Frozen yogurt franchisee sues chain, rebrands his two shops

Choi also claims that Red Mango attempted to “de-franchise” him for defaulting on his so-far-nonexistent franchise agreements and sought to collect more fees from him, which, when he refused, resulted in Red Mango demanding that he stop using all their trademarks immediately, the lawsuit said. That meant changing the name of the stores to RM Yogurt.

http://pacific.bizjournals.com
July 2, 2010

Frozen yogurt franchisee sues chain, rebrands his two shops
Texas-based Red Mango leaves Hawaii, suit heads to federal court
Linda Chiem

RedMango.jpg

The former Red Mango frozen yogurt store on Waikiki Beach Walk is now called RM Yogurt, as is a second location in Kahala Mall. Tina Yuen

A popular frozen yogurt franchise company has pulled out of the Hawaii market over a dispute with the local franchisee that has prompted a federal lawsuit and a rebranding of two Oahu stores.

Red Mango, the self-described pioneer of the North American frozen yogurt boom of recent years, opened its first Hawaii store at Waikiki Beach Walk in September 2008 and its second at Kahala Mall in August 2009.

But now, Alex Choi, the Hawaii franchisee, is suing Red Mango and its founder, Daniel Kim, accusing them of misrepresenting their business arrangement and collecting hundreds of thousands of dollars in fees only to renege on the promise of a real franchise agreement for Hawaii, according to Choi’s lawsuit, filed in 1st Circuit Court on Feb. 16 and later transferred to federal court.

Since then, the former Red Mango stores have been rebranded as RM Yogurt and Red Mango no longer lists any Hawaii locations on its website.

Choi and his attorneys, Thomas Bush and Louise Ing of the Honolulu law firm Alston Hunt Floyd & Ing, declined to comment on the lawsuit.

In an e-mail to PBN, Grant A. Walsh, an attorney for Kim and Red Mango, said the company does not comment on pending litigation.

“Red Mango takes pride in the exceptional product quality and in-store experience offered to its customers at more than 70 stores located across the United States,” Walsh, an attorney with the Richardson, Texas, law firm Mullin Law, said in his e-mail. “The franchisor has an obligation to its customers and the entire franchise system to take corrective action — including the possible termination of franchisees — if any franchise owner is consistently unable to follow Red Mango’s operational and quality protocols that are essential for protecting the Red Mango brand and its reputation for excellence.”

Choi claims in his lawsuit that he had a so-called “area development deal” with Red Mango for up to seven stores in Hawaii, but that deal stopped short of giving Choi outright ownership of the Red Mango stores in Hawaii — even after he invested more than $600,000 in fees, construction costs, equipment and lease negotiations to develop them.

Choi is suing the Dallas-based company for breach of Hawaii’s franchise investment law, claiming that Red Mango didn’t disclose a number of hidden fees, including royalty and advertising fees and all monies collected from the sale of gift cards. He also claims that the company backed out of other support involving materials and equipment over the course of their initial agreement, which resulted in lost profits.

Choi also claims that Red Mango attempted to “de-franchise” him for defaulting on his so-far-nonexistent franchise agreements and sought to collect more fees from him, which, when he refused, resulted in Red Mango demanding that he stop using all their trademarks immediately, the lawsuit said.

That meant changing the name of the stores to RM Yogurt.

On June 18, Honolulu Federal Court Judge Helen Gillmor granted Kim’s motion to transfer the case from Hawaii to the Northern District of Texas.

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http://pacific.bizjournals.com/pacific/stories/2010/07/05/story8.html?b=1278302400^3600261


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