News Briefs

Dunkin' Donuts Franchisee Wins First Round

Dunkin' Donuts USA Inc. franchisee Riese Organization of New York has fended off the first part of the franchisor's lawsuit, an effort to obtain a preliminary injunction to stop it from doing business as a Dunkin' Donuts franchisee. U.S. District Court for the Eastern District of New York Judge Nicholas G. Garaufis denied Dunkin' Donuts' request on Oct. 14.

Dunkin' Donuts, a subsidiary of Allied Domecq, sued Riese in Nov- ember 2002 to revoke its franchise rights. Dunkin' accused Riese of not meeting standards for shop cleanliness, withholding royalty payments, and selling donuts wholesale to competitors. Riese has countersued for wrongful termination and breach of the covenant of good faith and fair dealing.

Riese's 19 Dunkin' Donuts franchises have passed New York City health inspections, said Gladwyn Lopez, associate vice president for Rubenstein Communications, Inc., the public relations firm for Riese. “Riese wants to continue to operate the franchises,” said Lopez. “We are pleased that the injunction lets us continue just as we were.”

The wholesale operations of Riese, which potentially put it in competition with other Dunkin' Donuts franchises in the New York City area, are unusual, but Lopez pointed out that Dunkin' Donuts has been aware of it for about 20 years. Lopez would not comment on whether that is the primary point of contention in the lawsuit.

Dunkin' Donuts has filed more than 200 lawsuits against franchisees since 2000, according to a report in Nation's Restaurant News, part of what the company calls a broad campaign of enforcing high operational standards in a competitive environment. At least one other franchisee has won an injunction in a situation similar to Riese's.

Lawsuit May Spawn New Coffee Franchisor

Fresh from a victory over the Starbucks coffee chain, the owners of a single, isolated cafe called HaidaBucks say that they might take advantage of their higher profile to start franchising new outlets.

HaidaBucks is located in the town of Masset, on Haida Gwaii Island more than 75 miles off the northwestern coast of Canada (about 450 miles from Vancouver). Four partners opened the cafe in 1999, hoping to capitalize on the summer tourist trade that visits the area. Three of the partners are members of the Haida First Nation, and the fourth is married to a Haida woman.

In 2002, the store owners received notice from Starbucks that they were infringing on the company's trademark, both through their name and their circular logo that showed traditional Haida imagery. HaidaBucks' owners argued that their store's appearance, wider restaurant menu, and location hundreds of miles from the nearest Starbucks made it unlikely that a customer would be confused. The owners pointed out that the name HaidaBucks is based on the common term for young men in the area, “bucks.”

Starbucks withdrew its threat in October, but not before the potential litigation brought HaidaBucks a great deal of publicity and the idea that they could capitalize by starting a franchise. A Web site, http://www.haidabuckscafe.com/, tells the story.

Ziebart Franchisees Win Arbitration for $1.44 Million

Franchisees of Ziebert International Corp., an automobile maintenance company, won a $1.44-million arbitration claim against the company for overcharging them for a rustproofing sealant product. The franchisees argued that they were overcharged by Ziebert for the spray-on sealant that they use to rustproof vehicles. The arbitration was heard by a former chief justice of the Oakland County (Michigan) Circuit Court.

Ziebart “does not agree with all of the findings of the arbitrator … but the fact of the matter is that the franchisees did not accomplish what they set out to do,” said Frank Soccorsi, Ziebart vice president of franchised operations. Franchisees were seeking much higher compensation, Soccorsi said. He added that he could not comment further because the arbitration “has left one or two outstanding issues, and the arbitration is not final until it has been entered into the circuit court.”

Of the 27 franchisees that brought the suit, 23 are still Ziebart franchises, said Soccorsi.

Ziebart International has about 200 franchises and 25 company-owned stores that sell its spray-on rustproofing services and other accessories such as truck bed liners.

Ron Dengler, former president of the Ziebart Dealer Association, and one of the lead plaintiffs, did not return phone calls requesting comment.

Media Arts Lawsuit Expands

Fifteen owners of art galleries franchised by mass market painter and graphic artist Thomas Kinkade and Media Arts Group Inc., are suing the company for fraud, breach of contract, and violations of franchise investment and antitrust laws. The number of gallery owners has increased since three Michigan owners started the class action lawsuit (see FBLA, June 2003).

Norman Yatooma, a Birmingham, MI, attorney who represents the plaintiffs, said that more lawsuits will follow. “The litigation against Media Arts is growing rapidly,” he said in a statement released to the media. “Our office receives calls almost weekly from gallery owners across the country interested in joining our efforts. We anticipate filing two additional class action lawsuits, one on behalf of collectors of this artwork and one on behalf of shareholders of Media Arts.”

Among the major charges, the plaintiffs say that gallery owners were required by Media Arts to buy and sell artwork at set prices, but Media Arts undercut those prices by selling the same items to mass-market retailers for lower prices.

Media Arts Group would not comment. Kinkade announced on Oct. 31 that he will buy the company (he currently owns 35% of the stock) for $4 per share. The deal should be completed early in 2004, according to Media Arts.

Dunkin' Donuts Franchisee Wins First Round

Dunkin' Donuts USA Inc. franchisee Riese Organization of New York has fended off the first part of the franchisor's lawsuit, an effort to obtain a preliminary injunction to stop it from doing business as a Dunkin' Donuts franchisee. U.S. District Court for the Eastern District of New York Judge Nicholas G. Garaufis denied Dunkin' Donuts' request on Oct. 14.

Dunkin' Donuts, a subsidiary of Allied Domecq, sued Riese in Nov- ember 2002 to revoke its franchise rights. Dunkin' accused Riese of not meeting standards for shop cleanliness, withholding royalty payments, and selling donuts wholesale to competitors. Riese has countersued for wrongful termination and breach of the covenant of good faith and fair dealing.

Riese's 19 Dunkin' Donuts franchises have passed New York City health inspections, said Gladwyn Lopez, associate vice president for Rubenstein Communications, Inc., the public relations firm for Riese. “Riese wants to continue to operate the franchises,” said Lopez. “We are pleased that the injunction lets us continue just as we were.”

The wholesale operations of Riese, which potentially put it in competition with other Dunkin' Donuts franchises in the New York City area, are unusual, but Lopez pointed out that Dunkin' Donuts has been aware of it for about 20 years. Lopez would not comment on whether that is the primary point of contention in the lawsuit.

Dunkin' Donuts has filed more than 200 lawsuits against franchisees since 2000, according to a report in Nation's Restaurant News, part of what the company calls a broad campaign of enforcing high operational standards in a competitive environment. At least one other franchisee has won an injunction in a situation similar to Riese's.

Lawsuit May Spawn New Coffee Franchisor

Fresh from a victory over the Starbucks coffee chain, the owners of a single, isolated cafe called HaidaBucks say that they might take advantage of their higher profile to start franchising new outlets.

HaidaBucks is located in the town of Masset, on Haida Gwaii Island more than 75 miles off the northwestern coast of Canada (about 450 miles from Vancouver). Four partners opened the cafe in 1999, hoping to capitalize on the summer tourist trade that visits the area. Three of the partners are members of the Haida First Nation, and the fourth is married to a Haida woman.

In 2002, the store owners received notice from Starbucks that they were infringing on the company's trademark, both through their name and their circular logo that showed traditional Haida imagery. HaidaBucks' owners argued that their store's appearance, wider restaurant menu, and location hundreds of miles from the nearest Starbucks made it unlikely that a customer would be confused. The owners pointed out that the name HaidaBucks is based on the common term for young men in the area, “bucks.”

Starbucks withdrew its threat in October, but not before the potential litigation brought HaidaBucks a great deal of publicity and the idea that they could capitalize by starting a franchise. A Web site, http://www.haidabuckscafe.com/, tells the story.

Ziebart Franchisees Win Arbitration for $1.44 Million

Franchisees of Ziebert International Corp., an automobile maintenance company, won a $1.44-million arbitration claim against the company for overcharging them for a rustproofing sealant product. The franchisees argued that they were overcharged by Ziebert for the spray-on sealant that they use to rustproof vehicles. The arbitration was heard by a former chief justice of the Oakland County (Michigan) Circuit Court.

Ziebart “does not agree with all of the findings of the arbitrator … but the fact of the matter is that the franchisees did not accomplish what they set out to do,” said Frank Soccorsi, Ziebart vice president of franchised operations. Franchisees were seeking much higher compensation, Soccorsi said. He added that he could not comment further because the arbitration “has left one or two outstanding issues, and the arbitration is not final until it has been entered into the circuit court.”

Of the 27 franchisees that brought the suit, 23 are still Ziebart franchises, said Soccorsi.

Ziebart International has about 200 franchises and 25 company-owned stores that sell its spray-on rustproofing services and other accessories such as truck bed liners.

Ron Dengler, former president of the Ziebart Dealer Association, and one of the lead plaintiffs, did not return phone calls requesting comment.

Media Arts Lawsuit Expands

Fifteen owners of art galleries franchised by mass market painter and graphic artist Thomas Kinkade and Media Arts Group Inc., are suing the company for fraud, breach of contract, and violations of franchise investment and antitrust laws. The number of gallery owners has increased since three Michigan owners started the class action lawsuit (see FBLA, June 2003).

Norman Yatooma, a Birmingham, MI, attorney who represents the plaintiffs, said that more lawsuits will follow. “The litigation against Media Arts is growing rapidly,” he said in a statement released to the media. “Our office receives calls almost weekly from gallery owners across the country interested in joining our efforts. We anticipate filing two additional class action lawsuits, one on behalf of collectors of this artwork and one on behalf of shareholders of Media Arts.”

Among the major charges, the plaintiffs say that gallery owners were required by Media Arts to buy and sell artwork at set prices, but Media Arts undercut those prices by selling the same items to mass-market retailers for lower prices.

Media Arts Group would not comment. Kinkade announced on Oct. 31 that he will buy the company (he currently owns 35% of the stock) for $4 per share. The deal should be completed early in 2004, according to Media Arts.