Judge Rules Against Dunkin' Donuts Franchisee in Jury Trial

Barkan has been fighting in court against the franchisor for five years to seek justice in losing his six stores and his store development agreements to open new franchises. He claimed that Dunkin’ intentionally blocked his efforts to refinance his stores through CIT, even though Dunkin’ had agreed to the financial restructuring of his company.

Blue MauMau
January 22, 2010

Judge Rules Against Dunkin' Donuts Franchisee in Jury Trial
Janet Sparks


Dunkin' Donuts Shop in Providence, R.I. Photo: BMM

PROVIDENCE, RI – “We were stunned.” That from Dunkin’ Donuts franchisee Irwin Barkan after receiving a directed verdict by Senior U.S. District Judge Ronald R. Lagueux on Wednesday, the seventh day of his jury trial. Barkan said he was very disappointed that the judge took the decision out of the hands of the jury after all this time. “And he did it without hearing the testimony of a single witness from Dunkin’ defendants. We were right in the middle of the trial when he issued the judgment,” he added.

Barkan has been fighting in court against the franchisor for five years to seek justice in losing his six stores and his store development agreements to open new franchises. He claimed that Dunkin’ intentionally blocked his efforts to refinance his stores through CIT, even though Dunkin’ had agreed to the financial restructuring of his company. Barkan asserts that Dunkin’s interference of the refinancing process forced him into bankruptcy with his stores, and that it was an intentional act by Dunkin’ to eliminate him from the system.

In recent years, Dunkin’ Brands has been accused of hardball tactics in terminating smaller franchisees, under the guise that they have breached their contracts. Franchise operators have alleged that they then sell the stores to large multi-unit operators of Dunkin’s choosing.

According to court documents, the judge dismissed the jury on the seventh day of trial. He also granted Dunkin defendants’ oral motion to preclude the testimony of Barkan’s damages expert, Frank Torchio. The expert witness was to give evidence that Barkan would have made $13 million if he had received the refinancing and continued to open his additional stores. But after hearing arguments from both parties, Judge Lagueux gave his oral judgment in favor of Dunkin defendants’, which suddenly concluded the trial.

Barkan would only say that he was not giving up. “There were serious mistakes in the judgment and we intend to appeal. Now, instead of it taking five years it looks like it is going to take ten.”

Arthur Pressman of Nixon Peabody, lead counsel for Dunkin’ Brands in the case, declined to make comment.

Karen Raskopf, senior vice president of communications for Dunkin' Brands, Inc. issued this statement:

From the beginning, we believed that Mr. Barkan's lawsuit against Dunkin' Brands was frivolous, and we are very pleased that Judge Lagueux agreed with our position. In his decision, Judge Lagueux confirmed our position that there was no evidence of fraud or breach of contract on Dunkin' Brands' part, and furthermore that Dunkin' Brands did the best we could to assist Mr. Barkan as he tried to restructure his debt. Mr. Barkan's former restaurants are flourishing under new franchisee management, and we look forward to continuing to serve the people of Providence our high-quality coffee and bakery products."

In conclusion, Barkan said that he was disappointed in the lack of support from the franchisee community. “There were plenty of opportunities to show its support but it has been mostly silent, in spite of my attempts to reach out. I guess that’s life.”

He feels there were franchisees and groups that could have helped their case, but just wouldn’t for the obvious reasons. He feels Dunkin’ made him out to be the “devil” and most franchisees are petrified of that, they don’t want to get involved. [Franchisees are afraid that they will be singled out like Barkan and be made into a public example of a devil by their franchisor.]

Related Articles:

* Judge Declares Mistrial at Dunkin' Donuts Franchisee Trial
* Franchisee Gets Trial Date, Scoffs at Dunkin' Donuts Settlement Offers
* Judge Clears Jury Trial for Dunkin' Franchisee
* Franchisee Awaits Jury Trial after Four-Year Battle with Dunkin' Donuts
* Smoking Gun Emails Billow Dark Cloud over Dunkin' Brands
* Dunkin' Caught in Scheme to Entrap Franchisee
* Despite Mounting Evidence, Dunkin' Continues to Deny Spying on Franchisees
* Another Major Dunkin Franchise, Kainos, Goes Bankrupt
* Dunkin' Donuts Accused of Churning Franchises for Profit


1. By Guest 2010-01-26 18:15
Why didn't the franchisee take the settlement offer?

Does anyone know why the franchisee rejected the settlement offer prior to the jury trial?

2. By Mr. DaDu 2u 2010-01-24 22:48
The System Will Never Come Together

The game is about distribution. Dunkin' is a cash cow. Look at the ADQSR reports under Allied Domecq. The business model is litigation and everyone has been paid off. Irwin Barkan’s case resulted in a mistrial early last month. Now, he gets a directed verdict? I'm glad to see Mr. Barkan has the wherewithal to take it down in Appeals. More importantly, I give you the following from the Veda:
“In addition to the stability and capital efficiency of the business model, a significant portion of Dunkin’ Brands’ cost structure is fixed and will not require a proportionate investment in corporate resources as new PODs are added. The scalable nature of this business model historically has led to increased profit margins for Dunkin’ Brands as the Franchised Brands have grown.”

There is significant profitability buried in the statement above. From what I understand they were sweating at the Water Cooler Building up in Peabody Station. The Greek Train is fast and fierce from Peabody Station to DC Station. Now, they are toasting the victory, at Barkan’s expense, which was initially funded by the franchisees. Any negative decision against DBI goes against franchisees, since DBI are merely franchisees themselves. A negative decision breaks them off from the waterfall. And, they can no longer receive the residual nectar from mother royalty. The Indymac is full of “crap”, as well. Mr. Barkan was said to be a “bad” businessman/operator by the Indymac himself. Those types of individual statements do not serve the purpose of an effective Independent Association. Go figure…

Here’s something that was written on the wall in Sanskrit:
“Unlike other QSR franchise systems, Dunkin’ Brands historically has not been called upon to guarantee its franchisees’ obligations. Accordingly, Dunkin’ Brands has limited its credit exposure from franchisees. As of February 25, 2006, Dunkin’ Brands guaranteed $12.7 million of franchisee financing. In the future, Dunkin’ Brands intends to continue its past practice of limiting its financing for franchisees by entering into expansion markets with franchisees who do not require significant financial guarantees.”

A strong ad fund brings in over $200M a year in float. The Master Servicer clips a 1 point in servicing fees. In addition, they manage to siphon another 20% as “other” related activities to protect the brand. Let’s just say brand protection = “litigation”. A $40MM legal fund is hard to win against when judges look for handouts as well. Will it ever change? Or, has the “float” opened the eyes of lady justice for a Den of Thieves?

3. By Insightful 2010-01-25 01:19
Funniest thing is…

…that Granville_Bean thinks it's not possible. Apparently, Ole Granville has never visited Brooklyn NY…

Naivete has no boundaries.

4. By Granville_Bean 2010-01-26 23:46
No Evidence not same as "not possible"

Like I said, anyone have any EVIDENCE??? Other than wishful thinking?

(Pssst - I'm a retired trial lawyer. AND appellate counsel.)

5. By Insightful 2010-01-27 15:40
Evidence works both ways,

Evidence works both ways, Counselor.
(Pssst - I come from Brooklyn NY. Routinely, Judges and Trial lawyers are both bought and sold.)

6. By Granville_Bean 2010-01-23 22:07
Get real
“And he did it without hearing the testimony of a single witness from Dunkin’ defendants." Well, Duh. That's what a directed verdict is all about. The judge determined that the Plaintiff hadn't made out an adequate case, so why bother to require a defense to be put on. The case failed after the Plaintiff's best shot. The Plaintiff didn't present a good enough case to bother continuing with. I wasn't there, but were you? Does anyone have any actual EVIDENCE beyond wishful thinking, that someone "got to" the judge?

7. Guest 2010-01-28 23:19
well, it made it past summary

well, it made it past summary judgement, no?

8. By Insightful 2010-01-23 15:18
Seems suspicious?

Think someone, or a "group", got to the Judge?


Risks: Banks collude, Churning (serial reselling), Comments on article are interesting, Confidence in judiciary eroded, Breach of contract, Farce, Franchise banker, Franchisor financing: faster in, out & resold (serial bankrupts), FranWhack: a system that is not investment-worthy, Fraud, Futility of taking legal action, Good money after bad, Individuals are profoundly shaken by fraud experience, Lending is subject to expert fraud because it is a credence good service, Retaliation, Scapegoating, Symbiotic relationships (industry, banks, lawyers), The Fixer fixes for a hefty price, The game is rigged, Unreasonably withholds consent, United States, 20100122 Judge rules

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