AAFD Quietly Suspends Cuppy’s Franchisor Accreditation
August 8, 2008 by Sean Kelly
Filed under CUPPY'S COFFEE, x AAFD
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Self-Proclaimed Fairness Advocacy Group Quietly Takes its Ball and Goes Home.
What does it take to for a franchisor to lose its “fair franchising” accreditation with the American Association of Franchisees & Dealers (AAFD )*?
Outcries from dozens of franchisees claiming they were defrauded out of their life savings? No, that’s OK….
Allegations that current franchisees were paid to tell prospective franchisees they were happy? No big deal…
What about a public acknowledgement from the company Prez that they violated AAFD standards? No biggie…
How about detailed accounts circumvention of franchise disclosure laws, failure to provide promised services and lawsuits from unpaid vendors? Nobody’s perfect…
What if the franchisor fails to pay the AAFD? An outrage! Grounds for immediate suspension!
* * * * *
It seems that Cuppy’s Coffee & More has now crossed the line and committed the ultimate AAFD sin: not paying the piper.
AAFD President Bob Purvin was a staunch defendant of Morg Morgan’s Cuppy’s Coffee back when the company said it intended to pay the AAFD for putting together and administrating a franchisee association for the scandal-ridden upstart. But new Cuppy’s Coffee owner Dale Nabors has refused to play ball with the AAFD and has, according to Purvin, “gone silent” on them.
So now Bob Purvin has suspended it’s ludicrous and deceptive “contract accreditation.”
Congratulations, Bob, for “getting religion.”
Too bad you waited ’til the good guy took over to get it.
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The news came via Janet Sparks on franchise site Blue Mau Mau. Bob Purvin announced the blockbuster news on a conference call with a whopping 3 franchisees in attendance. Writes Sparks:
Last night, the American Association of Franchisees and Dealers made the decision to suspend Cuppy’s Coffee Accreditation status, awarded last year for having franchise agreements that substantially conform to AAFD’s standards. A letter was then sent to CEO and owner Dale Nabors regarding its decision and at 9:30 this morning AAFD chairman Robert Purvin announced their decision on a conference call to franchisees and other interested parties. Originally, the call was to be an exploratory effort in starting a Cuppy’s Chapter of the AAFD. But when the call went public and was posted on Blue MauMau, Purvin had no choice but to open it to others and change the agenda of the meeting. In a fairly accurate count, AAFD said there were approximately thirteen people in attendance, but only the three original Cuppy’s franchisees invited were on the call.
Purvin sent a clear message to all franchisors that you gotta pay to play:
“When Dale Nabors took over the company there were statements that those commitments would still be honored, but they have not followed through,” Purvin said. “When he brought mediation to Nabors, he and the company ignored the engagement of that mediation. The new management declined to advance its promised subsidy of an owners association and for the past six weeks our telephone and email communications have gone unanswered. “Cuppy’s has gone silent on us.”
Seems like more and more are going silent on the AAFD. Any idea why?
* formerly known here as the AAFD&C (American Association of Franchisees, Dealers & Cuppy’s)
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Sean,
Forgive my ignorance, but what is the purpose of the AAFD? Is this a group that truly helps the franchisee? Or is this something the franchisor has to pay for?
Wondering:
No forgiveness needed. I’m trying to figure out the same thing. Go to aafd.org and see if you can figure it out.
They seem to try to do three things. The newest is “contract accreditation” They review the franchise agreement of a company and “accredit” it if it meets their idea of a fair contract. In Cuppy’s case, they allowed them to use it to claim that they won a fair franchising award. However, Cuppy’s didn’t honor any of the provisions in the contract or even seemingly comply with franchise laws. However, the AAFD allowed the to use their “Good Housekeeping Seal” to unsuspecting franchisees who proceeded to lose $30K-$52K or more.
The second thing they do is manage “franchisee associations,” kind of like a franchise company equivalent of Student Council. AAFD allowed Cuppy’s the use of the award because they had committed to forming a franchisee association and paying AAFD to run it.
The third thing they do is an overall accreditation process for franchisors. It seems to me that franchisors with image problems (with a few exceptions) apply for this to show they’re behaving. There are only like 15 recipients who have it after 17 years, and they’re hardly the top franchisors in the industry.
The AAFD criteria and approach, IMHO, are seriously whacked out. Purvin praises a high risk money pit like Cuppy’s Coffee, but dismisses McDonald’s as a terrible investment.
Hmmm….
Which would you rather own…?
Thanks Sean! I had actually viewed their website before posting my original question. I’m glad to see I’m not the only one scratching my head.
Sean!
Aren’t you being too hard on Robert Purvin and the AAFD.
How could Robert Purvin possibly overcome the influence of the constructive fraud of the FTC Rule/FDD and the boilerplate franchise agreements presented as a package to new buyers of franchises.
He and his organization has had to work within the status quo of public policy to try to accomplish some good. He tried to get support to lobby the Congress, etc.. from prospective franchisees and franchisees but the very model of franchising keeps those who need the most help silent and not helpful because they don’t understand that they need help until too late —and then it is to late to help anyone else.
He has to survive as an organization and he needs income to survive and he does try to do good for franchising by improving the relationship between the franchisor and the franchisee and by warning franchisees of the need to do due diligence on franchisors.
Is there something personal here that we don’t know about, Sean? I agree with your position but does the AAFD in any way pose a threat to the way that you make your living?
Just curious!
Carol
Yes Carol, there is something personal between them. But a simpler explanation is that Sean works for competitors.
He finally just disclosed that in an offhand reply to Michael Webster on BMM.
This may sound incredibly naive, but I am truly disappointed in Sean Kelly. He should have disclosed this upfront, and in his profile on BMM, and in his postings. Readers (particularly of other websites) should not have to scour this site to learn of his conflicts of interest.
The problem with a course of action such as Sean has taken here is that it causes the rest of us to question the integrity of all of his work: how are we to know what he is posting simply for the purposes of advancing his client’s interest?
That is a shame, because Sean Kelly has performed a valuable service, even though that was performed for the benefit of his secret client(s) who were threatened by the AAFD seal. Personally, I believe the AAFD seal is over-rated as a sales tool. But I can see why non-AAFD seal recipients would want to shut down Purvin.
Paul:
Have lost your marbles?
What’s with the ad hominem attacks?
What competitor do I work with?
Carol:
Of course, Bob’s not to blame for what these guys are doing. Has it pissed me off? No question. Maybe I’ve been too focused on it - the way you are so focused on the FTC requiring unit economic disclosure.
I think it’s because I’m hoping to goad them into a change, but it ain’t gonna happen. In the beginning I sent all the victims of Cuppy’s over to the AAFD thinking they would help. I came to the realization that that was a mistake. I think that Solomon is probably correct. I guess I was hard on them because they were the closest thing to a force for franchise advocacy and fairness in the industry going.
I’m tired right now… tired of this Cuppy’s Coffee thing… I really didn’t want to be the one to keep the conversation going, but when I didn’t call attention to it no one would.
To have Paul Steinberg and Michael Webster, guys I respect, turn on me with personal ad hominem attacks is even more disheartening.
Why? Because a lot of this is about fighting off the depressing notion that everybody is in this for themselves, everybody’s got an angle, and no one is interested in standing up for what’s right… or fighting for some basic minimum of fairness.
It seems to me that if that change is gonna come, it’s not going to come from within the franchise establishment. They’re too used to things the way they are… they can’t even envision anything other than some slight variation of the way things are.
So I give up on hoping that Bob Purvin and the AAFD can be anything other than they are… They’ll probably miss all the publicity, though.
http://www.csun.edu/~dgw61315/fallacies.html
Argumentum ad hominem (argument directed at the person). This is the error of attacking the character or motives of a person who has stated an idea, rather than the idea itself… Argumentum ad hominem also occurs when someone’s arguments are discounted merely because they stand to benefit from the policy they advocate — such as Bill Gates arguing against antitrust, rich people arguing for lower taxes, white people arguing against affirmative action, minorities arguing for affirmative action, etc. In all of these cases, the relevant question is not who makes the argument, but whether the argument is valid.
It is always bad form to use the fallacy of argumentum ad hominem.
Thanks, Sean! I respect you and I understand where you are coming from. I have been the victim of “argumentum ad hominem” and know that it is the tool of those who don’t want to address the validity of the argument and want to divert attention from the matter at hand. Every time, I think of stopping my posting, I read something that makes me mad all over again, and I get back out on the Internet to try to make my points. I don’t even mind the attacks because I know that they attack me because they can’t attack the truth I am trying to expose to other cheated and abused franchisees.
I guess I should ask Paul Steinberg if there is somnething personal between the two of you. Paul’s response did surprise me. Paul was one of my teachers on Blue Mau Mau and I have great respect for him and for his book “Beguiling Heresy” but very often I am not sure where he is coming from. He is complex and perhaps has given up his hopes of bringing any real change to franchising and is tired, also, like you, although he is too young to throw in the towel.
I have always agreed with your position in this matter but did think you came down hard on Robert Purvin, who, in the past, has tried to expose the great fraud in franchising to the American Public.
But! you were right! And, the facts bear this out and you should take comfort in the fact that you did warn Cuppy’s franchisees of the dangers involved, etc.. and perhaps saved others by warning them off of this investment at this time. You did the right thing. But, maybe Robert Purvin was trying to do the right thing, too! Blessed are the peacemakers………
I agree, of course, that the Seal or the Accreditation of the Contract will be misused by franchisors on their websites and in the sales process and interpreted by prospective buyers as a recommendation to buy the franchise by the AAFD. This will be a problem for the AAFD but they will not be doing anything different than the SBA Franchise Registry or FranVet, etc..
Thank you, again, for being a free speech website and for tolerating my “rants” about disclosure of unit performance statistics —that, I believe, is the only real solution to the problem of the rampant fraud in franchising.
Wasn’t the Opening of the Olympics Magnificent? Have a good weekend! Don’t let the bastards get you down, whoever! or is it whomever! they are.
Carol
I guess I should ask Paul Steinberg if there is somnething personal between the two of you. Paul’s response did surprise me.
Paul’s ad hominem attacks were uncharacteristic and unfounded. They were proceeded by a couple of other posts where he tried to discredit my argument by mischaracterizing it.
Maybe he had a bad day. Maybe he feels the AAFD needs defending. Maybe I hurt his feelings inadvertently as we bantered back and forth.
I have to say it’s a little disappointing for him to go after my integrity in such a slanderous way, especially when I defended him when he was maliciously attacked by anonymous Cuppy’s defamers last year. But it’s a good reminder that if you’re going to bash the status quo, you need to watch your back.
I still have a world of respect for Paul, and I’ve learned a lot from him and Michael Webster. I agree that Beguiling Heresy was excellent. Hopefully, he was just kidding around or had a momentary brain freeze from eating a $2 Cuppy’s Snow Cone. It’s really his reputation that stands to suffer from this attack, as the simple truth is that I don’t have any clients in the coffee industry and haven’t for a year or more. My supposedly secret coffee website is openly linked to on every site I have, and contains news from every coffee franchise I could find.
As I look back, I have hammered at the AAFD pretty hard (I blame Mr. Blue Mau Mau for continuing to wave its unfortunate actions in front of me like a red flag in front of a bull.) My last few comments attacking their franchisee associations as franchising’s “student councils” was probably over the line, since what I’m most familiar with is their mishandling of Cuppy’s Coffee.
I did not create the AAFD’s declining participation or revenue, and I didn’t cause its waning credibility. All the personal attacks in the world can’t change the fact that an association needs to stand for something for it to be relevant. The AAFD can’t feign franchise fairness, then promote unfair settlements; it can’t denounce gag orders, then abide settlement offers containing gag orders; it can’t sell badges of credibility to those engaging in fraud and then be surprised when their credibility is damaged.
Cuppy’s Coffee was a highly publicized (at least on the Internet) situation where prospective, new and existing franchisees were in need of the very advocacy the AAFD was formed to provide. It was a golden opportunity for the AAFD to demonstrate that it could play a vital and relevant role in the process. It was an opportunity for it to show what it’s made of.
Unfortunately, the AAFD would rather fume about the criticism, and its defenders would rather attack the messenger, rather than acknowledge and address its own disappointing actions.
To be clear, I have not attacked Sean the messenger.
However, I believe that Paul’s comments on BMM about disclosing competing interests are relevant.
Sean knows what his client list is, but to maintain objectivity, when you have a pro franchisor X site, and you are commenting on a franchisor, it is appropriate to mention or raise your possible conflict of interest.
The appearance of a conflict is what matters. And, conflicts of interest are not simply the province of attorneys.
I will say that I believe, on the evidence provided so far, that Paul’s assertion of a secret campaign by Sean has as much plausibility of Sean’s assertion that Purvin is somehow in bed with fraud artists.
But, as Sean is finding out, it is very difficult to refute such suggestions - especially when made by a talented attorney like Paul.
I have personally come to no conclusion about Paul’s suspicions - except to note that it would have been more appropriate for Sean to have fully disclosed the coffee blogs earlier.
Unfortunately, for Sean, his valid criticisms of the AAFD, and there certainly are some, may well be lost in a general “Sean is a hypocrite” mood.
Mike:
There’s nothing to disclose. I’m currently making my living blogging and if links in the sidebar under a list of my sites isn’t full disclosure, I’m not sure what you want.
Eventually, conversation on BMM like many forums ends in character assassination and that’s why people come for a while, participate, and then leave. If you think the points I make and made - and all of the evidence I’ve sent your way - are on par with Paul’s fantasies, that’s fine.
The fact that I don’t work for any coffee company currently - and that none would hire someone to sink Cuppy’s when they’ve done such a fine job on their own - is probably not worth bringing up.
Sean;
It is appearances that count. In retrospect, the easiest way to have disclosed your possible conflict of interest would have been to have “coffee.franbest.com” appear beneath your signature when posting about Cuppy’s or any coffee franchise.
It would seem that Michael Webster and others who promote the AAFD would just want to leave this alone.
Just exactly, what is Sean’s Conflict of Interest in real terms, Michael Webster. Surely you can speak more plainly that this! It’s not like you to want the last word.
If Sean hadn’t given these franchisees a voice and made an issue of this, wouldn’t more prospective franchisees have been put at risk. There is no doubt that the Cuppy’s Website was using the AAFD Fair Contract Accreditation to sell franchises, is there?
I noticed in the above mentioned article that Mr. Purvin states, ” the door is open to communication and an honest effort to resolve the growing conflict and controversy surrounding Cuppy’s Coffee.” Dale Nabors will never step forward into that door. He prefers running in the opposite direction. He is a coward and spineless. The franchisee’s that he is running from are actually lucky. Down the road the francisee’s that he does open stores for are just putting off the inevitable road to bankruptcy and failure. Dale Nabor’s leadership qualities are a joke. He hides behind several very uneducate people that he has “brainwashed” into thinking they have a future with this “sinking ship,” Cuppy’s Coffee. Shame on you Dale Nabors, not only for the lives you’ve already ruined but the others that you will bury in the very near future.
Dales Nabors famous last words…
Believe (my lies) And Succeed (in going broke)
I think this kind of attack on Dale Nabor’s is unnecessary. I don’t understand why Dale bought Cuppy’s but apparently he thought he could make money for himself or he wouldn’t have bought into the mess. Apparently, the AAFD thought they could do damage control and that Cuppy’s could survive, which would be good for all of the current franchisees of Cuppy’s who are the real losers if this franchise goes under.
The Cuppy’s Mess demonstrates the problem with the franchising model itself. Franchisors are encouraged by the status quo of regulation and the law to try to grow franchise chains and under the law, their contracts protect them from franchisees who fail in arbitration and the courts. This emboldens them, of course, and encourages overselling of franchises to perpetuate the franchise system and grow the gross sales of the systems upon which the franchisors realize their profits.
Obviously, Dale Nabors knew that the current contracts would protect him from Cuppy’s Franchisees who failed or would fail in the future, but ENOUGH Cuppy’s franchisees were standing that he thought he could revive the system and grow it in the future.
Obviously, the negative publicity hasn’t helped sales and the black swan of a recession hangs over all commercial activity.
Couldn’t all of “franchise” abuse and exploitation be stopped if franchisors were required to disclosure UNIT historical financial statistics to new buyers? Then, only the viable franchisors would stand in the economy and they would have to compete for the cheap labor and cheap “venture” capital of prospective franchisees to grow their brand chain systems?
Carol
Guest:
I would hardly call Dale Nabors a coward. Taking over that company and putting his reputation on the line with the kind of publicity and scrutiny was a pretty bold move. I’m not saying a wise move, but it certainly wasn’t a cowardly move.
I also would not characterize the AAFD’s open door as any test of commitment to franchisees. I’d rather see money get returned to the rightful owners - the depositers of tens of thousands of dollars - than to the AAFD for a space on the stage at next year’s karaoke contest.
Carol:
I think the Cuppy’s story is a good demonstration as to why pre-sale disclosure and legislation alone will not solve this problem. All of the regulation put in place for presale disclosure was worthless, in this case, because there’s no enforcement.
What good are regulations if there’s no enforcement? The AAFD gives awards for fair contracts but doesn’t seem to concerned about whether they were even given to prospects in accordance with the law. And throughout this whole ordeal, there’s not a peep from the FTC, state franchise regulators, state attorneys general or law enforcement.
Make & Take Gourmet talked about selling unregistered franchises and gave earnings claims in NY business publications and no one bothered to stop them… still haven’t. Nobody’s at the wheel… so why bother to comply?
All true Sean! But, when franchisors get into trouble, it is the franchisees who bear all of the risk of building and operating physical units who also bear the main brunt of failure when the network goes down. I’m sure that Dale wouldn’t have bought Cuppy’s if there weren’t some franchisees out there making a living from their businesses. When a system goes down, everybody loses. I’m sure the AAFD, who has to survive as a trade organization, was motivated by their own interests but I think they did think that they could serve everyone’s interests if they could negotiate a peace between the parties.
As Richard Solomon and Paul Steinberg say, there is NO budget for enforcement of the ineffective and weak regulatory laws that are on the books, and no strong will by the regulators to enforce the laws against franchise systems because franchise “systems” feed the economy and the special interests. Franchisees, under law, are merely resources for the entrepreneur franchisors who are encouraged by government regulation to prove their ventures with the cheap labor and cheap capital of franchisees.
The Regulatory Capture of the FTC is pretty obvious but this wouldn’t have been possible unless this was the “will” of the Congress and the Department of the Commerce and the Department of the Treasury and the other powers that be.
Personally, I believe the original sin, to begin with, is the regulation of franchising by the federal government. If franchise regulation had remained under state laws, perhaps the UNIT performance statistics of systems would have been mandated under State laws as MATERIAL to new buyers of franchises and there would not be as much “churning” and “fraud” as we have today in franchising, because of the fact that franchisors know they have protection from fraud claims in the courts because of the FTC Rule and their boilerplate contracts.
If prospective buyers of franchises had access to the proprietary unit performance statistics of franchises before they signed on the dotted line, they would give their informed consent to the odds of success/failure, profits or lack of profitability, as demonstrated by other “first” owners of franchises in the system, and second and third owners, etc., when they put their signature to the contract. They wouldn’t feel so “defrauded” when their franchise failed if the real odds had been disclosed to them before the purchase. Of course, conversely, they might not have made the purchase if the real odds of the purchase had been disclosed to them. And, this is why we have federal regulation of franchising.
The “sin” here is in the selling of franchises as the American dream with little risk and in the franchisors being allowed to withhold MATERIAL proprietory unit performance statistics that would indicate the the risk/reward of the purchase of their franchise because of the package of a government disclosure document and a binding “boilerplate” franchise agreement that deems that these statistics are not MATERIAL to new buyers of franchises.
CUPPY’S COFFEE: Interview With Franchisee Rick Noem Rick Noem tells how he gave Cuppy’s Coffee a deposit of $125,000 in March, 2008 shortly before Dale Nabors took over. He’s been unable to get even workeable plans or his phone calls returned, much less construction. Meanwhile, he’s gone broke paying $6000 a month rent and a $3000 monthly loan payment on a business that hasn’t been built.
CUPPY’S COFFEE: List of Locations, Status Here’s the location list from the Cuppy’s website. I’ve started adding closed locations, and those who paid but never opened. Contribute additions or clarifications with a comment or by emailing unhappyfranchisee[at]gmail.com.
Cuppy’s Coffee Overview Here’s a central page with links to Cuppy’s Coffee franchisee interviews, stories, documents and information. Direct people here to get them up to speed on the Cuppy’s Coffee story.
CUPPY’S COFFEE, Java Jo’z, Elite Manufacturing, Medina Blogliography Franchise Pick’s links to Cuppy’s Coffee, Elite Manufacturing, AAFD, & Java Jo’z related posts.