Country Style Donut’s Sleight of Hand

They’ve taken a healthy company and because they can’t sell it in its present form, they are sawing it in half. These are cynical, self-serving tricks that give bankruptcy, insolvency and the franchise industry a bad name,” Stewart said.

News Release
December 16, 2001

Country Style Donut’s Sleight of Hand
Franchisor in driver’s seat; franchisees & landlords in trunk
Les Stewart, CAFO

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For Immediate Release
December 16, 2001

Country Style Donuts restructuring is not magical: it’s well-thought out, oft-repeated and pre-meditated plan, claims Les Stewart president of the Canadian Alliance of Franchise Operators. In the process, they are destroying hundreds of franchisees’ life-savings, stiffing landlords and making a mockery of federal insolvency regulations and Ontario’s new franchise law.

“What a show. They’ve taken a healthy company and because they can’t sell it in its present form, they are sawing it in half. These are cynical, self-serving tricks that give bankruptcy, insolvency and the franchise industry a bad name,” Stewart said.

And the small business franchisees and you and I pay for all this cleverness. The franchisees’ bank loans are usually guaranteed federally.

Their $23 million debt load is an excuse. The true goal is to sell the franchise agreements to an already identified, but silent buyer. As for the suppliers, landlords and franchisees, well, we’ll blame them even though they had no part in the franchisor’s debt situation. Sales have been constant for 3 years and the only thing that has run out is the New York-based owner’s patience.

“A significant portion of their debt is judgments that former franchisees have won in court against Country Style. The rest is easily carried with a cash flow of at least $30 million annually.”

The up to 200 franchisees that are being thrown out of their stores lose $40 million in their investments and are thrown into unemployment along with 2,000 of their staff. The landlords will likely lose up to $10 million.

“Country Style is breaking the Arthur Wishart Act (Franchise Disclosure) by not dealing fairly or to a commercially reasonable standard with its franchisees. Unfortunately, tapped-out shell-shocked operators are in little position emotionally or financially to take on a 3 to 4 year lawsuit costing $250,000,” said Stewart.

A franchisee that prefers to remain anonymous says Country Style has retained Canada’s pre-eminent, pro-franchisee litigation lawyer. This deprives franchisees of the best counsel available.

Armed guards provide 24-hour protection to Country Style’s head office in Richmond Hill.

Let the show begin.

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Les Stewart MBA is the founder and President of the Canadian Alliance of Franchise Operators (CAFO). CAFO provides franchisee business consultancy and advocacy services. Stewart is a former franchisee, an advisor to the Grand & Toy group and is an accidental organizer of a group of Country Style franchisees and landlords.

For more information contact:

Les Stewart
Canadian Alliance of Franchise Operators
http://www.cafo.net
705-737-4635 tel

Richard Cunningham
Canadian Franchise Association
http://www.cfa.ca
905-625-2896 tel


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