Blenz the Canadian Coffee Company LTD Welcomes Mark West as Returning Chief?

Blenz the Canadian Coffee Company LTD announced at their National Sales Seminar on October 4th, 2012 Mark West as their new General Manager to replace previous CEO George Moen.

Mark West, who is also the current owner of My Cup Coffee and Tea franchise with several locations around Vancouver that compete directly with several Blenz locations, gave his first speech to the franchisees. In this speech he informed them that he ‘is not actively involved’ in his My Cup operation and that he is dedicated to helping grow the sales of Blenz franchisees.

Mark West was the CEO of Blenz until 2007, just prior to the announcement of George Moen as CEO who has since gone on to start a pay-for-referral business called RapidTimes Networks.

 

 

Business in Vancouver’s Biggest BC Franchise List – A Coffee Perspective

This list was published by Business in Vancouver not that long ago and deserves some attention.  First of all, we commend Business in Vancouver for putting together lists like these and for gathering data as it’s very useful for the public, especially the potential buyer of a coffee shop franchise.

Here are some pieces of information that we pulled out of this related to coffee, but first, please familiarize yourself with the VCSFA’s exhaustive Francouver. (Franchises in Vancouver) page.

1. Out of 80 franchises, only 6 are coffee.  That’s only 7.5% of all franchises in the list – pretty low numbers, I thought, actually.  And is Tim Horton’s really a ‘coffee franchise’ or is it a ‘food franchise’?  That discussion is up for debate.  We will give them the benefit of the doubt as well as add McDonalds to our Francouver list since it’s not there at the time of writing this article.

Here is the list with our running commentary:

#2 Tim Horton’s: Not much to say here except I’d be carefully watching the golden arches if I were them

#3 McDonalds: They are definitely into coffee now and much better in fact, than many of their competitors – they are in a new game now and I would not be surprised to see them start to seriously eat away at #2’s coffee share.

#13 Blenz: Sheer numbers.  They were cranking out new locations until about two years ago when everything seemed to come to a grinding halt.  Economy?  Other?

#39 Waves Coffee: Very similar situation to Blenz the way they were cranking out new stores. In fact, they may have out-cranked Blenz this year… I’d like to see those stats. Waves may be heading into other provinces to crank further whereas Blenz doesn’t seem to be doing much with North America.  Let’s see where these numbers sit between Blenz and Waves next year.  They are, if you didn’t know, rivals to say the least.  We will hopefully publish that story one day but feel free to dig in yourself. It’s very interesting!  We’ll leave that for a rainy day which will likely be soon. And, apparently another Vancouver coffee franchise will be joining this story in based on some new announcements from one of these chains.

#62 Esquires: They are huge elsewhere but I was actually impressed with their footprint here (respectable numbers!)

#65 Second Cup: Still hanging in there with their Ontario fanclub.  Not much expansion in BC but apparently heading quickly into the states.

Notes for Potential Buyers

From our experience in the coffee shop franchise arena, there is a small guage that is worth looking at on this list that would likely go unnoticed. You’ll note that there is a column for ‘number of locations’ and then ‘number of franchises’.  Typically speaking you would be looking for the number to be the same and that would indicate a better health.  You should not see the gap between the number growing and if you do, you would want to ask why.  Typcially what is happening is the owner of the store is going bankrupt, or, they have been forced out by the head office and they are running it.  We would very much welcome our readers to email us your comments as I think this would make a good discussion.  For now, however, we would recommend considering a fluctuating number here to be an indication that you should ask more questions about the health of the chain. Here is how those numbers look:

#2 Tim Horton’s: 289/289

#3 McDonalds: 166/207

#13 Blenz: 62/64

#39 Waves Coffee: 24/24

#62 Esquires: NP (Not Provided!)/12

#65 Second Cup: NP (Not Provided!) / 9

We would be concerned about a ‘not provided’ answer.

We would recommend monitoring the number of locations from one year the next and especially keep an eye on that gap mentioned above from one year to the next.  If you see an increase in the gap you know that head office has taken over another store and you would want to investigate why from both sides.

We hope this coffee shop franchise perspective on this famous list was useful and don’t forget that we always welcome you to email us with your feedback.

Why Join?

Download the Printable PDF version of this page HERE

The Vancouver Coffee Shop Franchisees Association

For the Betterment of Coffee Shop Franchisees

*Lack of support and feeling alone?

*Stressed out, sleep deprived or even depressed?

*Future uncertain?

YOU ARE NOT ALONE. WE ARE HERE TO HELP.

www.vcsfa.ca | info@vcsfa.ca | text/phone 604-367-0875

Join many other franchisees as we diligently work towards a brighter future.

Why Join the VCSFA?

Financial

  • Increase bottom line profit
  • Increase sales with creative VCSFA initiatives
  • Gain access to pooled information before it negatively affects you
  • Gain access to our VCSFA Group Benefit Plan to create more security for your family
  • Gain access to special pricing from VCSFA approved vendors (ie. zero-commission agent to sell your store!)

Practical

  • Become proactive instead of reactive
  • Learn basic things about running a coffee shop that you have not been taught (bookkeeping, technology, cost-of-goods control, hiring and firing, etc)
  • Gain access to our priceless prospective employee database
  • Learn about the latest scams and criminal activity before they hit your store

Legal

  • Have your voice heard without fear of personal attack
  • Gain access to priceless legal advice (ie. Lease agreements, franchisee agreements, etc) for free
  • Gain access to world class franchise lawyers at discounted rates
  • Gain access to our approved appraisers who can help you before, during and after your mandatory renovation

Awareness and Lobbying

  • Raise awareness to the public about coffee shop franchising
  • Lobby the BC government to introduce franchise legislation

Social

  • Have fun while you build deep and meaningful relationships with fellow franchisees at fun social events, gatherings and association meetings

Before you Sell a Coffee Shop Franchise in Vancouver – Commercial Agents

Sellers Beware

“COFFEE SHOP FRANCHISE OWNER HELD HOSTAGE FOR ONE YEAR BY HIS AGENT

Imagine reading that headline in your local paper.  You’d probably want to read every word in the article to see how something like this could happen in a free country! Well, it does.  Right here in Vancouver.  However, it’s not the kind of hostage situation with guns and bombs,  but no less psychologically damaging and abusive.

What we’re talking about here is the fact that an agent can, by law, hold you hostage to the listing agreement you sign for a year (or whatever you happened to sign for).

Let us first state that this legal commitment is not necessarily a bad thing – in fact, it’s a good thing because sometimes sellers will abuse and use their agents and make them lose their justly deserved commission.  In that case, of course, the contract is a good thing to have enforceable.

Let’s allow one of our members tell you a true story of what happened to him this week when working with an agent that his head office strongly encouraged him to work with.  For anonymity, let’s call the head office company B and let’s call the agent M and the store owner A:

“I was approached by the leasing guy at B.  He said that M has a buyer.  B strongly recommended that I work with M because this buyer will help me get out of the business sooner. Also, B said they would drop the 7.5% transfer fee [that’s the money the owner has to pay to the franchise when he/she sells his/her store] AND M would not charge me a sales commission because he said this ‘was a favour to B’.  Since B has more experience in the sale of franchises, I took their advice and decided to work with M even though I had my own agent. Another owner had even warned me that this guy held him hostage before but I didn’t believe it.

Next, M shows up at my shop with what looked to be a basically blank document that I’ve never seen [see image above].  I’ve never listed a business for sale before.  He didn’t even explain it but just said “Sign here and this will be enough and then I’ll bring the offer.”  There was no explanation of what was on the document, what the document meant, nor what an ‘exclusive listing’ meant to the person signing.  I was about to learn the hard way.

A few days later , M shows up with an ‘offer’.  I couldn’t believe my eyes.  The ‘offer’ was for 25% of (or 75% less than) my asking price!!  What?  Are you joking, man?  So I threw the offer back at him and told him I don’t want to sell it.

During this time, my friend was selling his coffee shop franchisee, too, in almost the same situation.  In his situation, M brought an offer for 30% of what he wanted.  He contacted M and said “I’d like to end this relationship” and to him, like to me, M said ‘we don’t have a relationship because there is no commission.”  My friend still demanded the unconditional release documents and M replied “I’m a man of my word so I’ll send them if you want them.”  My friend told me that he thought it was strange that he is sending release documents for a relationship that M said didn’t exist.  When I called and ask for the documents he told me the same thing – there is no relationship.

I was happy now.  I immediately approached my agent (M2) and asked him to list my store for sale.  M2 happens to work in the same brokerage as M.  As soon as M2 listed the store for sale, M approached his broker and asked him to pull the listing because he had a one year exclusive listing with me! What?  No way.  Is this happening?  Yes.  Apparently it was something I signed for that I didn’t read.  M then called and left a voice mail for me saying “You have an exclusive listing agreement with me for one year and if you have any problems with that you can contact my broker.”  At this point it got very interesting.  I contacted M’s broker to complain.  He replied “M has the only rights to sell B franchises in Vancouver.”  I was shocked.  What was he talking about?  Did M convince his broker that he was the only one who could sell B franchises?

Immediately I contacted B and told them what was happening by email.  I asked if they would prefer to deal with my lawyer or with this agent.  They replied back shortly later that “We do not have any such exclusive relationship with M”.  At that point M’s broker was contacted and educated about the truth and asked M to send the release documents. Finally!  I’m free to list with whom I want.

That night I decided that I was going to work with M2 and started again to list with him.  This time M’s broker asked him not to list through their brokerage.  Now he’s trying to tell me which brokerage I can and cannot list with even though I do not have a valid listing agreement with anyone! Crazy.  To this day I am still arguing back and forth about this.  My friend had listed with six or seven different agents over the years and only one agent would not send the release documents – the B agent of choice: M

An exclusive listing is a cause of concern for the following reasons, we learned the hard way:

  1. You cannot reach out to the real estate board to get help so the agent operates to some extent ‘outside of the law’
  2. Your store does not get posted on the ICX.com (MLS for commercial) therefore loses lots of exposure
  3. You can’t work with another agent until this agent releases you

Here are some red flag comments that you should be aware of. They may be true but consider them a red flag until you see action:

  • “I have buyers looking to buy a coffee shop franchise right now.  Just sign.”
  • “I market the store privately.”  If you ask for details on this you may find out what that really means is “I only put your store on my personal web page and pray to the stars that a buyer finds it.”
  • They do not go over in detail with you the initial listing agreement or give you sufficient time to read the details

Here are some red flag comments that may indicate you are about to get sucked into some kind of secret game:

  • I’m not getting paid.  I’m doing this as a favour
  • The buyer that I had got sick, but don’t worry, we’ll find another one
  • I’m a man of my word

Why would someone volunteer to put themselves at risk as an agent for free?  Why did your ‘sure thing’ buyer disappear?  Why are you telling me you are a man of your word? By doing a transaction together with integrity I will see that.

We hope this article will save many people many hassles.

As usual, don’t hesitate to contact the VCSFA as we are always ready and willing to help anyone.

Does a Coffee Shop Franchisor Have to Do Anything for Their Royalty Cheque?

It’s a provocative title, but isn’t that the million dollar question that at least one side of the relationship is always asking?  Owning a franchise is always tricky because the franchisee (owner) would like to see more value for his/her dollar and the franchisor (their boss) always feels that their name alone is worthy of praise and since they did all the hard work establishing it – way back when Grandma and Grandpa were smooching at the drive-in –  that customers and franchisees should be lining up to dump money in their tills.

–>       Times have changed.     <–

Ask Dunkin’ Donuts in Quebec who’s bottom got tanned recently for a total neglect of their brand and for ignoring their franchisees for just a little too long.

This article by Mcarthy Tetrault walks through the situation in depth.  There is one paragraph, however, that I would like to draw the reader’s attention to as follows:

In the Franchise Agreements, the franchisor promised to protect and enhance both its reputation, and the “demand for the products of the Dunkin Donuts System” – in sum, the brand. The Court found that, despite the fact that the franchisor had assigned to itself the principal obligation of protecting and enhancing its brand, it failed over a period of a decade to protect its brand. The Court concluded that brand protection is an ongoing, continuing and “successive” obligation and that franchisees cannot succeed where the franchisor has failed to in this fundamental obligation. According to the Court, the franchisor has a duty to minimize losses and reposition itself in a changing marketplace. Although the Court made mention of the civil duty of good faith and of loyalty owed by franchisors to franchisees, no analysis was undertaken as to what that meant in these circumstances apart from a duty to work “in concert with” the franchisees in such market conditions.

The article then goes on to conclude:

Unfortunately, there is next to no guidance in the decision as to what, practically speaking, it means to protect the brand. Clearly, a franchisor cannot be content to rest on its past success. It must innovate and rejuvenate. However, beyond that, the decision is quite unhelpful.

I disagree that the decision is unhelpful.  I know that lawyers are always looking for black and white and would salivate if a crystal clear cookie cutter judgement would have resulted from this case for ease of use in all their upcoming  cases of a similar nature – so maybe in that case it’s not ultra-helpful for lawyers.  However, from a franchisee’s perspective, this case is monumental and has significantly contributed to the greater good of the future of the franchise system in Canada.  Now franchisees across the country can stand up with great confidence together to make sure that their franchisor is not letting their assets and life investments get eaten up while they sip martinis watching the fireworks while hooting their hardy-hars on their yacht out in Coal Harbour (you gotta be from Vancouver to real feel that one).

It allows franchisees to ask of their franchisor questions like these:

  • What is my franchisor doing to combat competition in my market?
  • Does my franchisor have any concrete plans to combat competition or do they plan on riding old systems hoping they keep working?
  • What is the value of the brand I’m paying for?
  • Is the brand I’m paying for decreasing, stagnant or increasing in value?
  • Where under the sun is my marketing pool money going?
  • Has my franchisor allowed the dilution of the brand I’m paying good money for (ie. notable inconsistencies across the brand, unclear core business, multiple direction changes that confuse the customers, etc)?
  • What kind of calibre leadership does my franchisor employ? What are their credentials? Were they hired because they are best for the job or because they grew up with the franchisor’s son’s girlfriend’s uncle?
  • Am I a member of a group like the VCSFA which facilitates the banding-together of other coffee shop franchisees to address such important things or am I an island on my own?

Now think about the franchise coffee market in Vancouver and the competition. Which brands are in competition with each other? You can go to our increasingly exhaustive list of Vancouver coffee shop franchises page called “FRANCOUVER” to run this question yourself.

At the VCSFA we have plans to conduct surveys to find out how much your brand is being affected by other competing brands.  Be sure to become a member so you can gain access and even help contribute towards these important future works.