Blenz Coffee Franchise Poster Child Example of Need for BC Franchise Legislation

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In this most recent Business in Vancouver article on the topic of the need for franchise legislation in BC, Wayne Taylor briefly describes his personal experience dealing with Blenz Coffee (Blenz the Canadian Coffee Company Ltd) and just some of the claims he and two other former Franchisees have against the Vancouver franchise and its directors Sarah Kate Moen, Geoffrey Hair and Brian Noble.

Blenz Coffee and many other local Franchisors have essentially been able to do whatever they like while they hide behind their weighty franchise agreements and the shield of their pricey lawyers.

Until now.

Franchisees around BC have had enough and have figured out that the scales have not only been unbalanced but completely lop-sided in their Franchisor’s favour.

Typically what will occur is the Franchisee will enter into a binding legal agreement with the Franchisor and by the time he or she figures out that their investment is built on sand (or worse) they have no money left to fight the imbalance in court because government has been conveniently avoiding getting involved.

The result? Ruined marriages, unnecessary bankruptcies, lost homes, and serious cases of depression around our beautiful cities.

For some Franchisees there may be time to recover their financial house before retirement but for many others the clock has run out by the time the battle begins.

The government of BC needs to at least make a way for the small guy to have a fighting chance against companies that display sociopath and bully-like, in the same way that they have in other provinces.

It’s time to level the playing field.

 

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.

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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.

 

 

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.

 

 

 

Do You Take This Franchise to Be Your Lawfully Wedded Spouse?

I was sitting there at 4:30am drinking a large drip coffee and thinking about my life’s direction – that’s what coffee shop franchisees do, by the way.  I started thinking to myself about how this Franchisor-Franchisee thing is way more like a marriage than any other kind of business relationship on the planet.  I thought surely someone else has written an article with this analogy so I went to a search engine and found a real gem that I wanted to share by Marilyn Sinclair of BMO in her article entitled ‘A good business partnership resembles a good marriage’.  Please take three minutes (that’s how long it took me) to read this article because it’s awesome in every way when considering any kind of business partnership.  A three minutes of your time that will save you years of possible suffering is what we like to call a good investment.

What I will do here is take Marilyn’s points of the article, use them as a structure and then angle them specifically on the Franchisor-Franchisee ‘union’ as it is a unique relationship.

The Dangers of Passion

Almost every franchisee I have spoken to our in coffee shop franchise had the same story to report – they put all logic aside during the hopeful and exciting discussions with the franchisor about ‘how good things should go when you take over your store’.  We signed franchise agreements that no sober person would ever sign because of the ‘surely-these-50-other-franchisees-can’t-possibly-be-wrong’ delusion.  Now, we are all facing the fact that we may have rushed into a ‘bad marriage’.  Make sure you have a balance of wisdom with your passion.

Pros of Taking on a Partner

1. Complimentary Skills

Do not assume that the franchisor has world class talent working at head office. Every organization will showcase their top talent but crucial areas such as marketing, accounting, vendor relations, etc, may be run by unqualified or even unethical people.  Do your homework.  Never assume just because there is a nice shiny logo on many stores than everything is kosher.

2. Sharing the Risk

It is true that the franchisor shares some risk.  If the Franchisee goes bankrupt and locks and walks, they are liable to the landlord for the lease and trying to keep the store open to look good to the public.  If the whole chain goes badly, I suppose they might suffer the risk of not being able to fund their head office operations, but that’s really about it.  The rest of the risk is yours, newlywed.  Suck it up, buttercup because you signed the marriage certificate and it’s highly weighted in favour of your new Mr. Wonderful.  Hopefully he’ll be kind after the honeymoon.

3. Shared Responsibility

We’ve learned a lot about this one over the years.  Most folks buy a franchise because they assume that their hefty royalty fee includes some kind of guarantee.  Thanks to the recent Dunkin’ Donuts case in Quebec there may now actually be some hope of providing some kind of value to the franchisee for the hard-earned royalty fee they pay.  However, at the end of the day, your franchisee agreement (the legal stuff) can probably be summed up as “We’ll give you a logo and tell you what to do, but if things don’t work out, don’t come crying to me because we didn’t promise you anything.” In this marriage most people are signing in hopes of benefiting without truly knowing with whom you will be united.  Just understand that the Franchisor may not be taking much responsibility for the success of the relationship.

Cons of Taking on a Partner

1. Accountability

Let’s keep this simple: When you enter into a Franchisor-Franchisee marriage, your spouse will be watching your every step. If you don’t like that, run the other way.

2. Compatibility

Do you even know the directors and the people with whom you’ll be dealing on a daily basis?  Likely not and it’s admittedly hard to expect to wine and dine with your Franchisor before signing.  However, you have a bunch of currently-marriage spouses (and divorced ones) all over the city.  Find them, treat them well, get to know them and milk them for every detail they have.  You will be very surprised what you will learn about your future spouse.  You may postpone the vows.

3. Sharing the Wealth

It’s true that if you are becoming wealthy with as a franchisee so is your franchisor.  What they don’t tell you in marriage counselling is that if you are losing money at your job every month your Franchisor will still be there asking for 10% of your line of credit to keep his car running.  Will he give you a break next month because of your hard times?  We haven’t seen it yet in Vancouver but we wouldn’t expect them to publish it if it has happened. What we have seen repeatedly, though, is the Franchisor roughly blaming/accusing the Franchisee for not working long enough hours or working hard enough or spending enough of their own money on local marketing initiatives –  all the while not offering any of their own resources to help.  This can create a rough marriage environment, by the way. You would also expect the Franchisor to share the wealth by means of marketing but we have also seen this offering to be quite lacking.

4. The right ‘fit’

I think we’ve beat this dead horse.  Be careful who you marry.

Have the difficult conversations before you tie the knot

We concur.  Open the franchisee agreement and take the notes and discuss them with Franchisor.  If you need a good lawyer in Vancouver with expertise in Franchises, by all means let us know and we’ll send you some contacts.

Go Slow – Don’t Rush

I’m admittedly a little envious of you, reader.  There was no VCSFA when I bought my coffee shop franchise.  There was no one to turn to except the active franchisees, lawyers and a few franchise websites.  I’m not blaming anyone and it has been a great learning experience and now you can benefit greatly.  Don’t rush is right.  Ask the right questions before you sign because once you are married, you don’t want to know how hard it is to get divorced.  In some cases, stores that have been for sale for years are not selling or their buyers have not been approved.   At least with a marriage you can move to another city and get another job while you await your divorce papers but with a coffee shop franchise, you better make sure that store stays open!  Be wise.  Seek wise counsel.

We are here to help and don’t hesitate to contact us.