DAILY SEAN: "Discrete Sheep" Want Their Money Baaaa-ack
(FranchisePick.Com) Today’s Quote:
We are discrete sheep—we want to see how the drove is going, and then we go with the drove.
- Mark Twain
All that is necessary for evil to succeed is that good men do nothing.
- Edmund Burke
Nothing personal toward Joshua, Angela, David, Christy and other recent commenters, but after a year and a half of writing about Cuppy’s Coffee, warning people, donating my time writing dozens of posts, my sympathy toward the Java Jo’z and Cuppy’s Coffee depositers is wearing a bit thin.
If you haven’t followed this saga, in a nutshell there are hundreds of people who naively handed over tens of thousands of dollars to these guys for a Cuppy’s Coffee franchise. These deposits were to be refundable if the “depositers” couldn’t get funding approved. When they couldn’t get funding, the depositers were told their deposit money was gone… spent… sorry about that.
Instead of speaking out publicly and warning others, these depositers willingly accepted gag orders and a weak deal to get part of their money back over a ridiculously long time frame. The few who posted comments here and elsewhere clammed up once they got their deal. They got a few measly payments and then (surprise surprise) the payments stopped.
I’ve been writing on Cuppy’s Coffee for going on two years and can tell you this: The blog postings were the only thing that ever spurred these guys to action. If only half of you had stepped forward to publicly tell your story, the media, law enforcement and regulators could not ignore it in this election year. Imagine the outcry. Even if you had held off to go public until the first day after your first payment was missed… but you remained silent except for anonymous comments.
Dozens of Cuppy’s Coffee franchisees and franchise depositers were sent an invitation to fill out this interview questionaire and email it to unhappyfranchisee[at]gmail.com for posting.
Do you know how many of you Cuppy’s Coffee depositers have had the guts to publicly tell their stories? Five.
Five stepped forward to speak out, to expose this fraud, to stand up for themselves and also to warn others.
Five weren’t afraid to exercise their 1st amendment rights.
There’s a name for that: The Silence of the Lambs
* * * * * * *
I can’t say that I’ve lost my sympathy for the victims of Cuppy’s Coffee. I haven’t.
But it’s hard to argue with those who contend that sheep are made for shearing.
And somebody’s got enough wool to stay nice and toasty warm this winter.
WHAT DO YOU THINK? SHARE A COMMENT BELOW.
* * * * * * *
More on Cuppy’s Coffee:
CUPPY’S COFFEE, Java Jo’z, Elite Manufacturing, Medina Blogliography
Cuppy’s Coffee, Elite Manufacturing Franchise Complaint on Rip-off Report
Cuppy’s Coffee Overview/Interviews (Unhappy Franchisee)
Does Cuppy’s Coffee or Elite Manufacturing Owe You Money?
CUPPY’S COFFEE: Attorney Rudy Harper & Assistant Desiree (Reportedly) Resign
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POSTED IN: > DAILY SEAN, CUPPY'S COFFEE
27 opinions for DAILY SEAN: "Discrete Sheep" Want Their Money Baaaa-ack
Dan Rafter
Sep 26, 2008 at 7:20 am
Wow, Sean, this is a great post. It is a shame that so many people are willing to clam up once their own needs are — supposedly — taken care of. I’m glad you’ve had the guts to say what I hope a lot of others are thinking.
Dan
Sebastien Page
Sep 26, 2008 at 8:16 am
Sean, why do you think only 5 people publicly talked about this? Were they scared of worsening even more their relationship with Cuppy’s?
sean
Sep 26, 2008 at 10:27 am
Sebastien:
Here’s how it typically went. Zee gave $40K 20% refundable deposit to Elite to build their Cuppy’s, understanding that if they didn’t get their funding they’d get their $$$ back, and if they did Elite would pay their $15K franchise fee to Cuppy’s (Same owner as Elite)
Zee gets turned down for funding, returns for $$$ and gets the runaround. Calls not returned, etc. They make angry posts here and suddenly they get a call. Danny Jones says: Your money’s gone, but we’ll agree to pay you 1/2 back, because we paid the $15K FF, & other stuff. We’ll pay you back $2K per month for 10 months, but you’ ve got to agree not to post on the blogs & warn others.
So active commenters go silent. They get maybe 2 payments (if they’re lucky) then it stops. They’re too timid to violate the gag order on the agreement even though Cuppy’s breached their end.
Their first mistake was signing away their freedom of speech. Once CC gagged them they had no incentive to pay for their silence - they already had it. And the Zee becomes somewhat complicit by staying quiet while they keep collecting deposits from other suckers.
Ben Scoble - brother of A-list blogger Robert Scoble - got paid in full (or close) because he had the power to make big noise on the Internet, which would have killed their ongoing racket. So they paid him off. These guys went silent so they could get paid from the future deposits from others - they just forgot what happens when you trust the untrustworthy.
wisequeen
Sep 27, 2008 at 6:23 am
Lemmings following lemmings, sheep following sheep, the motivations are usually the same as those that got the financial markets into such a mess. Greed and lack of individual thought and responsibility. Vacant hope. Well done Sean, for calling it what it is.
Wisequeen
carol cross
Sep 27, 2008 at 4:21 pm
You know, also, when the attorneys get into the matter, they tell the plaintiff franchisee NOT to post about the subject matter because, of course, the attorneys know that if the franchisor’s revenue stream is slowed down by negative posting that results in lack of new sales, or LACK of FINANCING, they might not get paid.
Also, the attorneys indicate that information, such as in your “interview questionaire” is not a good idea because it gives the franchisor information that he can use against the franchisee in arbitration or the courts.
This capture of franchisees who are forced to deal with their franchisor “one-on-one” protects the franchisor and it is usually only in a collective action that there is any possibility of recovery and in an action like Cuppy’s where funds have been diverted, there probably isn’t any money to be had. How can you blame those who tried to recover their money by agreeing to be silent if this was the only way they could recover some of their money?
Now! we are hearing from all of those who tried to warn about the dangerous state of the economy but were ignored. We await the decision of the “Discrete Sheep” who flock together in our Congress and hope that they will do what is best for the American people —or that they even KNOW what is best for the American people!
Bet there was a lot of “insider” dumping of some of these now devalued securities that will never be discovered or punished.
sean
Sep 28, 2008 at 12:28 pm
How can you blame those who tried to recover their money by agreeing to be silent if this was the only way they could recover some of their money?
I find it pretty easy to criticize them.
First, for the stupidity of trusting someone already proven untrustworthy. They gave up the only thing that ever worked in their favor - the ability to complain on the Internet. They didn’t even write in that their silence was conditional upon the payment terms being met.
Second, they fell for a common scammer trick: making them complicit in the scam in order to get their money back. They agreed, in essence, not to warn others in order to get some of their own money back.
The problem, Carol, is that this fraud is just perpetuated if everyone is just interested in getting as much for themselves as possible - And no one is interested in doing what’s right. This is why the scamming environment is so fertile- because people are willing to go away quietly just to be granted the crusts of their own bread.
carol cross
Sep 28, 2008 at 1:17 pm
I agree, Sean! But the “silencing of the lambs” is inherent in the system of regulation of franchising that does mean that the “losing” franchisees are generally advised by their attorneys to be SILENT. Apparently, this gives the attorneys some “edge” in the courts where 30 years of case law favorable to franchisors is always protected.
The Cuppy’s franchisees who VOTED for themselves in an effort to get their money back are, of course, no more altruistic than the person who cheated them to begin with. No doubt they understood that the value of their silence might mean some recovery of their money and they couldn’t afford $200 or $300 attorneys.
The winning franchisees always join with the franchisor to try to silence those who are losing and who feel they were defrauded in the sales process because the material “risk” and the “rewards” or lack of rewards of the purchase was not disclosed to them. Of course, I believe that the guiding principle of regulation was to protect franchisors against the certain percentage who would fail and who would feel that they were cheated and defrauded because the risk, as known to the franchisor, wouldn’t be disclosed to new buyers of franchises under federal regulatory policy. Churning was premeditated and legalized by the regulators and in the law.
The constructive fraud of the State FDD (UFOC) and the boilerplate franchise agreement accomplishes the purpose of federal regulatory policy, which acta as a subsidy of both good and “bad” franchisors.
The fraud is perpetuated because federal “regulation” doesn’t allow for the recognition and punishment of fraud with a private right of action under State statutes governing securities or comon law fraud.
Yes! Unfortunately! people have always been “willing to to go away quietly just to be granted the crusts of their own bread.” They can’t afford to put the “crust” at risk because they have to eat “something” to survive.
Aren’t we witnessing the proof of this truth in the scenario being played out in our Congress today? Only time will tell!
Paul Steinberg
Sep 29, 2008 at 8:48 am
Sean writes: They gave up the only thing that ever worked in their favor - the ability to complain on the Internet.
I disagree. That view is predicated on the assumption that the company could afford to buy silence. It never could.
It appears that all that was happening is that new marks were being fleeced to pay off the squeaky wheels. As with any Ponzi scheme, that will only work for so long.
With the benefit of hindsight we can see that this franchise was getting in deeper by the day. You can’t suck blood from a stone, and bitching on the Internet won’t change that.
What might have made a difference is filing lawsuits. Get injunctive relief. Impose a constructive trust on what assets remain. Do something actually productive.
But that would take actual effort. I’d have to shower up and get down to the courthouse, and I’m too lazy to do that.
I can blog in my pajamas while watching Jerry Springer. Ain’t the Internet great?
sean
Sep 29, 2008 at 10:11 am
I’m sure your view isn’t influenced by the fact that you’re a franchise attorney.
Paul Steinberg
Sep 29, 2008 at 11:03 am
No doubt that an attorney would see legal options. Ditto anyone experienced in business.
But there is a bit of common sense needed. Anyone not in a coma knows that in America we resolve disputes in court; indeed some might say we are too litigious.
The concept that someone screwed in a business deal can file a lawsuit is nothing new. I hear that long before Al Gore invented the Internet, they had courthouses with old guys in black robes and the whole shebang.
Nothing is forcing any of these people to file suits. And if they choose to bitch on the Internet or to their local bartender, that is one way of dealing with the problem, albeit a way not likely to produce pecuniary satisfaction.
But we are now at 2 years of this crap. And frankly, when one considers the large number of people who invested in this freakshow, there are a surprisingly few people even bothered enough to complain on a blogsite.
I honestly don’t understand these people. I mean, you do feel bad for them. But it is not like these are helpless victims in Darfur or something. These people know how to find their way to a lawyer (not me, I only practice locally) and the courthouses are open.
But you and I both know that they will continue making rent payments on empty storefronts, continue paying off SBA loans they got scammed on, and continue looking in the mailbox each month waiting for Morg or Dale or the scammer-du-jour to send them a check.
And every month, that check will always be on the way–just wait till next month, you’ll see!
Hell–even the SBT people filed suit once they got thrown off the gravy train.
Wake up and smell the coffee (Just not that tainted instant coffee from China).
carol cross
Sep 30, 2008 at 9:48 am
Paul!
Where is your perspective? You know that attorneys will not take franchise disputes on “contingency” and that there is 30 years of case law that protects franchisors from franchisees who feel that they have been cheated and defrauded in the sales process and afterwards, in the relationship.
Where do these cheated and defrauded prospective franchisees and franchisees get the money to pay the attorneys to litigate the matter? You don’t think that this is a problem for the people who have used their “cash reserves” very often to “pony up” deposits on a franchise, etc. and have maxed out their credit cards, etc..
You must know that only a SMALL percentage of franchisees ever get to court and that most who fail, just fail away into silence in bankruptcy or continue to pay on their startup debt and want to forget the whole terrible experience. It is not surprising, therefore, that many do not bother to post their anger and frustration on the Internet.
Did you give up after you wrote “Beguiling Heresy” —your excellent study and commentary on franchising and the law? Do you think Dale Nabors is going to come out of this mess without losing everything? —-or only what it cost him to buy Cuppy’s and his legal fees?
Barb
Sep 30, 2008 at 3:56 pm
I do not understand why people who win in arbitration cannot post. Is it because the zor settles out of court and then ask the zee to sign a contract to never say anything about the franchise they are in? Is arbritration cases when won by a zee found anywhere on the internet? If they win can they still write their opinions on the internet?
carol cross
Sep 30, 2008 at 5:21 pm
I don’t think ZEES win very often in either arbitration or the courts but when they do, I’m sure they have to sign confidentiality agreements. Arbitrations are not public records, unfortunately, and it would be difficult to know or to find out how rarely franchisees have won in arbitrations over the past 30 years since the FTC Rule was promulgated.
Evidently, there are no “res judicata” implications for franchisors when arbitrations result in favorable settlements with franchisees, unlike jury or bench trials that do produce case law,
However, I believe the new Rule does require franchisors to disclose the results of all arbitration/mediation/litigation and the reasons for the litigation in their next FDD.
But, the confidentiality agreements do serve some purpose because the results are not disclosed to existing franchisees or new buyers of the franchise until the next publication of their mandated FDD.
Franchisors are looking to reduce the time limits in which franchisees can make claims against them and asking the States for shorter statutes of limitations that will help ZORS maintain their superior position in the ZOR-ZEE relationship.
We are lucky that Coffee Beanery franchisees, Richard and Deborah, shared their terrible experience and all of the written records of the courts, the state regulators, and the arbitrators with us on the Blue Mau Mau Internet Site and here on Franchise Pick.
This, perhaps, is why the Appeals Court looked at the case and in a RARE move, the Appeals Court overturned an arbitrator and Debby and Richard can now approach the court and ask for a Summary Judgment and a Jury hearing on the damages. (as reported by Janet Sparks in the new issue of The Franchise Times)
Billy Rosenberg
Oct 8, 2008 at 9:38 am
The strong Code of Ethics required of IFA members means that no Cuppy’s franchisee actually had any of these things happen.
If anything like this had happened, the IFA would have investigated and taken action.
It may be difficult for any franchisee to contact me since cell phone reception is very poor due to the heat down here, but call Ms. Bond at 202-662-0780 and see what she can do (and tell her that Billy Rosenberg said hi to all the folks at IFA).
Anonymous
Oct 8, 2008 at 9:54 am
The strong code of ethics required of IFA??? Please let me laugh. haha. Ok, let’s be serious for a minute. IFA couldn’t care less about your business as long as you pay your membership fees.
Billy Rosenberg
Oct 8, 2008 at 10:49 am
Do you know who I am?
Your questioning of me and my organization is highly offensive and really gets me hot under the collar…
…oh, wait–it’s not you, it is just REALLY hot down here.
Anyway, call Ms. Bond and tell her that William Rosenberg told you to call, and tell her that I’m starting up a new IFA chapter down here.
You wouldn’t believe how many franchisors are here.
Gus Boulis
Oct 8, 2008 at 10:59 am
Yo Anonymous!
We know who you are. Charlie Dickens says that him, me, and Billy Rosenberg are paying you a visit tonite.
sean
Oct 8, 2008 at 11:53 am
Anonymous:
He’s playin with you - and, indeed, playing with his immortal soul in the process by desecrating the memory of some of the esteemed franchise pioneers.
William Rosenburg is the late, great Founder of Dunkin’ Donuts and a co-founder of the International Franchise Association (IFA).
Gus Boulis was the founder of the Miami Subs franchise chain who was gunned down gangland style shortly after he sold SunCruz Casinos to Washington lobbyist Jack Abramoff and businessman Adam Kidan.
The killers had ties to the Gambino crime family and were members of La Cosa Nostra, which I believe could be considered an illegal franchise since they operate under a common name, require payment of a fee, and enforce strict operational procedures and guidelines.
Read more here:
http://www.washingtonpost.com/wp-dyn/content/article/2005/09/27/AR2005092700980.html
Billy Rosenberg
Oct 8, 2008 at 12:15 pm
Sean: Franchise historians have said (incorrectly) that the Roman Catholic Church is a franchise. I don’t know about that, and they have the “Up” escalator guarded by Cerberus, so I will have to wait till Cerby is napping to slip upstairs.
But the phone number for Ms. Bond is still good, and if the hundreds of Cuppys zees called her today I think that she would be happy to hear from them this afternoon.
I’d call her myself, but Adolph is hogging the long-distance line flirting with Eva. Maybe she’ll bake us some schwarzwald kuchen.
202-662-0780, Cecelia Bond.
sean
Oct 8, 2008 at 1:48 pm
I’m sure downstairs is fine, what with all the franchise lawyers there to schmooze you ;)
Billy Rosenberg
Oct 8, 2008 at 8:12 pm
Sean:
Yes, so many that we are even holding a satellite session of the IFA Legal Symposium this year, thanks for your concern.
I still resent you telling people that franchising is not safe. As I always say, if you want a sure thing, buy a franchise!
But hey, don’t take it from me, take it from one of our esteemed franchisors:
http://cuppyscoffeefranchise.com/
From the Cuppy’s website:
4. How safe is franchising?
According to the US Department of Commerce, 90 percent of franchise businesses are still operating 10 years, but 82 percent of all independent businesses have failed.
5. How does franchising minimize the risks of opening a new business?
With franchising, the risks involved in starting a new business are minimized because the Franchisor provides a proven method of operation. The Franchisee’s benefit because they maintain total control over the businesses financial and growth potential. As a Premiere Franchisor, Cuppy’s Coffee provided initial and ongoing support services which include:
* Cuppy’s Coffee site location assistance;
* Site lease negotiations assistance;
* Comprehensive ongoing training;
* Standardized media advertising and marketing materials;
* Ongoing advertising campaign planning;
* Business organization guidance;
* Manuals, instructional materials and much, much more!
6. How safe is franchising?
The benefits of owning a Cuppys Coffee Franchise are corporate identity, international visibility, profit potential, and investment value. Consumers will search out a Franchise before buying a product or service. As the Franchisor, Cuppy’s Coffee benefits from the manpower that our franchisees bring to the table, enabling us to grow rapidly and obtain market share, without having to stress our financial and manpower resources.
sean
Oct 9, 2008 at 4:33 am
According to the US Department of Commerce, 90 percent of franchise businesses are still operating 10 years, but 82 percent of all independent businesses have failed.
Bill:
Of course, the troublemakers insist on pointing out that these statistics are slightly exaggerated or even what some have termed “baldfaced lies,” they fail to appreciate the “Believe & Succeed” approach to franchising. If 90% truly believe hard enough, the U.S. Dept. of Commerce is saying, 90% will succeed.
However, if you think negative thoughts or insist on statistics that weren’t debunked 15 years ago, you kill the Success Fairy and everyone fails.
As Dale says, we must stop the negative blogging which created this mess in the first place.
Billy: I’m sure you were disappointed by the IFA issuing multiple memos to its members exposing these bogus stats and telling them not to use them. They’re turning into doggone flip floppers.
Note to franchise prospects regarding franchise survival statistics, despite what articles like the one below say, remember that this is America. Just because it’s a lie doesn’t mean that you don’t have the right to believe it.
http://www.franbest.com/insider-secrets-of-franchising/lies-damn-lies-franchise-statistics/
carol cross
Oct 9, 2008 at 10:08 am
I think the IFA is delighted that there is so much confusion about startup failure rates of franchisees and happy that a Google Search on the Internet still leaves prospects confused — That is, if new prospects even research for the failure rate of franchises before they buy a franchise.
Since the startup rate of failure of franchisees is so high, I guess it is understandable that the FTC Rule would have to work to obscure this known ZOR statistic in UFOC/FDD’s from new buyers.
Of course, the startup failure rate of ZORS is much less than ZEES because the ZOR doesn’t always share in the failure of the ZEES if he can somehow acquire the assets of the failed ZEE that will continue in the service of the ZOR.
Obviously, overseeding and churning is what makes franchising so durable and profitable for franchisors.
This is why franchising is protected and encouraged through public policy, Franchisors somewhat can beat the bad odds of startup failure of small businesses and can even grow to big business status if they can always churn and also sell enough enough new franchises to perpetuate and grow the gross sales of the system.
I guess it is understandable that you can buy a franchise on the SBA Franchise Registry and get a fast loan and buy a snapshot of the franchise from Fran Data and have no idea of the actual failure rate of of those franchisees who went before you —who signed ten-year agreements and failed in the first few years, and then fire-saled their businesses to the next franchisee.
Pretty malicious stuff. And, of course, the lie is perpetuated because it serves the interests of all of the special interests except the ZEE. The lie is considered as necessary to serve the economy and the “greater good.”
This lie is an offshoot of the lie of the FTC who, when they first promulgated the Rule in the late 70’s, said that the purpose of the Rule was to make franchisors disclose essential information to assess the risk of the investment and to compare the risk of the investment with other investments. “What a tangled web we weave, when first we practice to deceive” or something like that!
In my opinion, the constructive “legal” fraud of the package of the FDD offered together with a binding boilerplate and adhesory franchise agreement does the job it is intended to do. It obscures the risk and protects franchisors from common law fraud actions for fraudulent inducement/concealment in the State courts.
It is this great first lie that is the Mother of all of the lies that are told when selling a franchise as an investment. Apparently, franchising would or could not survive the disclosure of the known risk of the investment, as demonstrated by the failure/success of the performance of first-owner franchisees in the system.
Thomas Bayes
Oct 9, 2008 at 12:12 pm
Being a Presbyterian from Edinburgh, I normally ignore drunken Irishmen.
But Billy Rosenberg asked me to rebut your rebuttal of the IFA statistics and Dale Nabors’ correlation of belief to probability of success.
Dale and Billy are correct.
We cannot be certain of any statistical probability. Indeed, probability inherently incorporates belief as an essential predicate.
Therefore, to the extent that we have belief which is greater in quantity and certainty, the probability will necessarily change.
Ergo, to believe is to succeed.
carol cross
Oct 9, 2008 at 3:50 pm
Ah yes! as our good Presbyterian from Edinburgh says “We cannot be certain of any statistical probability” of future performance but when there is NO statistical probability provided and only BS rhetoric in the hard sell to replace hard statistics, this is total BS that does tend to put prospective buyers of franchises off their guard and eager to be “awarded” franchises.
Ergo, to believe BS is to be had!
Seems like Dale Nabors was caught in circumstances beyond his control and the probability of succeeding is failing. Dale was familiar with the history of this franchise. Why did he buy it? Dale Nabors posted on Blue Mau Mau for years. Wasn’t he “Dear Frannie” of the BM advice column? Is Frannie on her fanny?
Phil & Rita Connors
Nov 20, 2008 at 2:37 pm
So now Dale is working with Brian & Morg?!!
Brian is back for one more round of fun, and the Cuppy’s franchisees are begging him to take their money.
PT Barnum in his wildest dreams could not have thought anyone would be this big of a sucker.
Brian Hayes-Ponzi
Nov 20, 2008 at 5:00 pm
Suckers make life sweet!
The lawsuits are not naming me or Morgy or SBT. So even when these sheep get a default judgment they won’t see a penny of it, since we got the contracts “transferred” from Elite.
Don’t tell anyone and ruin our last sheep-shearing session. Mum’s the word ;)
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