Peaberry Coffee of Denver, Colorado was recently ruled to be the winner in a case between coffee franchisor and its franchisees.
10 Franchisees alleged that the franchisor had misled them regarding the income potential of the business and also that the business concept itself was not a viable business. Despite finding that the company had failed to disclose financial information, it was not sufficient to justify the claims of the plaintiffs. A judgement was awarded in favor of the defendant, including all legal costs and back franchise fees owed by the plaintiffs. Ouch.
The plaintiff’s attorney filed an appeal immediately thereafter, claiming that the legal construction of the court’s ruling was flawed. The saga will continue.
So, what practical information can we all learn from this case?
First off, always understand the nature of your investments and how they make money. True, there will always be unscrupulous people out there that will lie to you, withhold information or use other tactics to swindle you of of your cash, but this does not appear to have been the situation here.
Remember the fundamental truism that what you want to happen in life is not necessarily what will happen; never confuse the two. You may want your coffee shop to earn $750,000 per year, but that alone does not ensure that your dream will come to fruition. Furthermore, be sure to call into question the motives and credibility of anyone who is in a position to benefit financially from the pursuit of your dream.
Running a business is never easy and no franchise is a turnkey operation; if you want a turnkey business with a steady income, get a job at Starbucks. With the exception of up-front planning, franchises are just as difficult if not more difficult to operate than an independent business for all intents and purposes.
Second, when you’ve failed, accept your own genuine mistakes and move on. Failure at one business does not mean that you are a failure in life; accept responsibility, learn from your mistakes and try again. It seems to me that from Judge Robbins’ ruling, he was scolding the group of plaintiffs for their unwillingness to accept responsibility for their own lack of judgement or performance.
“If it seems too good to be true…” you know the rest. It’s not someone else’s fault if you don’t.
You can read a summary of the case and decision on franchise information site Blue Mau Mau.
I was on Yahoo and found your blog. Read a few of your other posts. Good work. I am looking forward to reading more from you in the future.
It seems to me that Judge Robbins was put in the position of protecting all of the case law that has been developed to protect franchisors since the FTC Rule governing the sale of franchises became law in late 1979.
Unfortunately, captured, ineffective and immoral regulation of franchisors permits franchisors to “experiment” and try to “prove” their business concepts on the cheap labor and venture capital of innocent franchisees who aren’t provided adequate disclosure of the risk under the law.
How can you defend the fact that technicalities of the law are used to defend the franchisor who hid the losses of the corporate stores from “good faith” innocent buyers of this franchise? —who, of course, would never had purchased this franchise if the truth had been disclosed!