It looks like Jugo Juice is becoming ‘sue-go juice‘.
I had been running my own coffee franchise for nearly two years when I took my first Canada Line trip. The very first thing I noticed was what seemed like a Jugo Juice at almost every location. The first thought that came to my mind was ‘Those rascals!’ (of course using much more colour terminology). My only surprise is that there are not more names on the plaintiff list.
As discussed in other VCSFA articles, the Franchisor is in a clear position of power and has the advantage of being the creator of some very hand-crafted – and arguably one-sided – legal documents, namely the lease, the sublease (if applicable) and the Franchise Agreement. The profile of Franchisee that seems to be preferred by Franchisors is typically, from my experience, someone not steeped in either franchising, or small business. They are often accountants, teachers, retail managers, and such, but more commonly – again from my experience – immigrants who may not quite have the language skills to battle on their own should such a need arise. The point here is that not one of Franchisees I have met over the last few years in the food and beverage business – especially in the Vancouver coffee business – came with the expertise required to make such a huge financial and time investment. As a result, I have seen devastated marriages and families as the money is bled out of their lives.
The worst part is that British Columbia doesn’t have *any* franchise legislation to help abused Franchisees. In their often nearly bankrupt condition – the time when they most need a lawyer’s help – they are left to fend for themselves. As in this Jugo Juice case, I’m sure that we will see that a mandatory disclosure document may have saved these Franchisees the need to file this lawsuit.
One will often come across quotes from experts in law and business saying things like, “It’s buyer beware” or, “One has to check the legal documents carefully”. That’s very easy for someone to say who has no experience in business or business law. To reiterate, most prospective Franchisees are not coming from a position of being savvy in business – and the Franchisors know that.
Every Franchisee I have spoken to has one thing in common – they trusted the name and the brand and their experience. They trusted that the Franchisor would not knowingly put them (or allow them) into a bad deal. The trust that potential buyers put in the brand is so strong that I have witnessed sound-minded, intelligent people sign documents that are so bad they would give you cramps. I know one gentleman whose position is, “Well, they signed it.” I disagree with this position. If it were an independent cafe or restaurant and the people who created the documents were on the same playing field in experience, then I would steadfastly agree. However, the very nature of a Franchise implies ‘trust’ and ‘success’ and they accomplish this image largely because of the sheer number of locations. I will never forget a quote from my good friend. He had just explained how he had received accounting and legal advice *not* to purchase his franchise coffee shop. The outcome of his decision to purchase was the most devastating series of events I have ever witnessed. After explaining his situation to someone the person asked ‘Well, why in the world did you purchase, then?” His response? I’ll never forget it. It’s engraved in my mind forever:
I thought surely sixty locations couldn’t all be wrong.
They were wrong, though. They all signed a similarly one-sided document and were reaping the reward of their folly. Just like me.
Did Jugo Juice sincerely think – with all their experience in the retail beverage business – that these stores would succeed buried deep within the Canada Line? Who has time, while rushing to a train, to have a nice, blended drink? And, let’s just say you do have just enough time to grab a drink and get on the train, it says right here in the Translink Etiquette Guide (item #4) that you should ‘refrain from eating and drinking on the train’. So stopping to get one of these drinks will set you up to be a bad guy in the eyes of your co-commuters. To me, this sounds like a business disaster waiting to happen. Just to make sure it wasn’t my personal experience and bias clouding my judgement, I started surveying my own customers to find out when was the last time they stopped and bought a nice drink at a transit station and if they would do so in the future. The results of the mini survey were dismal: they all agreed that they would prefer to go a little further *above ground* and buy their speciality beverage.
Here’s what Jugo Juice gained out of the last few years since their 2010 Canada Line Expansion:
- Incredible brand awareness: countless hundreds of thousands of people walked by (the key is *walked by*) those Jugo Juice logos
- Increased probability of selling new stores: “Mr. Prospective Buyer, we are a big, well-known brand. You are buying into a big chain with a winning formula. Look at the proof – we have stores in most Canada Line stations.”
- Royalty payments: Did Jugo Juice offer ‘royalty relief’ during their time of suffering or was the full contractual amount continually (and probably automatically) taken from their bank accounts? This will come to light, I’m sure.
What did the Franchisees – who likely invested all of their life-savings in these businesses – get out of the deal? A court date?
It will be most interesting to follow this lawsuit and perhaps it will pave the way to better Franchisee-Franchisor relations in BC and ultimately the quick establishment of franchise legislation in our beautiful province.