Blenz Ranked as Lawsuit of the Week by Business in Vancouver (BIV)

Blenz Ranked as Lawsuit of the Week by Business in Vancouver (BIV)

Well respected and well read local business publication Business in Vancouver not only picked up on the court filing made by three former Blenz Franchisees against its former Franchisor, but ranked it as their ‘Lawsuit of the Week’ – and rightfully so.  Blenz has enjoyed for many years a natural windfall of sales produced by loyal customers who feel warm and fuzzy about the ‘local Canadian brand’. No doubt the very presence of this filing surprised the author.

Although the BIV article covers fairly well the claims of hindered store sales and lease renewal problems common to the three plaintiffs, a $6.00 download of the very large filing reveals that it didn’t even touch upon one of the most devastating claims against the Franchisor – Kormi’s doomed, mandatory, and very expensive renovation and surrounding events.  This part of the claim alone covers pages and pages and, if these claims are proven in a court of law and picked up by local media (ie. Steele on your Side), they will certainly have the potential to evaporate a good percentage of the ‘warm & fuzzy’ mentioned above.

767_seymour_from_front_left

It is also noteworthy that there was no mention of the first court filing of 2014 against Blenz by Elizabeth Jacobo.  Reports from those who have read this filing indicate that it is on par or even more potentially devastating to the Vancouver brand than the claims found within the Taylor, Sahdra, Kormi suit.

Read our March 14th report of the growing number of lawsuits Blenz is facing in 2014.

Check back regularly for updates on this and other similar stories.

 

 

Franchising, Suffering, and Stockholm Syndrome

Franchising, Suffering, and Stockholm Syndrome

Over the last couple of months, we have been involved in painful conversations with several coffee shop Franchisees which was not unlike the dialogue a parent might have with their children about the dangers of drinking and driving or getting involved with gangs.  The older, wiser parent explains – from their own experience – the death and pain surrounding these important life decisions and why it’s important to avoid bad decisions at all costs.

In the first dialogue, the Franchisee had already been abused by their Franchisor when asked to cough up a large amount of money that was clearly for the unilateral gain of the Franchisee and the unilateral pain of the Franchisee.  Yet the Franchisee paid.  The Franchise also told us that the business was for sale and has been for a long time.  We explained that the commercial agent the Franchisee was using was highly questionable and may have other motives than the sale of the shop.  Yet, the Franchisee continued to use this agent.  This person even went so far as to explain that there was no happiness surrounding the business and it is not making much if any money.  Yet this person remains the Franchisee on record for that location today.

In the second dialogue, a Franchisee who has watched several other owners in the same chain get raked over the coals by exorbitantly priced – and forced -renovations (which lead to their eventual demise) reached out to us for our advice.  Can you guess what our advice was?  You guessed it.  We said, “Run for the hills and do not look back.”  Yet, it is rumoured that this Franchisee is about to hand over the money!

These two dialogues have resulted not only in the hurt of the Franchisee while they operate but also in the hurt of the people who advised them – much like the parents who watch their children drink and drive against their advice.  One can understand the teenager making life decisions like this but it does not explain very well the adults because they are… well…  adults.

One former business owner presented the idea that these people are suffering from Stockholm Syndrome.  Don’t worry, I didn’t know what it was either so here is a pretty good video link that will bring you up to speed.  I believe this person has hit the nail right on the head.

Franchisors (and the courts of law know this) are in a position of power over the Franchisees.  There are no two ways about it and even before signing the Franchise Agreements, everyone knows it.  If the Franchisor turns out to be highly ethical and wants a win-win business relationship you have done well and have obviously been an avid reader of VCSFA articles.  However, if the opposite happens, you are now a captive for the duration of your lease term unless the franchise allows you to take back your retail space and go independent.

We have witnessed, first hand, Franchisees begin to defend their Franchisors even though they had previously acknowledged them as abusive dictators.  Their mental condition began to change as the pressure was put on them by the Franchisor.  They began to think about their seemingly powerless situation and feel hopeless against their new Goliath.  They began to have thoughts that perhaps if they tried to work with the Franchisor amicably that their hostile environment would somehow turn out less hostile and they would have a better chance of coming out unscathed – both legally and financially.

From the non-business owner and former Franchisee’s perspective, this kind of behaviour is akin to the nice girl who insists on staying in the abusive relationship.  No matter what counsellor or agency you refer her to, she insists that she will be able to change this abusive man and that somehow things will get better and one day she won’t wake up with black and blue eyes.  In both situations, what they haven’t considered is that a man cannot change another man’s heart.  Whether it’s a corporation or an individual, a change must occur in the heart for outward change to manifest.

So how do you know which chain is oppressive and captor-like?  You will know them by their fruit. No good seed from a good tree will produce bad fruit and conversely no bad seed from a bad tree can produce good fruit. In a franchise environment, the individual Franchisees and their locations are the fruit.

No good seed from a good tree will produce bad fruit and conversely no bad seed from a bad tree can produce good fruit. In a franchise environment, the individual Franchisees and their locations are the fruit.

 

Need some advice? Considering signing up with a franchise?  We are here to help.  Shoot us an email at info@vcsfa.ca

Blenz Coffee Sells Off Corporate Training Centre at Prestigious Library Blenz

Blenz the Canadian Coffee Company LTD has sold their corporate training centre at Library Square to a new franchisee.  A sign reading “This location has new owners! We look forward to serving you!” was posted on the window.

new-owners

This location was a very useful component to the Blenz brand and had been the location used not only for giving new franchisees (owners) a chance to train with the public before running their own stores, but also for hosting events such as ‘That Barista Thing’.  They also used the location to do dry runs on new products and get feedback from customers.

This location has a challenging history as it was reportedly owned by a franchisee before Blenz took over the location from the upset owner.

Adding to the story of the sudden recent change of hands of this prestigious location is the simultaneous erection of a dividing wall between what was the ‘training side’ (left) and the ‘customer side’ (right) as shown in the this photo:

closed-training

This most serious corporate decision begs the following questions:

  • Where will new franchisees in the Blenz chain get trained moving forward and how will this affect the quality of the training?
  • Has Blenz protected the current owner of this Library Square location from a potentially competing business opening right next store?  There is not hint of what kind of business will be moving in to the former training space.  What if it turned out to be another coffee shop or tea shop?
  • Why did Blenz sell this location?  Did the city of Vancouver charge too much rent?  Our reports show that lease rates in Library Square are some of the most manageable in the city.  There are fewer locations with such a captive audience as library square.

This seemingly silent transaction should prompt franchisees and all stakeholders involved with Blenz the Canadian Coffee Company LTD to be on high alert if this decision was indeed not explained in advance.

As always, send us your industry information and we will be pleased to do a follow up report.  We are here to help.

How a Burger Franchise Used Coffee to Revive Its Brand

First, thanks to @coffeetalkmag for always tweeting such quality articles.  A recently tweeted article was of high relevance to anyone involved in franchising, especially coffee.

This article is important because it highlights:

  • strategy by the Franchisor
  • importance of coffee to Canadians
  • effort and action by the Franchisor to protect the brand
  • effort and action by the Franchisor to improve the brand
  • effort and action by the Franchisor to reinvent the offering to match the market
  • implementation of a leader who was able and willing to lead
  • the results of the free coffee program – which hurt lots of other local coffee shops was as follows:

    Of the operators who gave it away for free, some of them were up 30-40% in the morning. Guest counts were up 40 or 50%.

In short, as a Franchisor, they came to bat and hit a home run.

If you are a Franchisee in a coffee franchise and don’t have eggs and burgers to sell, you better evaluate quickly how your Franchisor weighs up.

As always, don’t hesitate to contact us.  We are here to help.

 

Sue-Go Juice: Did Jugo Juice Juice their Franchisees?

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.

 

 

 

Bell Mobility Gets Sued by Franchisees: A Deeper look into the Franchisee-Franchisor relationship

The Globe and Mail, on July 29th, published this article about how the Bell Mobility division of Bell is getting sued by its independent dealers.

In short, the Franchisees are suing their Franchisor for squashing their profits and looking out only for their own interests at the expense of the front line troops – the Franchisees.

This is another example of the potentially very challenging relationship a company must face if it chooses the franchise business model.  The motives, agendas, and heart of the Franchisor *must* be like a parent shepherding their flock of less experienced sheep towards a mutually profitable enterprise.  Once it is known (or suspected) that the Franchisor’s main goal is to take as much as possible from their flock and give back little, the relationship will be short-lived and it will be just the blink of an eye before court documents are filed.  Should one be surprised?  Divorce rates are well over 50% and there is much more than money to be lost in a divorce.

It must be noted that not all franchises are being sued.  In fact, we have had Franchisees of a few select coffee franchises claim boldly that they are a) making money and b) satisfied with their Franchisor.  So, it is absolutely possible to have a synergistic and win-win relationship with the Franchisor. However, when trust is breached as in the case of Bell, and if swift and serious action is not taken to repair the breach then all roads lead to the courthouse.

This is serious business, rest assured.

Sometimes Franchisors lose touch with their roots.  They don’t spend enough time in the field getting to know the customers and Franchisees personally.  They don’t know that everything is falling to pieces when a simple, transparent and humble chat would have revealed all. Perhaps the Franchisor would have to consider some compensation for past errors.  Perhaps all it would take would be a grave apology letter or speech from the Directors.  Unfortunately, the impression that many Franchisees get from their ‘shepherd’, as they suffer significant financial hardship, is that they are nothing more than mechanical cogwheels in their money-making machine, held in place by nasty and sometimes abusive contracts.

The Canadian – specifically the British Columbia – franchise world will, in the near future, see the collapse end of bad Franchise ’empires’ as associations like the VCSFA are able to help prepare potential buyers for their investment. We hope that Franchisors who are serious about maintaining a positive brand and all the goodwill their created in the eyes of their customers, will hear the voices of their front-line soldiers and take strong action.

 

 

 

Sears Faces Class Action by Hometown Franchisees

In the following article covered by News 680 is the announcement that Sears is now facing class action by its Hometown Franchisees.  The Franchisees are going to go after Sears for failing them in the following ways:

  1. For competing against them in their territories
  2. For lowering local advertising budgets
  3. For dictating conditions
  4. For eroding Franchisees’ profits by corporate decisions that are not in the Franchisees’ favour

The following quote from the article summarizes the Franchisees’ situation:

“We are tired of disappointing our customers because we lack the resources to serve them properly,” – Jim Kay

The VCSFA has heard countless stories of situations where Franchisees – specifically coffee shop franchisees – have been unable to provide the right product at the right price, or, been unable to provide a consistent brand experience to meet the customers’s expectations that the customer is expecting before he or she enters their place of business.

It is paramount that the prospective buyer of an existing or new franchise investigate the ‘atmosphere of support’ experienced by existing franchisees.  A lot of Franchisees could have protected themselves against complete financial ruin, family hardship, or worse – had they only probed the managers or Franchisees of existing stores.  This is *completely free* and most Franchisees, given enough time and in the atmosphere of trust, will divulge all their good and bad feelings they have about the Franchisor which is one of the most valuable pieces of investment information you can obtain.

No matter what kind of franchise you plan to purchase, do your homework before you purchase. Multiple locations is not always an indication of a successful franchise.

As always, don’t hesitate to contact the VCSFA should you have any questions.

 

How to Start a Coffee Shop for under $25K without your money?

 

One of our members submitted this video uploaded by David Hayward and we thought it had tremendous value for potential coffee shop owner.

Many prospective coffee shop purchasers don’t have any confidence in themselves.  They think that since they don’t have any experience in the field, or they don’t have any small business background at all (financing, leasing, etc), that they will not be able to do something powerful on their own.  Instead, they often choose the path of Franchising.  We are not saying that it is not possible to make money with a coffee franchise, but we are suggesting that there are other ways (I.e. spending $25k versus $250K!)

This ten minute video is great because it gives tips that will even help you choose a coffee franchise if you are purchasing an existing store (ie. you should have your store on the right side of the road during morning traffic).

We hope this video will be just another tool along the road to creating a better chance of success for you and your family

A Business Plan for a Coffee Franchise?

Most people think that you only need a business plan if you are going to start an independent cafe.  Think again.  Some coffee shop franchises don’t have your best interests in mind, don’t properly spend their marketing money for your store, or have systems that are archaic or even useless.

You should have a business plan for your cafe before you buy it.  If you have already bought one, it’s not too late.

This article someone forwarded to us has a bunch of good concepts.  We don’t agree with all of their ideas but it’s a good start.

So, whether you are a franchised coffee shop or an independent, you should be considering the concepts of a business plan.  Otherwise, you will not run your shop – it will run you.

 

 

 

 

What’s Going on at Blenz Coffee? Blenz at 4198 Main Street in Vancouver Closes

Brown paper covers the windows of this closed Blenz on Main street in Vancouver

Yet another sudden closure without notice has occurred at Blenz Coffee, this time on Main Street in Vancouver.  Customers in the area reported to us that they were attempting to patronize the location but found the store closed with brown paper on the wall (see photo).

So far we are unable to get details on what is taking place at this location.

This closure is the 4th closure of this type in the last 3 months, following quickly on the heels of Robson and Bute on May 1, and 815 Hastings on March 3, and 3297 Cambie on March 29th.