The Franchise Owner's most trusted news source


Log In / Register | Dec 15, 2017

Comments regarding this article:

Add new comment


44 Comments

No Fool, It is not about

No Fool, It is not about laying around and cry, cry cry! It's about saving more good people from losing everything from their, lies, lies, lies! I see sunshine at the end of my tunnel, and god blessed me enough power to pull away, and not worry about Kahala's intimidating, threating letters week after week. Why would a personm like myself who was a self made Millionair take my money and be stupid enough to put it in a failed business model. This franchisee was one of the biggest mistakes of my life, and again the good lord gave me enough strengh, and with Cecil Rolle's help guide my partner and I out in to the fresh air of life!!!

So your another one who

So your another one who jumped the Titanic to save yourself, and screw the franchisee's who have lost EVERYTHING! You will be next you selfish franchisee! How dare you agree with ZArco who said franchisee's who failed where victums of employment theft out the back door. Give me a break. All Zarco is doing is being paid to save face for Kahala, NOT FOR THE FRANCHISEE! The bloodsucking franchisor is getting richer and richer, and you franchisee's who are still hanging in are scared to death to speak out for worrying Kahala will kick you down further than you are now. Wake up! Don't be a coward as even I was for so many years intimidated from the criminals. You will see fool! Suck up to them like Rudy Pig, head of the NAB. He;s like an elementry school kid who just received his saftey patrol belt, and badge! What a hero Rudy...

Very Timely Indeed

Excellent work Mr. Williston! I appreciate your incredible knowledge of the law and savvy legal research. It will come in handy for us next week. Thank you for your talented contributions.

BMM is just lovely....

Corbin Williston's picture

Tort action arising from special relationship of zee & zor

MW wrote:

the breach of contract was also a breach of the statutory tort of good faith and fair dealing.  I believe that a number of states actually have a similar statutory tort.

A timely observation by Mike Webster.

On Dec 29, in Herbst Gaming v. Insurcorp (2010 U.S. Dist. LEXIS 137691), the federal court in Nevada reiterated that this is true in Nevada, and cited Ins. Co. of the West v. Gibson Tire [ 134 P.3d 692,708 (Nev. 2006)]

Although every contract contains an implied covenant of good faith and fair dealing, an action in tort for breach of the covenant arises only "in rare and exceptional cases" when there is a special relationship between the victim and tortfeasor. A special relationship is "characterized by elements of public interest, adhesion, and fiduciary responsibility." Examples of special relationships include those between insurers and insureds, partners of partnerships, and franchisees and franchisers. Each of these relationships shares "a special element of reliance" common to partnership, insurance, and franchise agreements. We have recognized that in these situations involving an element of reliance, there is a need to "protect the weak from the insults of the stronger" that is not adequately met by ordinary contract damages. In addition, we have extended the tort remedy to certain situations in which one party holds "vastly superior bargaining power."

michael webster's picture

Statutory Tort

The Good Professor will note that the breach of contract was also a breach of the statutory tort of good faith and fair dealing.  I believe that a number of states actually have a similar statutory tort.

Corbin Williston's picture

Emotional distress damages in contract breach

From the facts of the case, it looks like the court was really awarding punitive damages, although denominating them as damages for emotional distress. You woud not see the same result here: the franchisee would have been awarded damages sufficient to make him whole and nothing more.

In the USA, punitive damages are not recoverable in breach of contract actions. Damages for emotional distress are normally not recoverable. There are rare exceptions such as inkeepers and funeral home operators; in those occupations the presumption is that the very nature of the service performed might lead to emotional damage.

The main theory is that there are limits to business risk, and the greater the risk the higher the cost of business and hence a lessening of beneficial economic activity.

See Corbin on Contracts section 59.1

Ray Borradale's picture

The numbers will be substantial

There is no way to know how many and no way to get information to them.  This would be a good time to have a national franchisees association but as yet there is not one and I’m not sure it would help that many anyway.

The rain wasn’t the problem it was the water that followed and now it isn’t the water that is the problem it is that so much industry is screwed and those who did not have a very healthy savings account will fall over. They might dry out there businesses but too many of their customers are broke.

We have an entire state who just found out [again] that they did not have flood coverage – it turns out [again] that they missed the fine print and had ‘flash flood’ coverage mostly defined as flood that comes within 24 hrs from local rain. Not 30 to 45 feet of water that came days later and from hundreds of miles away. The insurance companies lament so many lost customers while Ebay rejoices.

Our compassionate government has sent everyone a McDonalds voucher and a bucket of best wishes. We will all pay for this for a long time but you watch – humans like cockroaches are resilient.  Or at least we have this ancient ability to turn away from those who are totally screwed and get on with our own little lives   It is freakin sad.

Richard; I’m will remember that advice and look to any opportunity to pass it on.

Les Stewart's picture

woulda, coulda, shoulda

Richard,

Yes but would any equally handsome, well-resourced attorney be able to have turned the tide on this industry devolution?

No because I know many would have tried in vain to thwart this degradation.

It was just that point-in-time. Technology hadn't yet progressed enough to have the imbalance of information out-turmp (as it has done since the dawn of time) the imbalance of coercive power.

Our only choice is to lead, follow or get the hell out of the tsunami of systemic, sustainable net change.

RichardSolomon's picture

It's an old song, Les (as you well know)

In 1995  a group of Cold Stone Creameries franchisees came to see me about what were then perceived as terrible relationship issues. We went through their litany and I presented them a plan that was calculated to get them out of their franchise agreements.

The agreements were nothing like today's contract models. Escape was then much more feasible. They had pretty good claims and could have walked.

Then it came to a discusion of retention. When I told them what they should expect by way of costs and how that would need to be accounted for, one of them said "My brother is a damn good lawyer and he doesn't make that kind of money." They left, angry at me.

This scene ws repeated in my office well over a dozen times with franchisees of systems that are now still loudly lamented in here and elsewhere. Where do they get the idea that someone should coe fix their troubles simply because it would be the right thing to do? It doesn't work that way.

I don't expect any of those particular individuals are still in the Cold Stone system, but they could be. They now hope that CNBC will deliver them from their current evils. Some things just don't change. You would think that grown ups today would know that there is no free lunch,

Les Stewart's picture

Correct: Franchise investors have per se made a foolish decision

Tsk, Tsk Tsk. Reminder from 1972 to MoTown Richard:

Okay, so your heart is broken
You're sitting around mopin', mopin', mopin', cryin', cryin'
You say you're even thinking about dying
Well, before you do anything rash, dig this

Everybody plays the fool sometimes
There's no exception to the rule, listen baby
It may be factual, it may be cruel, I ain't lying
Everybody plays the fool

Spouses, employers, schools, franchises: differenct lyrics, same melody.

RichardSolomon's picture

Ray - How intense is the franchisee population in the flooded

areas in Oz? If I were there, the floods would be the basis of many escapes from bad franchise contract relationships, using the force majeur notions, the bankruptcy notions and the things about such extremely unusual circustances that franchise agreements lack provisions to deal with.

RichardSolomon's picture

Cruel? Hardly. What is cruel is the indisputable fact that so

many supposedly grown up and well educated, experienced investors sign contracts they have no way to understand in the context of the business realities of the proposition that they also do not understand. It is a self inflicted wound in the eyes of the law, absent "clear and convincing" evidence showing fraud.

What the "normal" investor thinks of as fraud is not considered fraud in most instances as a matter of law. There is no discernible line between puffing (not fraud) and fraud.

As the good Professor indicated, these are not consumer agreements in which one side is seen as needing protection..

What protection is deemed appropriate is already incorporated into the franchise laws and the body of case law springing from it, including the common law isssues as well as the statutory mandates and prohibitions.

If you weren't shooting your entire wad with your little ball point pen - if you had a reasonably easy way out once you found out you were "disappointed" in the deal quality where the rubber meets the road, this would not be the tragedy that it is for so many people and families. But there is no "way out" to speak of.

There are two resources available. The first and most effective is pre investment due diligence on the deal quality as well as on the contracts. Most folks won't  spend the money to get that level of help and it isn't meaningfully available from many sources. That leaves only post signing relationship management with the deck stacked. That is another expensive science that most folks won't spend the money on.

The result is your typical ColdStone, Quiznos, Dunkin Donut scenario. There are far more of these than just the ones lamented on Blue Mau Mau.

This isn't likely to change just because the victims think life should not work this way. 

Robert W Sisyphus's picture

That is cruel Corbin

Every time one of you lawyers lays it out like that we that signed a franchise agreement shudder to a stop.

Robert W Sisyphus's picture

I like a happy ending

I might send some of that off to South Australia and Western Australia

michael webster's picture

Ontario to the Rescue

Here is a very recent Ontario case in which the franchisee got $50,000 for mental distress - essentially for the way in which the breach of contract was carried out by the franchisor.  Also got $250,000 for breach of contract.

Good faith and fair dealing actually mean something in Ontario law.

Corbin Williston's picture

Contract vs. Tort

You attorneys can get them a hill of beans in court against a good granchise [sic] agreement. What's the most recent case you remember where the plaintiffs got any punitive damages that more than covered the cost of the attorneys?

  • A cause of action based in contract (such as breach of a franchise agreement) will normally not give rise to punitive liability. Instead, liability will be limited to that which gives the non-breaching party the benefit of his bargain. The reasons for this distinction (which is not followed in all countries) are grounded in economic concepts such as "efficient breach" causing a "Pareto-optimal" outcome.
  • Courts will normally not re-write a contract. They will enforce it according to its terms, unless those are contrary to public policy.
  • Unconscionability is normally measured by the status of the parties at the time of entering into the contract--not at the time one party seeks to avoid its obligations on grounds that the contract has become too onerous.
  • Franchise Agreements are not consumer contracts. On a routine basis, courts have held that they are contracts between two business parties of equal bargaining power and sophistication. This is a legal fiction, but one which is very different from the consumer contracts that most first-time franchisees are accustomed to.
  • The deck is indeed stacked due to the fact that the franchsior drafts the agreement. That is why it is far more important to retain competent legal counsel prior to purchasing a franchise; to wait till a problem arises is closing the barn door after the horse is long gone.

And probably because they have sense enough to know

You attorneys can get them a hill of beans in court against a good granchise agreement. What's the most recent case you remember where the plaintiffs got any punitive damages that more than covered the cost of the attorneys? You guys all talk about gettign a good attorney. but good attorney or not you guys aren't worth it. It ends up costing Zees more $$, lost sleep, etc. The deck is stacked and all you guys can sell is the equilavent odds of winning a lottery with a lot more money to throw away. My2Cents

zarco and his chain of fools

Anyone thinking about hiring Marco should get the curves fdd, look for case settlements and ask their opinion of his representation. It isn't pretty.

This is why you are an attorney and not in pr

PR 101 is to get out front of the issue. Publicity can awaken a zor to change.

Maybe he's having gastric bypass because he Having his Cake

AND EATING IT TOO! Sound like it representing both parties. They should have hired a referee not an attorney!

Yes, just call some of the Curves Franchisees that went through

Hell for over 2 years. medium settlement was only a few thousand dollars. The lowest was $1,000 and the highest was 25,000 or so. Median settlement was around $6,000 as calculated from the FDD. And silence was paid for.

This is the same thing Curves did to their franchise association

They bought them off, and nutralize them. There is an obvious conflict of interest here from a franchisee perspective. The attorney get's the Zee to form group so he has leverage to "Jesse Jackson" corporate.

Do your homework Zarvo

Bob, you need to do your homework. You are totally misinformed. The failure rate of Coldstone franchisee's is astronomically higher that the CNBC report. Ask your real clients (Kahala) and you will see. If you are representing the franchisee's, why have we not been contacted. We built this company and had it stolen from us and now we are paying for your gastric bypass so you can still fit in your Aston Martin. If you are representing us you will get Kahala to take the $70 million annual profits and make us whole. Other than that get lost!!!

Conflict of Interest?

Loking at it pragmatically, franchisee attorneys make more money if there more franchise failures. Helping Cold Stone silence critics may mean Cold Stone has a longer franchise life.

The less bad press, the better for the franchisor...a greater probability of selling more franchises and having a longer franchisor life.

Longer franchisor life: More potential future failed franchisee clients.

So, in assisting Kahala, Mr. Zarco may be increasing the likelihood of ever more failed franchisees seeking his services.

Win-Win!

Perhaps that could be viewed as a conflict of interest?

As an aside, it appears this action by Kahala may have resulted in increased curiosity about possible skeletons in Cold Stone's closet, and a little googling turns up some awfully damning stuff.

Oops.

P.s. Mr. Zarco, please remember to stimulate the economy, okay?

Paul Steinberg's picture

Conflict of interest waiver

Guest writes:

 2 of the litigants who were represented by Zarco and they felt sold out

This is exactly the debate which Webster and I were having with Solomon earlier.

  1. Zarco Einhorn et al had a preexisting client relationship with the "independent" association ("NIACSF").
  2. Zarco Einhorn et al then took on a new client--the franchisor-sponsored National Advisory Board ("NAB").
  3. Zarco then had Kahala Brands sign a waiver of any conflict-of-interest.

This makes no sense. My understanding is that the NIACSF would most likely have to sign a waiver, and probably the NAB. But it seens that neither the NIACSF nor the NAB signed a waiver.

On the other hand, the paymaster (Kahala) was the only one to sign a waiver. But Kahala is not the Zarco Einhorn client; it is nice that they did sign a waiver, but not necessary that they do so.

I am confused, and this is why I disagree with Richard Solomon on this point.

____________________________________________________

  • NB: A lot of folks are under the erroneous impression that Kahala is the client of Zarco, including Mediaite and even the headline here on BMM which reads "...after receiving a threatening letter from Kahala’s newly retained counsel Robert Zarco."
  • Am I the only one who thinks it odd that nobody from Zarco Einhorn feels it necessary to disabuse the world of the notion that the client is Kahala rather than the hapless franchisees who were Zarco's clients before he got the bank wire?

This sounds fishy

I am not an attorney 2 of the litigants who were represented by Zarco and they felt sold out. Zarco oversold and undelivered to their plaintiffs, at least the two I know. I would want Zarco getting in bed with the ZOR in the case of the association. I bet those ZEES feel sold out like my two friends.

Zarco vs. Steinberg

I believe that the real issues are being distorted by a sideshow. I have had the priviledge of knowing and breaking bread with each of Mr. Zarco and Mr. Steinberg and hold each of them in the highest regard. Both of them have independently helped the franchisees in my system in more ways than I can count. Their accomplishments for other franchisees speak for themselves.

I am of the opinion that the Cold Stone system is in a death spiral and Cold Stone possibly recognizes that changes need to be made. If the Cold Stone franchisees continue to fail (for whatever reason), revenue will wither and die along with the goodwill in the name. A real player like Bob Zarco stepping in to help to rebuild the system to be more fair to franchisee survival would be a great way to start in changing the fortunes of the company.

Only someone of the reputation (deserved, BTW) of a Robert Zarco can have the credibility to make changes like this and get franchisee buy-in. Only Nixon can go to China, if you will. Gray, Plant & Mooty or another franchisor-friendly likely suspect probably couldn't get that done.

If Zarco can't endorse what the franchisor offers to do to repair relations (if anything), he won't. I believe he is able to get the best "deal" for changes in that system and it was a GOOD thing that he accepted the job. He (and Steinberg!) have faced far more formidable foes and forced changes--not the least of which was changing the Dunkin system from what it was in the Horn era to what it is today.

As Richard Solomon aptly pointed out: the franchisees weren't willing to seek out this kind of help with their own dollars. Zarc got the franchisor to pony up to hopefully take a step toward repairing the system. If it acheives nothing, how are the franchisees who fail worse off?! CNBC or any other press will NOT force the Cold Stone franchisor to change anything. The only people who care less about the failing franchisees than the franchisor executives are the public. The general consumer is not affected at all. In fact, if they even notice and want to respond, it would likely be with a boycott of the shops! Less sales won't help franchisees.

As for the hyperbole in the statement, that is just part of the Zarco, Einhorn firm's style. It works for them. Let's not lose sight of the real goal--saving franchisees' businesses. A high profile solution may be the best one.

A point of note--the client is NOT the person who pays the bill. Zarco, Einhorn et al owe a fiduciary duty to the franchisee entity, not the franchisor who wrote the check. The attorneys of that firm are of of a high enough ethical caliber that it would not even occur to me to question whether they would ever not recognize that. Even if they were inclined to honor this duty, it would not make long term business sense. They wouldn't sell their reputation in any event, and certainly not this cheaply.

You Could've Fooled Me

After the sell-out by the Q class action attorneys nothing like this surprises me. Nothing about the legal profession seems to be black and white, cut and dried. It's not about wrong or right with lawyers like Mr. Zarco, just wins and losses and the size of the check. The Cold Stone story on CNBC wasn't damning because the facts were wrong or because of CNBC's vendetta against the franchisor. The story is damning because it puts a face on the scheme Cold Stone and other franchisors have put in place to boost profits at the expense of its franchisee "partners". Cold Stone didn't respond because any attempt to explain its side would have made Cold Stone look worse to current and prospective franchisees; as well as the general public. I doubt Five Guys will need to hire Mr. Zarco to "protect" its franchisees. The fact that Mr. Zarco either doesn't see that or chooses to ignore it while taking the money just highlights the sordid mess our legal system has become.

RichardSolomon's picture

Steinberg - Zarco: What is this really about?

Nothing in the CNBC story, or for that matter in the various repostes to it; or in all the argumentation going on in here is going to have any material impact upon the plight of ColdStone franchisees. The ColdStone model is now rather pervasive in the franchise industry, with costs of carrying the relationship itself in the range of 20 % of gross sales or more.

Paul and Bobby are both fine attorneys with great reputations. Neither would ever sell out a client. Especially in Bobby's case, the retainer does not represent so large an enticement to get him to "stray". He has satisfied himself, I am sure, that he will do no harm in the proces of his assignment. Whatever the result, the franchisees will be no worse off than they would have been without his participation. Franchisee statements in here reassure me that they would not have done anything other than cheer lead CNBC, hoping for some free ride kind of miracle.

What this argument shows is really the difference between the practices of Paul and Bobby.

Paul freely discloses that his interests are more local and his concerns are more institutional (civil liberties). On the other hand, Bobby's practice is heavy hitting and national or international in scope, with less emphasis on theory and more on making things happen where the rubber meets the road. He has demonstrated for many years that he is very good at that.

Neither is better or worse than the other. They are just different. Whatever they may have, they have earned. You are free to agree or disagree. It really changes nothing.

Robert Zarco is a PR Nightmare!

You think Kahala would like to have that Zarco pitch back? Too high and inside with a big hitter at the plate. Some really bad decision-making going on inside Kahala. It may be too late for change.

Paul Steinberg's picture

Paul Steinberg response to Robert Zarco

Zarco writes:

Paul Steinberg is very angry about what he perceives to be a betrayal of Cold Stone franchisees by Robert Zarco

Reply:

  1. If anyone is angry, it is Mr. Zarco--just read his letter to CNBC.
  2. I am very disturbed by the threat to free speech (more about that below). Indeed Mr. Zarco has gone on a publicity blitz boasting about how once a franchisor had wired a retainer to the Zarco bank account, Zarco got a major network news department to pull their broadcast.
  3. I am not dealing with "betrayal" which is an emotional--not legal--concept. I do think that Mr. Zarco had an ethical responsibility to the franchisees and that his actions--and his own admissions to the media--raise serious issues as to the legal ethics.

Zarco writes:

Mr. Steinberg fails to understand that Cold Stone hired my firm to represent the Cold Stone franchisees, not as a nefarious plot to lure its biggest adversary over to the “dark side,” but because as Cold Stone stated, “it sought the best franchise attorney in the country” as representation for its franchisees.

  1. It is irrelevant to speculate on the motives of Kahala in wiring money to Mr. Zarco. As I noted previously, there are instances in which an adversarial party may (voluntarily or pursuant to statute) pay the expenses of the other side.
  2. My issue is that the actual statements of Mr. Zarco regarding his litigation philosophy in the instant case, coupled with the manner in which he is conducting this media campaign, raise serious doubts as to Mr. Zarco's zealous representation of his clients--and his initial clients were the franchisees, NOT the franchisor Advisory Board, let alone Kahala itself.
  3. I do not seriously think that representing franchisors is going "to the dark side." Much as we may joke about this, the American system is an adversarial system in which the optimal outcome is achieved by having the respective counterparties obtain good counsel and having their day before a neutral trier of fact. As such, I believe that both sides need good legal representation. But I do have concerns about one attorney attempting to represent multiple parties whose interests are so patently in conflict on so many issues.
  4. As to Mr. Zarco discussing his status as "the best franchise attorney in the country"---well, I will pass on the opportunity to comment other than to note that Mr. Zarco has a solid track record and his work in Scheck remains a worthy subject of study.

Zarco writes:

Mr. Steinberg’s insistence that the interests of franchisor and franchisee can never be aligned is myopic

  1. I have not said any such thing.
  2. In fact, the interests of franchisor and franchisee should be aligned in most instances.

Zarco writes:

Nevertheless, the brand itself, in which thousands of franchisees are deeply invested, is entitled to be protected from the sort of irresponsible reporting made manifest in CNBC’s television program

  1. The franchisor itself chose not to cooperate during the production of the program.
  2. Now, Mr. Zarco is trying to achieve by threat of legal action what he could never have achieved had the franchisor simply given an interview in the first place.
  3. Mr. Zarco is not in this statement saying that he is objecting to something which is legally actionable (e.g., defamatory). Rather he is blasting "irresponsible reporting" and that sounds more like caudillo than counselor.

Zarco writes:

Mr. Steinberg opposes my advocacy on behalf of the Cold Stone franchisees just because it also creates a corresponding benefit to the franchisor

  1. I never said any such thing (see previous comments above).

Zarco writes:

Mr. Steinberg’s writings may be more of an effort to drum up business that he might not otherwise get in the absence of conjuring a new villain (Zarco) to guide more phone calls to his number over other more well-known franchise attorneys

  1. Anybody who has read BMM in the past (or called me) knows that I only practice in NY State court, and only in the metro NYC area. So the likelihood of my getting any business from posting is less than Mr. Zarco getting humble. Unlike Mr. Zarco, I don't have a website (I'm not even on Facebook), I don't have tables at IFA Expos or other such sales opportunities, I don't go on Joan Rivers' show, etc. Not that there is anything wrong with that, but Mr. Zarco is assuming that I must have some pecuniary motive and I simply have no such motive. As some BMMers are aware, I have done much work here on BMM where my name is not attached to the article. Indeed as Mr. Zarco is aware, when I attended the ABA Forum (Toronto) and wrote several articles (including an interview with Mr. Zarco) all of those were bylined as "BMM Staff Report". I don't see anything wrong with people who promote themselves as the "face" of their business, but I am frankly rather publicity-shy by nature. The reason that I put my name on the byline of "Sue me, Bob Zarco" is because it would not have been fair to take pot shots under a "Guest" byline, and more importantly because I firmly believe that people need to have the courage to stand up for free speech (both in the franchise context and everywhere else).
  2. On the other hand, Mr. Zarco has gone on a media blitz proclaiming that he is "the best franchise attorney in the country" and as CNBC spokespeople have pointed out, he has spent more time giving media interviews than attempting to resolve his purported beef with CNBC.
  3. I have never said that Mr. Zarco is a villain. I have a lot of respect for his work, and in particular that he has become successful by fighting for the side which is (generally) less monied.

Zarco writes:

As a final matter, I’d like to address Mr. Steinberg’s comments about free speech. “Support free speech, fight Zarco Einhorn,” says Paul Steinberg.

Although I often like to comfort my associates that I run my law firm as a “benevolent enterprise,” I can honestly say that Mr. Steinberg’s column and comments constitute the first time anyone has ever actually charged that I wield the power of a head of state. While I am flattered, I am not the government, and neither is Cold Stone or its franchisees that I represent. The First Amendment and free speech have absolutely nothing to do with what is going on between CNBC and the Cold Stone franchise system.

  1. Mr. Zarco improperly conflates "free speech" with the First Amendment.
  2. Freedom of speech is often regarded as a natural right, and I don't think that most people would view free speech as dependent on the First Amendment. Most of the planet is not subject to the United States Constitution, of which the First Amendment is a part.
  3. Mr. Zarco does not wield the power of a head of state, or even of a village Justice of the Peace.
  4. However, Mr. Zarco achieves his goals by enlisting the aid of the sovereign and that does indeed impact Constitutional rights if he is seeking to pursue legal action against a person or entity before an American court.
  5. It is disingenuous for Mr. Zarco to send out a take-down demand on legal letterhead, threaten legal action, and then adopt an "aw shucks, its just little Bobby Zarco" approach. Mr. Zarco is acting in his capacity as an attorney who has said that he will be filing an action in court.
  • I believed that Mr. Zarco's action (and more significantly, the response of the NBC attorney) is a threat to free speech--with or without any state action. To the extent that there is state action, that does have Constitutional implications.
  • I believe that Mr. Zarco is trying to have it both ways insofar as his explicitly-stated goal is not to zealously represent his client, but rather to "align" his client's interest with that of a non-client. In light of the historical contentious relationship between his client and the franchisor, this point is of particular concern. If Mr. Zarco wished to represent the franchisees, he could have done so; he already had set up a franchisee association who presumably was paying him to represent their interests, and a logical question arises as to why he felt it necessary to have the franchisor wire money to his bank account before his firm would do what they were under a pre-existing obligation to do in the first place... represent the interest of the franchisees who had hired him 2 weeks earlier.

Not me. Did not even know

Not me. Did not even know that an association was being set up
I am certainly not even going to get involve with this association
as long as he is taking money from the Kahala personnel I can not see how any franchisee would
even sign up for this association

Robert W Sisyphus's picture

What Bobby meant to say

My credibility is worth much more than that Kahala check.

Yes the CNBC story is terrible and what is worse is that there is more to come with our legal and non-legal strategy.  Kahala won't be able to replace franchisees.

So we can all work together to reasonably fix franchisee profitability or the entire brand can go down the toilet taking Kahala along.

To which Kahala would probably have responded;

No Bobby that would cost too much so you take the check and you come down the toilet with the rest of us.

"If the franchisees have seen

"If the franchisees have seen an investment destroying agenda at work for some years now, and believe that many of them have failed because of it, the fair question seems to be (drum roll please), why have they not already retained their own really good counsel and configured their own war plan to save their businesses?"

Because Cold Stone made you feel individually that you are not doing your job as an owner
If you search the internet for stores for sales you will see prices from 50,000 to 90,000 dollars
we originallly paid for build out and equipment over 300,000
Also what is happening now is the second generation franchisees who may have brought
their stores fo under 100,000 dollars are also sqwarking - is this all there is ?
Cecil Rolle says he had three stores his loan was total I believe 600,000 -800,000 dollars
The question is How much did cold stone sell those three stores ??
I believe they sold them alot alot less then what they sold them to the franchisee
So therefore if cold stone does not have confidence in the worth of our stores (cheaping the sale)
why should a potential buyer

Richard - You are SO Wrong...

Everyone knows that it's not the "Big Mick" - it's the "Big Mac" sandwich but it's annunciated  "MickDonald's" and spelled McDonald's not "MacDonald's" or "McDowell's"

You've been watching  Eddie Murphy's "Coming to America" too much.  Get off the couch.

Question for Mr. Zarco

Thank you for taking the time to post your views of the CSC/Kahala situation.

Questions for you, Mr. Zarco:

1. Can former franchisees who have not signed releases, etc. and those franchisees who are considering legal action against CSC/Kahala become members of NIACSF? If so, how do they connect with the NIACSF? Is there a web site?

2. Would you be willing to post the charter, etc. of the NIACSF in a public forum like BMM in order to allow people to review and understand the goals, plans, protections for franchisees anonymously before making a decision?

Thank you.

RichardSolomon's picture

Yes it probably would have. Why bark back at a dog?

Companies see things that pertain to them to be more significant than they are in almost every instance. Once you parse the messenger, the message, the audience, the currency of the story you usually come to a "so what" conclusion.

Ray Borradale's picture

Had you been retained for

Had you been retained for your 'media savvy' would your professional advice have been for Coldstone to ignore CNBC Richard?

RichardSolomon's picture

Get a dog - now there's a point. According to the rants,

ColdStone franchisees need a friend/champion. They claim this arrangement to "deal with: the CNBC coverage is a contrived fugazy like subterfuge not associated with representation of ColdStone frachisees' real interests.

Nothing about the ColdStone story is new. This scenario has been playing out for years.

If the franchisees have seen an investment destroying agenda at work for some years now, and believe that many of them have failed because of it, the fair question seems to be (drum roll please), why have they not already retained their own really good counsel and configured their own war plan to save their businesses?

Had they done that and this present situation was seen to be inconsistent with their main effective battle plan, the complaining might be understandable. But since they have done nothing effective, and they are not funding any project to change anything, why all the excitement?

Could the answer be that they are really dumb enough to believe that a CNBC expose about ColdStone/Kahala could bring their franchisor to good sense and rectify what they believe to be wrong? Why would their franchisor abandon revenue streams just because some special interest broadcaster decided to call them a bad name? What utter nonsense! CNBC is not capable of providing for free some panacea for your ills. Others will not fight your battles if you won't fight them yourself.

What is really going on here is a question of brand life and stage of brand life cycle. ColdStone/Kahala is not MacDonalds. Rather is belongs in the franchisor group where long brand life is not part of the equation. These thrown together companies of several mediocre brands are all short term "bleed 'em dry" theories of management. This franchisor is one of many such. The story lies in this direction, not in some sorry lament about the vicissitudes of the franchisees who will not stand up and do anything if they have to retain their own counsel.

One might better ask, why is ColdStone/Kahala wasting money going after CNBC, as CNBC represents only some noise in a stiff wind? The whole story would now be forgotten if this franchisor had just left it alone.

Ray Borradale's picture

That was a franchising response

Yes, I would like to know how many franchisees participated in the decision to have their attorney retained by their franchisor.

I would also like to know how in denying or at least trivializing the practices of Coldstone [franchisee complaints] it becomes protection of franchisee investments.

Given the numbers appear very damaging and the Coldstone history is deplorable it would seem that many if not all franchisees will eventually have a rough time of protecting their investments unless a change of franchisee financial model, at least, is on the table.

Industry trends would suggest that once a franchise system gets to a certain level in declining network numbers franchises are very difficult to sell and even more difficult to walk away from as the franchisor fights to slow the leak.  As the leak persists the franchisor will generally want more from the deminishing franchisee network.

If nothing changes why would anyone expect different outcomes?  How does representing the franchisor in these circumstances protect franchisee investments unless Cold Stone are prepared to perform a miracle?  Do we have a miracle Mr Zarco?

Re: Mr Zarco How can I/we as a

Zarco may be a fine attorney, however he's not your friend. He has duty to his clients. So, if Coldstone franchisees want a friend get a dog, if you need an attorney get one who will vigorously represent your interests.

Mr Zarco How can I/we as a

Mr Zarco
How can I/we as a franchisee ever trust you
you took a retainer check from a franchisor that we as franchisees can not trust
you have now walked into their camp
apparently you did not listen to your association that you help set up because you would know that the
enemy is not out there the enemy is from within . The enemy is the one that wrote you the retainer check

This is the same with Cold Stone they did not listen to the franchisees when franchisees emailed the executive committee about this show on CNBC It was not Cecil Rolle that is the problem it is the fees and especially the 18.5 percent
I ask you just like so many other franchisees will ask
please resign

FuwaFuwaUsagi's picture

Catchy slogan, but does it

Catchy slogan, but does it actually mean anything in the present dispute? “Free speech” is a concept that people invoke again and again without having a real understanding of what the phrase actually means. The First Amendment to the United States Constitution protects people and the press from government interference in expression. Although I often like to comfort my associates that I run my law firm as a “benevolent enterprise,” I can honestly say that Mr. Steinberg’s column and comments constitute the first time anyone has ever actually charged that I wield the power of a head of state. While I am flattered, I am not the government, and neither is Cold Stone or its franchisees that I represent. The First Amendment and free speech have absolutely nothing to do with what is going on between CNBC and the Cold Stone franchise system.

Wow, so is there an island of idiots out there that actually are misled by this type of tripe?  Head of State, hardly with this commentary you may just have successfully challenged Jonathan Edwards for title to the Douche of the Universe - uh with respect.  You see by using that phrase it exonertes me for appearing to be a f-ing phallic symbol.  You used a form of it earlier so I am sure you are familiar with the concept.

You are correct that the phrase freedom of speech is indeed paramount to the Bill of Rights.  So far so good.  But Paul made no reference to the Constitution.  His reference was to "free speech" which exists in many forms.  You might recall litigation over speaking languages other than English in the workplace  for example.  The term "freedom of speech" relates to the freedom to express you ideas, both in terms of Government and non-Governmental arenas.   Paul referenced the later and i am relatively sure you knew that.  It seems you just wanted to make a battle of appearances to distract people from the fact your integrity and independence is being called into question for what appears to be good reason despite your proclamations to the contrary. 

In the future I suggest you save your antics for a group of drooling mentally disadvantaged individuals.  I am not impressed by legal man the defender of people who have money in their bank any more than I am by any of the con men I run into on a day to day basis.   

Hey but nice try.  Let me know how that plays in Peoria.

michael webster's picture

CNBC and Coldstone

Robert, let's get down to the issues, then.

1.  Why do you say that the section 8 disclosure is not misleading to prospective franchisees?  

2.  Why do you support Cold Stone's false and misleading statements concerning financial representation projections, on its website?  Is this an issue of concern to the newly formed franchisee association?

3.  Why do you say that there is no merit to the Rolle claims regarding the business model of Cold Stone?  Are you relying only on the summary judgment order and subsequent appeal?

4.  Why do you say that the franchise relations between Cold Stone and its franchisees are normal for the industry?  The attrition rate and SBA loan failure rate do not appear normal.

5.  Finally, who are the directors and officers of this newly formed franchisee association?  Does the association have any statement of overall goals?  How were they elected?  How was it decided the association's legal bill would be paid by the franchisor?  How was the issue of apparent chaperty and maintenance dealt with?