In COFFEE BEANERY: Exec’s Trafficing Conviction Leads to Franchisee Legal Win Part 1, I recounted how Coffee Beanery V.P. Kevin Shaw’s dalliance into the secet underworld of blackmarket traffic cones had come back to bite him right in the crosswalk. As I was accused of “silliness” on this serious subject, I’ll try not to yield to my childish fascination with traffic cone trafficing and get to the serious lesson for you, the prospective franchise buyer.
The Coffee Cone-undrum Begins
In 2003, Deborah Williams and Richard Welshans (who are alternatively described as married, “significant others,” and/or both) were, by their own descriptions, highly successful corporate executives. Deborah was VP of Operations for a large corporation; Richard had 18 years experience in industrial sales not related to traffic cones. They were financially secure, with $600,000 in equity in a million-dollar house on an expertly paved street.
When Richard lost his job due to downsizing, the couple decided to start a business. “We just wanted a little coffee shop… we just wanted a little franchiseable coffee shop, like a little Cheers-type place,” says Deborah in a videotaped interview. “We started looking for different franchisors. Our first choice, of course, was Starbucks.”
Starbucks doesn’t offer franchises, so they became interested in a Coffee Beanery franchise. During the sales process, Coffee Beanery salespeople and Kevin “King Cone” Shaw allegedly detoured the couple toward their Cafe concept. Shaw and his crew advised the couple that they’d be better off opening a Coffee Beanery Cafe, their strip-center concept that included a food menu, rather than the coffee and beverage-based mall concept the franchisees had planned to open.
Franchisees Detoured to Dead End Cafe Concept
Williams and Welshans allege that they were led to believe the Cafe was a proven concept (when it wasn’t), that they were told they’d make $125,000 profit, and that critical details involving vendor rebates and Kevin Shaw’s grand larceny cone-viction were withheld from them. Had they known Kevin Shaw was a card carrying member of the TCPS, and was reputedly tied to the radical Cone Liberation Organization (CLO) there’s no way they would have purchased a Coffee Beanery franchise. Had that required info been disclosed, Richard and Deborah would surely be successful Cuppy’s Coffee franchise owners right now.
They opened their Coffee Beanery Cafe in January, 2004 in Annapolis, MD. In a second video interview posted at UnhappyFranchisee.com, Deborah Williams says “three months into the franchise, we realized something was wrong. Money was running out like it was going through a sieve. We hired an attorney. We also filed a complaint with the Maryland Attorney General’s office here in Maryland…”
Instead of being able to focus on building their coffee business, Williams and Welshans spent the next fours years battling their franchisor. They filed a demand for arbitration. They withdrew their demand for arbitration. They filed a complaint in the District Court of Maryland. They won the right to have their franchise agreement rescinded, but declined it. Coffee Beanery filed a demand for arbitration. The franchisees lost the arbitration. They appealed the judgement that they lost and lost again. They appealed to the District Court of Maryland, and Maryland overturned the arbitration ruling against the franchisees.
Hooray! They won! What did they win?
Hooray! They won! What did they win? After four years, they won the right to sue the Coffee Beanery for the same stuff they claimed in the arbitration. They won the right to plead their case in a real court of law, with a real jury and a real judge with robes and possibly a gavel. Woo-hoo!
And the lesson here is…?
The first lesson is that one should be very, very diligent in researching the franchise organization that one joins because the cards are stacked against the franchisee in the event of a dispute. Here Williams and Welshans are celebrating a win, and after four years all they’ve won is the right to spend more money on more years of bad moods and aggravation. While they clearly have valid complaints, they’ll never get awarded enough money to get back the time they lost and the toll it took.
They wanted a little coffee shop. Annapolis, apparently, didn’t.
But there’s a more fundamental question that sticks out like an orange thumb:
Didn’t the franchisees make their most critical mistake before they ever came in contact with the Coffee Beanery?
Wasn’t the franchisee’s first and most critical mistake being motivated by the romantic notion of themselves as proprietors of an upscale Cheers-Meets-Starbucks coffee shop, and failing to begin their planning process with a strategic business and market strategy?
Doesn’t the real problem start with Deborah’s statement ““We just wanted a little coffee shop…”
Shouldn’t they have first asked Annapolis if it needed – or wanted – a little coffee shop?
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