to the NLRB before deadline in April, agreeing to pay a range from $20 to $50,000 to several dozen workers and supporting the settlement by taking responsibility for the establishment of a $250,000 settlement fund, an attorney for the Fight for $15 campaign stated that McDonald&rsquo;s settlement &ldquo;does nothing to hold the $5 billion company accountable for violating its workers&rsquo; rights.&rdquo; She said the workers who were retaliated against for organizing, &ldquo;deserve a ruling in their case [and] not a settlement hammered out at the last minutes in collusion with the Trump administration.&rdquo;</p> <p>In spite of the excessive control big franchisors demonstrate in their systems, and all the litigation that is taking place in court rooms surrounding joint employment, it&rsquo;s surprising how many franchisees, who are considered to be independent business owners, side with their franchisors on the issue of joint employment. Now many on both sides think the NLRB rulemaking process will speed up the McDonald&rsquo;s joint employer decision.</p> <p>The Asian-American Hotel Owners Association, AAHOA, the world&rsquo;s largest hotel owners&rsquo; association, representing nearly 18,000 members, explained its position on the issue today, saying it welcomes the NLRB reconsideration of joint-employer standard. President, CEO Chip Rogers said, &ldquo;AAHOA members are encouraged by this first step towards rectifying one of the most egregious and disastrous actions ever taken by the NLRB. The Browning-Ferris Industries decision created chaos and uncertainty amongst franchisors and franchisees alike and continues to threaten the successful franchise business model that has been the path to small business success for so many AAHOA members. The joint-employer doctrine is one of the most important issues facing hoteliers today, and we are optimistic that Chairman Ring understands the value in resolving this matter. That said, we will continue to advocate for a statutory fix provided by H.R. 3441, the Save Local Business Act, which would codify the historical joint-employer standard and prevent the type of politicized bureaucratic bulldozing of decades of precedent that got us here in the first place.&rdquo;</p> <p>However, one long-term multi-franchisee who wishes to remain anonymous disagrees. He said, &ldquo;As soon as a Democrat is president and appoints a new NLRB board member, it will go back. The cat is out of the bag. It will never go away. It will just be more or less prominent.&rdquo;</p> <hr /> <p><strong>Related Articles:</strong></p> <ul> <li><a href="" target="_blank">NLRB Considers Rulemaking to Address Hotly-Contested Joint-Employer Standard</a></li> <li><a href="'s_settlement" target="_blank">NLRB Judge Listens to Arguments for and against McDonald&rsquo;s Settlement</a></li> <li><a href="'s_rushes_settlement_avoid_">McDonald&#39;s Rushes Settlement to Avoid &#39;Joint Employer&#39; Ruling, Judge Says No Approval Yet</a></li> <li><a href="" target="_blank">Push to Settle McDonald&#39;s Case, a Threat to Franchise Model</a></li> <li><a href="" target="_blank">Labor Board&#39;s Do-Over Leaves an Obama-Era Rule Intact</a></li> <li><a href="'s_settlement_talks" target="_blank">After Hy-Brand, Protesting Workers Demand NLRB Halt McDonald&#39;s Settlement Talks</a></li> <li><a href="" target="_blank">Fight for $15 Urges NLRB to Suspend Settlement Talks with McDonald&#39;s</a></li> <li><a href="" target="_blank">McDonald&#39;s Workers to NLRB: Let Judge Decide</a>&nbsp;</li> </ul> <!-- google_ad_section_end --> Legal claim & allegation AAHOA Browning-Ferris Chairman John F. Ring Hy-Brand Industrial Contractors International Franchise Association. Ltd McDonald's NLRB cases McDonald's NLRB Settlement NLRB rulemaking process Wed, 16 May 2018 19:46:23 +0000 Janet Sparks 16389 at Value Menu Items Are Bringing in Restaurant Traffic <!-- google_ad_section_start --><div class="photoright"><img alt="McDonald&#039;s 2 for $4 mix &amp;amp; match deal" src="/sites/default/files/u9/McDonald%27s1.jpg" style="margin: 3px; float: right; width: 320px; height: 240px;" width="320" height="240" /> <div class="caption">&nbsp;McDonald&#39;s window</div> </div> <p>Value menus are driving traffic in a flat market, according to one researcher. Value menu traffic for total QSR increased by 10 percent and consumer spend by 13 percent in the first quarter of 2018, according to a recent study by global information company The NPD Group.</p> <!--break--><!--break--><p> The current value wars began in late 2017 when McDonald&rsquo;s announced that they would launch a new value menu in January 2018. For McDonald&rsquo;s, their primary business objective was to bring back customers that they had lost over the past few years when they moved away from value via their Value Menu. Other QSR chains, such as Taco Bell and Jack in the Box, introduced a value offering of their own to compete directly with that of McDonald&rsquo;s, with the objective of retaining their customer base.</p> <p>Wendy&rsquo;s, Burger King, Carl&rsquo;s Jr., Arby&rsquo;s and others joined in.</p> <p>In addition to driving traffic and winning back or retaining customers, the idea of value menus was that once the customer ordered from the value menu, they would also purchase from the regular-priced menu. Looking at data from McDonald&rsquo;s, Jack in the Box and Taco Bell, on average 72 percent of all three chains&#39; customers who purchased from the value menu also purchased from the regular menu. The study analyzed actual receipts from consumers.</p> <p>&ldquo;A value proposition is definitely warranted to increase customer visits and drive frequency in today&rsquo;s marketplace as the recent crop of value menus bears out,&rdquo; says Bonnie Riggs, NPD restaurant industry analyst. &ldquo;But It&rsquo;s important to fully understand the impact and effectiveness of these promotions, whether it&rsquo;s understanding value-seeking customer behavior or loyalty erosion.&rdquo;</p> <!-- google_ad_section_end --> Trends Thu, 03 May 2018 18:22:24 +0000 Don Sniegowski 16378 at Franchises Drop 10,600 Jobs as Rest of Economy Robustly Hires <!-- google_ad_section_start --><p>Spring has brought two months of unpleasant surprises to the franchise sector. American franchises lost jobs yet again. Franchised establishments dropped hiring by 10,600 jobs in April, according to ADP National Franchise Report. That follows the month of March, which was the first month in over seven years to show a drop in hiring. April&#39;s dismal figure is the largest drop yet.</p> <p>Restaurants, automobile dealers and hotels had the largest employment losses.</p> <p>However, the economy as a whole continues to hire at a robust pace. Private sector employment increased by&nbsp;204,000 jobs from March to April. That number is down from March, but up 49,000 from April of last year.</p> <p>&ldquo;The labor market continues to maintain a steady pace of strong job growth with little sign of a slow down,&rdquo; said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute, regarding the private-sector and small business hiring numbers. &ldquo;However, as the labor pool tightens it will become increasingly difficult for employers to find skilled talent. Job gains in the high-skilled professional and business services industry accounted for more than half of all jobs added this month. The construction industry, which also relies on skilled labor, continued its six month trend of steady job gains&nbsp;as well.&rdquo;</p> <p>Small businesses of less than 50 employees increased their hiring from the month before by 62,000 jobs. The service-providing sector accounted for the lion&rsquo;s share of the increase in employment.</p> <p>Mark Zandi, chief economist of Moody&rsquo;s Analytics, said, &ldquo;Despite rising trade tensions, more volatile financial markets, and poor weather, businesses are adding a robust more than 200,000 jobs per month. At this pace, unemployment will soon be in the threes, which is rarified and risky territory, as the economy threatens to overheat.&rdquo;</p> <p>&nbsp;</p> <hr /> <p>&nbsp;</p> <p class="rtecenter"><img alt=" U.S. Lost -10,600 Franchise Jobs in April, According to ADP National Franchise Report " src="" style="border-width: 0px; border-style: solid; width: 598px; height: 789px;" /></p> <!-- google_ad_section_end --> The Economy Thu, 03 May 2018 17:48:01 +0000 Don Sniegowski 16377 at Subway CEO Suzanne Greco to Step Down <!-- google_ad_section_start --><p>Subway IP Inc., which oversees franchises under its Subway brand, announced Wednesday that its embattled chief executive officer, Suzanne Greco, is stepping down. The franchising firm has appointed Chief Business Development Officer Trevor Haynes as interim CEO. Greco will officially retire on June 30.</p> <!--break--><!--break--><p>Interim CEO Trevor Haynes joined the franchising firm in 2006 in Australia as Queensland territory manager. He moved to the United Kingdom in 2009 to serve as senior area developer&nbsp;for the UK and Ireland, followed by a move to New York in 2014 to serve as&nbsp;the firm&rsquo;s global director of restaurant operations. Haynes has a master&rsquo;s degree in international management from Australia&rsquo;s Queensland University of Technology.</p> <p>Greco, having joined the Subway system in 1973 as a sandwich stuffer. She became the franchising firm&#39;s president in June&nbsp;2015, while her brother Fred DeLuca, co-founder and CEO of Subway, struggled with leukemia in the last weeks of his life. He died in September&nbsp;2015. Greco then became CEO.</p> <p>The franchise system&rsquo;s store count in the United States began to decline almost immediately after DeLuca&rsquo;s death and under his sister&rsquo;s leadership. Store profits and same-store sales dropped. The net store count dropped by 1.7 percent in 2016, followed by the system&#39;s net shrinkage of over 800 shops in 2017.</p> <p><img alt="" src="/sites/default/files/resize/Subway%20chain%20net%20store%20losses-337x330.png" style="margin-left: 6px; margin-right: 6px; float: right; width: 337px; height: 330px;" width="337" height="330" />As traffic, sales and locations of franchised stores began to decline, some franchisees anonymously leaked to the media that the company needed to find a new CEO, although they were not specific about whom. They lacked a cohesive voice. The North American Association of Subway Franchisees, a trade group of Subway store business owners that was designed by franchisees to be their&nbsp;mouthpiece and arm, was publicly quiet during the turmoil, although it did manage to negotiate with the franchisor to waive certain stores from opening at 7 a.m. for breakfast.</p> <p>Franchisees have informed this journal that Subway&rsquo;s mantra has been to develop no matter what. One franchisee said, &ldquo;Subway demanded that I create another store a few blocks down the road or else they would find someone else that would and who was aggressive enough to replace my store.&rdquo; He invested in the second store, but said that although royalty payments from the two stores collectively went up slightly for franchisor Subway, the net profit in his own original store was decimated and his second store could not make a profit. Traffic and revenue increased only slightly from his original store but were now split between two stores.</p> <p>The Subway system under DeLuca&nbsp;grew to become the largest franchised restaurant chain in the United States and the world as measured by store units. It presently has 44,000 franchised sandwich shops worldwide, with 26,000 of them in the United States.</p> <p>Last week Bloomberg reported that Subway anticipates that the owner-operators of troubled stores will vacate their shops to such an extent that the system will contract in 2018 by a net loss&nbsp;of 500 locations.</p> <p>&ldquo;We focused in the past on restaurant count. We&rsquo;re focused now on strengthening market share,&rdquo; CEO Greco told Bloomberg&#39;s reporter Leslie Patton in a phone interview. &ldquo;Store count isn&rsquo;t everything.&rdquo;</p> <p>Now Greco is moving on.</p> <p>Franchisees are surprised at the speed of her departure after it had been leaked out by some franchisees and area representatives, which Subway calls development agents, that she should go.</p> <p>&ldquo;It&rsquo;s time for me to have more balance in my life,&rdquo; said the outgoing CEO. Greco added, &ldquo;I feel very good about the strategic moves we&rsquo;ve made in the last three years, and I have confidence in the future of the company.&rdquo;</p> <p>The board of directors of Subway IP Inc. is currently searching for a new chief executive to lead the 100 percent franchised system.</p> <hr /> <p><strong>Related reading</strong>:</p> <ul> <li><a href="" target="_blank">Subway Turns Blind Eye to Mayhem Surrounding Its Franchise System</a></li> <li><a href="">Subway Franchisees Turn&nbsp;against the CEO</a></li> <li><a href="">Subway Execs Confirm Franchisee Fears that It Will Continue to Disappear in America</a></li> <li><a href="">Subway Franchisees Say Produce Is Only Delivered One or Two Times a Week</a></li> <li><a href="">Subway In Turmoil as Franchisees Revolt and 909 Stores Close</a></li> <li><a href="">Why Subway Isn&#39;t Failing, According to Subway</a></li> <li><a href=";hash=2073995515&amp;search=external&amp;type=GENERAL">Subway FDD 4/27/2018</a></li> </ul> <!-- google_ad_section_end --> Leadership change franchise density franchising leadership sucession NAASF North American Association of Subway Franchisees SIP Subway IP Inc Susanne Greco Thu, 03 May 2018 01:45:38 +0000 Don Sniegowski 16376 at Domino’s Swiftly Settles Lawsuit with Multi-Unit Franchisee over Obstructing Sale of Stores <!-- google_ad_section_start --><p>Domino&#39;s Pizza Inc. (<a href="http://(DPZ)">DPZ</a>) settled a lawsuit on April 3, 2018 with a multi-unit franchisee, with 31 years in the system, over allegations that the franchisor obstructed his every move in selling his two award-winning stores to a well-qualified Domino&#39;s franchisee. Unexpectedly, Domino&#39;s did not disclose the litigation, required by law, in its April 2018 FDD.</p> <p>The court had granted Domino&#39;s requests for two extensions in responding to the lawsuit.</p> <p>According to PACER electronic public documents, Robert &quot;Bob&quot; Huth filed his lawsuit, <em>Holiday Delta, Inc. v. Domino&#39;s Pizza Franchising, LLC. </em>on December 29, 2017, in federal court of North Carolina, Eastern Division. Huth was a seasoned multi-unit franchisee who had been in the Domino&#39;s system, in good standing, for over three decades. The core of the litigation surrounds the two stores he owned in Camp Lejeune Marine Base, and he alleged Domino&#39;s was the one that pressured him to sell.</p> <p>The legal complaint gives the background to the litigation. It states that Robert &quot;Bob&quot; Huth signed a franchise agreement for a 10-year term with Domino&#39;s Pizza on December 15, 2003 for a store (#8926) located at Camp Lejeune Marine Base in North Carolina. The 10-year renewal agreement was signed by the parties on December 28, 2013, to be interpreted in accordance with North Carolina laws.</p> <p>Then, on February 26, 2008, he entered into another franchise agreement with Domino&#39;s for another store (8823) also at Camp Lejeune, again for a 10-year period, and with a renewal date on February 26, 2018 for another 10-year period, signing a new Domino&#39;s Pizza Franchising, LLC standard franchise agreement with Holiday Delta, Inc., labeled renewal agreement 8823.</p> <p>The lawsuit states that in 2013 Domino&#39;s presented franchisee Bob Huth with an award for his first store 8926 &quot;for being among the Top Ten National Stores having the highest sales during Award Year 2013.&quot; That franchise store had consistently ranked as the number one store in Domino&#39;s United States system since 2004 and ranked consistently in the top five worldwide and has consistently remained first in sales according to &quot;Carpenter&#39;s Area Store Ranking.&quot;</p> <p>Then on November 16, 2017, Domino&#39;s and Saint Jude&#39;s awarded Huth&#39;s second store, 8823, also located in Camp Lejeune for &quot;Top Daily Fundraiser&quot; from St. Jude&#39;s Thanksgiving Campaign.</p> <p>But court documents state that Domino&#39;s leadership team then &quot;expressed a strong desire&quot; that Huth leave the system. The complaint states that Huth, operating his business under Holiday Delta, Inc., states he was then informed and he believes, and thereon alleges that his franchise consistently operated as a &quot;B&quot; operator in Domino&#39;s &quot;ABF&quot; Grading System, based on Domino&#39;s grading criteria.&quot;</p> <p>On December 24, 2017, Bob Huth sent an email to Patrick Doyle, president, chief executive officer and director for Domino&#39;s Pizza Franchising, and Russell Weiner, president of Domino&#39;s U.S.A, and Kim Ridge, area vice president of Domino&#39;s, summarizing the events that took place over the past three and a half years, &quot;imploring&quot; Domino&#39;s to do the right thing and allow the sale of his two store in Camp Lejeune Marine Base.</p> <blockquote><p><strong><em>To date, it has been more than&nbsp; 31/2years that Domino&#39;s has required me to exit the system. I attempted, per Domino&#39;s instructions, to sell my remaining two Camp Lejeune stores to Robert Taylor, Jim Stansik, Salim Joarder, Alan Murph, and a number of high quality franchisees in good standing. None of these deals were acted upon by Domino&#39;s for approval and all were rejected by Domino&#39;s through its inaction or outright rejection. In addition, in February 2017, I provided yet another qualified offer to purchase and/or LOI [Letter of Intent] from a franchisee in goodstanding, Peter D&#39;Andrea. I have tried for the better part of 2017 to convince Domino&#39;s to allow Pete D&#39;Andrea to buy the stores, but Domino&#39;s again has decided to reject. Since my stores are not in default, and I have complied with the criteria set forth by Domino&#39;s (i.e., the stores will be able to cash flow themselves), I see no reason not to allow the deal with Peter to finalize. I have been getting the &quot;run around&quot; from Domino&#39;s for almost 2 years for this sale. When Robert Taylor was approved to buy my 19 stores in Wilmington, his OER [Operations Evaluation Report] scores were 2.6 star average (lower than Peter&#39;s currently), so the 3 star threshold is a red herring. The stores on Camp Lejeune meet the Domino&#39;s requirement to sell. I want Peter to be approved. Peter should be provided the same OER [Operations Evaluation Report] consideration as Robert Taylor. Domino&#39;s has not articulated to me, why it is taking this truculent position by obstructing my exit. After all, exiting is what Domino&#39;s required me to do. Exiting is not what I wanted to do. If I am missing something here, please feel free to respond to this email in writing. Merry Christmas Bob </em></strong></p> </blockquote> <p>Scott Hinshaw, executive VP of operations, responded to Huth&#39;s email on December 25, 2017, saying he would be back in touch when he was back in his office after the holiday. Huth acknowledge it by saying he was available anytime, &quot;today, tomorrow or Wednesday.&quot; But Huth did not receive any other response from Domino&#39;s.</p> <p>Bob Huth filed his lawsuit against Domino&#39;s Pizza Franchising on December 29, 2017.</p> <p>He asked the court to require Domino&#39;s to specifically perform its obligations under the franchise agreements, which addresses the sell and/or transfer of stores. He asks for declaratory judgment under the Federal Declaratory Judgment Act and asks the court to order Domino&#39;s to grant him permission to sell his stores to Peter D&#39;Andrea and Semper Fi Pizza.</p> <p>Other claims filed against Domino&#39;s are for relief for breach of contract, state common law breach of duty of good faith and fair dealing and bad faith, tortious interference with prospective economic advantage, and unfair and deceptive trade practices, N.C. Gen. Statute. Huth is asking for treble damages in the amount exceeding $75,000, the specific amount to be determined at trial; pre-judgment and post-judgment interest; and attorneys&#39; fees, taxed against Domino&#39;s to the extent allowed by applicable law.</p> <p>On April 3, 2018 the case was settled and dismissed, according to PACER docket. A Joint Stipulation of Dismissal with Prejudice was issued in <em>Holiday Delta, Inc. v Domino&#39;s Pizza Franchising LLC,</em> stating all parties jointly stipulate to dismiss the case with prejudice. Each party agrees to bear its own attorneys&#39; fees and costs.</p> <p><strong>Franchisee Huth litigation missing from Domino&#39;s Pizza Franchise Disclosure Document </strong></p> <p>As a requirement of the Federal Trade Commission, franchisors are required to disclosure information about their company under 23 specific categories, including data on the offered franchise, its officers, and franchisees in the system.</p> <p>Under litigation, Item 3, lawsuits fall into four broad categories: pending lawsuits, lawsuits involving the franchise relationship, prior lawsuits, and current government injunctive or restrictive actions. These include arbitration.</p> <p>According to the franchise disclosure document by Domino&#39;s Pizza Franchising, filed effective 3/28/2018, Domino&#39;s discloses one pending litigation. An action was filed by the Attorney General of New York against Domino&#39;s and its entities, and three New York franchisees. The AG alleges among other things the defendants failed to pay employees of the franchisees certain wages and expenses, and they are liable for labor law violations as joint employer with its franchisees. Additionally, Domino&#39;s has been named as a defendant in several labor and employment lawsuits brought by franchisees&#39; employees.</p> <p>Domino&#39;s discloses six lawsuits that have been concluded.</p> <p><strong><em>Holiday Delta, Inc. v. Domino&#39;s Pizza Franchising, LLC, </em>was not included in the April 28, 2018 <a href=";hash=525221233&amp;search=external&amp;type=GENERAL">Franchise Disclosure Document </a> </strong></p> <p><strong>-- </strong></p> <p><strong>Related Reading: </strong></p> <ul> <li><a href=";s_pizza" target="_blank">Franchisee Files SEC Whistleblower Complaint against Domino&#39;s</a></li> <li><a href=";s" target="_blank">Second SEC Whistleblower Complaint against Domino&#39;s</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=";s Holidy Delta Complaint.pdf">Domino&#039;s Holiday Delta Complaint.pdf</a></td><td>175.36 KB</td> </tr> </tbody> </table> Legal claim & allegation Camp Lejeune world's busiest Domino's CEO Patrick Doyle David Brandon Domino's Domino's litigation Domino's supply chain DPZ Federal Trade Commission Holiday Delta Inc. v Domino's Pizza Franchising LLC Robert Huth Scott Hinshaw SEC securitization stock repurchase Tue, 24 Apr 2018 02:16:34 +0000 Janet Sparks 16367 at Subway Turns Blind Eye to Mayhem Surrounding Its Franchise System <!-- google_ad_section_start --><p><img alt="" src="/sites/default/files/resize/042218_2207_SubwayTurns1-320x180.jpg" style="height: 180px; width: 320px; float: right; margin-left: 5px; margin-right: 5px;" width="320" height="180" />Subway sandwich chain, with over 25,800 units, is facing turmoil as store locations continue to decline and hundreds more face shuttering because of unprofitability. </p> <!--break--><!--break--><p> But Subway executives don&#39;t seem to be concerned. Don Fertman, chief development officer, expressed last month that over the next decade &quot;they expect to see fewer restaurants but a stronger, more robust franchisee base and a stronger, more profitable system.&quot;</p> <p>That sentiment came from Subway in a statement sent to <a href=""><em>Business Inside</em>r</a> last December as the news journal was looking into the current state of the franchisor&#39;s operation. It reported, &quot;The world&#39;s largest restaurant chain is being left behind as consumers seek healthier, fresher food and as competitors offer them better options.&quot; But the problems don&#39;t stop there. Subway&#39;s crisis is linked to other factors as well, including changing trends, oversaturation, internal conflict and past scandals the worst surrounding Subway&#39;s former pitchman, Jared Fogle, now imprisoned, convicted of child pornography and having sex with a minor.</p> <p>A Subway representative had provided <em>Business Insider</em> with figures that revealed Subway&#39;s U.S. store count dropped by 909 locations in 2017, and that represents more than 3 percent of the chain&#39;s 2016 store count. Subway showed it had 26,744 stores at the end of 2016, which was a drop of 1.7 percent and that marked the first time in Subway&#39;s history that the company had closed more stores in the U.S. than it opened. Figures also showed that Subway shops worldwide were down by 471 locations.</p> <p>Last November the chaos escalated after Subway announced its plan to bring back the &quot;$4.99 Footlong deal&quot; in January 2018. The original promotion of &quot;$5 Footlong&quot; ended in bad press and litigation (not all footlongs were 12 inches as promoted). <em>Business Insider</em> reported that a letter in protest was sent to Subway by the 400 franchisees protesting the upcoming campaign stating, &quot;The national promotional focus over the past five years . . . has decimated us and left many franchisees unprofitable and even insolvent.&quot; [NOTE: Blue MauMau was told by Subway insiders that the petition was signed by 900 franchisees representing 6,000 stores.]</p> <p>CEO Suzanne Greco, sister of the late Fred DeLuca, responded to the recent trials Subway is facing by saying they are &quot;relatively short-term setbacks in the longer arc of the brand&#39;s history, which spans more than half a century.&quot;</p> <h3><span style="color:#800000;"><strong>Subway&#39;s troubles longtime coming</strong></span></h3> <p>A <a href=""><strong><em>Fortune</em> magazine report </strong></a>in 1998 may shed some light on how Subway&#39;s problems developed over a 50-year span. The news report showed how Subway was not built in the same way as other franchise empires such as McDonald&#39;s, Kentucky Fried Chicken, Burger King and others. It told that Subway was the biggest problem in franchising according to a congressional staffer who studied the industry. While the chain&#39;s co-founder, the late Fred DeLuca, had a unique approach to the sandwich business which brought him staggering wealth, it has also brought big problems for the system, including unhappy franchisees. It said, &quot;DeLuca has used methods all his own, creating a corporate reflection of his own complicated personality.&quot; And while every large franchise operation has its problems,<em> Fortune </em>said what sets Subway apart is scope. &quot;It faces so much more trouble than its competitors on all these fronts [unhappy franchisees, disputes with landlords, and run-ins with regulators] that it&#39;s simply in a league of its own.&quot;</p> <p>Fred DeLuca&#39;s success story is rather remarkable. He was born in New York to second-generation Italian parents, where they lived in low-rent housing areas, first in Brooklyn and later in the Bronx. DeLuca started his career in 1965 when he received a loan of $1000 from his close friend Peter Buck, and the two of them started Pete&#39;s Super Submarines sandwich shop in Bridgeport, Connecticut. At the young age of 17, DeLuca said he didn&#39;t want to be a businessman, his dream was to be a doctor. The business partners then formed Doctors Associates, Inc., in reference of DeLuca&#39;s aspirations and Buck&#39;s doctorate. When Fred DeLuca passed away in September 2015, after being diagnosed with leukemia in 2013, he had grown the privately-traded company to 44,268 independently owned Subway franchises in 110 countries, surpassing KFC and McDonald&#39;s.</p> <p>After his death, DeLuca&#39;s sister Suzanne Greco took over the helm as chief executive officer, but soon the national media began picking up on rumblings from unhappy franchisees and longtime, well-established area developers, and some former corporate employees. <em>Business Insider</em> reported that Subway&#39;s current predicament revealed problems that went beyond larger restaurant-industry trends, after it conducted conversations with more than 30 current and former franchisees, employees, and others with knowledge of Subway&#39;s operation.</p> <p>One former staffer told <em>Business Insider</em>, &quot;I believe that Subway was more interested in the opening of stores. That is where they made the most money&mdash;the franchise fee.&quot; The person added that DeLuca made his money from the franchise fee. &quot;The more stores he opened, the more dollars he made.&quot; A former three-store franchisee in Virginia, Scott Godwin, agreed saying, &quot;I saw the handwriting on the wall with the focus being on opening as many units as possible, even if it angered franchisees.&quot;</p> <p>Subway insiders told the publication that the factors driving customers away from the fast food chain &quot;are deeply tied to internal conflicts within the company.&quot; The report said, &quot;With disagreements between corporate headquarters and franchisees, franchisees say they&#39;re stuck bearing the brunt of the damage.&quot;</p> <p>Franchisees are now calling for major changes at Subway&#39;s headquarters. <em>Business Insider</em> said three franchisees from different U.S. regions told them Subway needed new leadership, specifically, a new CEO.</p> <h3><span style="color:#800000;"><strong>Another franchisee bone of contention, mandatory remodels </strong></span></h3> <p>CEO Suzanne Greco announced in February that change is always difficult, and that is particularly true for a massive company with more than 44,000 restaurants [worldwide] that serve 7.5 million customers per day. But the chain&#39;s most visible change will sweep across the country with Subway&#39;s new Fresh Forward Design, a new mandatory condition for all new and store remodels.</p> <p>But when Greco speaks to the press about Subway&#39;s new look remodels, not everyone thinks she knows what she is talking about.</p> <p>Restaurant analyst and management consultant John Gordon recently spoke out on a recent Weekend Confidential piece in the <em>Wall Street Journal</em> regarding Suzanne Greco&#39;s puffery which she displayed regarding her comments on new store/new look remodels saying they were generating a large sales increase. Gordon told the <em>WSJ</em> reporter that unfortunately that was not true. He said Subway store remodels are only generating a five percent sales increase. He explained, &quot;On a pre-debt basis, that would equate to a 12-year payback, which is very poor. If debt is included, with the cost of debt (principal and interest included) my rough calculations show the payback would be infinity.&quot;</p> <p>Gordon said Greco probably included a new store in her comment, but that is absolutely not good analytical practice, and, in fact, compares apples to oranges. &quot;Remodels through the restaurant space generate about 5% increase for one year in the base sales.&nbsp; A few McDonald&#39;s or big casual or fine dining chains might relocate a store and have reported nice increases in sales, but those are rare,&quot; the restaurant analyst said.</p> <p>Gordon scolded, &quot;Franchisor organizations simply must tell and work with the truth.&quot; He notes, &quot;Subway does not operate even one company store.&quot;</p> <hr /> <p><strong>Related Articles: </strong></p> <ul> <li><a href="">Subway Franchisees Turn&nbsp;against the CEO</a></li> <li><a href="">Subway Execs Confirm Franchisee Fears that It Will Continue to Disappear in America</a></li> <li><a href="">Subway Franchisees Say Produce Is Only Delivered One or Two Times a Week</a></li> <li><a href="">Subway In Turmoil as Franchisees Revolt and 909 Stores Close</a></li> <li><a href="">Why Subway Isn&#39;t Failing, According to Subway</a></li> <li><a href=";hash=2073995515&amp;search=external&amp;type=GENERAL">Subway FDD 4/27/2018</a></li> </ul> <!-- google_ad_section_end --> Foodservice $4.99 Footlong promotion CEO Suzanne Greco chief devilopment officer Don Fertman Fred DeLuca internal conflict Jared Fogle pitchman mandatory store remodels Subway franchisee protests Sun, 22 Apr 2018 22:07:57 +0000 Janet Sparks 16366 at