Lights! Camera! Reaction!

IFA had no time at all. Alisa Harrison, the association’s vice president of communications and marketing, says the trade group contacted by Darren Rovell after being tipped off about the documentary and spent “a lot of time with him on the phone.” The IFA was never mentioned.

Franchise Times
February 1, 2011

Lights! Camera! Reaction!
Franchises answer back after CNBC air questionable report
Julie Bennett

An hour-long cable television program (44 minutes, without commercials) is causing havoc in the franchise community. The International Franchise Association (IFA) is feeling snubbed, insiders whose long interviews were cut to seconds are miffed, the owner of a Colorado dog-care facility claims she was ambushed and executives of Cold Stone Creamery are so angry, they threatened to sue the network, which stopped all scheduled rebroadcasts. CNBC is redoing parts of the documentary, but as of press time, had not set a time for its return to the air.

After weeks of heavy promotion, CNBC first aired “Behind the Counter: The Untold Story of Franchising,” on December 15th. Press releases said host Darren Rovell had spent four months researching the light and dark sides of franchising. Representing the light side were segments on Five Guys’ tremendous growth and the Idaho potato supplier who sends 150-million pounds of spuds to its franchisees each year, the prosperous rise of immigrants from South Asia and Portugal who are into their second and third generations as Dunkin’ donuts franchisees and the reasons consumer-product company Procter & Gamble launched dry cleaning and car wash franchises.

The dark side looked at problems within Camp Bow Wow in Boulder, Colorado, and Cold Stone Creamery in Scottsdale, Arizona.

Heidi Ganahl, CEO and Top Dog at Camp Bow Wow, says, “CNBC first contacted me in August and said they wanted to feature us in a showcase of franchising in America. We believed it would be an upbeat and positive story, so we invited them to our annual franchisee convention and let them talk to anyone they wanted to.” Even when CNBC sent a camera crew back to Colorado to “grill” Ganahl on the system’s Franchise Disclosure Document (FDD), she says she had no idea that the tone of her segment had shifted.

The documentary did show happy franchisees in their dog-filled Camp Bow Wow facilities, but reported that 80 others had paid their franchise fees and never opened. Clips of Ganahl, long hair loose above a red T-shirt, were interspersed with those of strait-laced Federal Trade Commission attorney Lois Greisman. “It sounded like the FTC was after us,” Ganahl says. “They didn’t include any of tour explanations (half of the 80 are in future development agreements and Ganahl had offered alternatives to franchisees who could not get zoning or funding). “We were blind-sided,” Ganahl says.

Ganahl hired New York law firm Buchanan Ingersoll & Roo0ney to “clear our name” with CNBC. In the meantime, “Our franchisees are discouraged at the angle the program took and we’re talking to a lot of potential leads who saw the story and now have concerns,” she says.

The Cold Stone facts
The Cold Stone Creamery segment was even darker. It featured former franchisee Cecil Rolle, who said he was forced to close three Cold Stone stores in Tallahassee and Ocala, Florida, because “hidden expenses” and vendor “kickbacks” to the franchisor ate up his profits. Rolle claimed he has heard from hundreds of other disheartened Cold Stone current and former franchisees and “talked five of them out of suicide,” Rovell stated. “This exposes the underbelly of franchising.”

Kahala, parent of Cold Stone Creamery and other brands, including Blimpies and TacoTime, lashed back by hiring Robert Zarco, of Zarco Einhorn Slakowski & Brito in Miami, to “aggressively” defend them. Zarco contacted CNBC and insisted that they strike the comments about hidden expenses, because everything’s spelled out in Cold Stone’s FDD, and add information that Rolle had lost a lawsuit against his former franchisor. CNBC made the changes before re-airing the documentary several more times in December.

ON December 23, Zasrco sent a letter to CNBC announcing that Cold Stone would sue the cable network unless they “immediately discontinue rebroadcasting the show.” CNBC complied by putting other programs into the time slots and wiping a detailed report about Cold Stone from its website. The move astounded media experts like Peter McKay, of New York, a former fellow of the Poynter Institute of Journalism in St. Petersburg, Florida, who said, “It’s not unusual for sources to complain. But I’ve never seen other television documentaries taken off the air. Usually, the producers just add a response at the end of the program.”

Zarco says Cold Stone President Dan Beem had originally turned down a chance to appear in the documentary because he could see the direction the producers were going. In January, Zarco insisted that he, Beem and Franchisee Rudy Puig of the National Independent Association of Cold Stone Creamery Franchisees, whom Zarco also represents, be interviewed by CNBC and that their comments be added to “Behind the Counter” before it can be put back on the air. The three men flew to New York and were interviewed in a CNBC studio on January 7.

Zarco says, “We had two of our own cameras running, too. If they depict us in a negative way, we’ll know what really happened and we’ll have a right to sue them.”

Many within the franchise community were surprised that Zarco, a well-known franchisee attorney, is representing a franchisor at all. Bloggers on message boards like Blue Mau Mau claim he has tarnished his reputation. But Zarco says the “reckless, sinister” report on Cold Stone has hurt franchisees in terms of lost sales, and that he can represent both sides because their interests in correcting the story are aligned. Jim Coen, president of the Dunkin’ donuts Independent Franchisee Association in Bellingham, Massachusetts, says he agrees negative comments in the media about a brand also devalue franchisees’ individual businesses.

The Dunkin’ Donuts segment, in fact, contained no negative information about that franchisor, which less than two years ago Zarco himself had called the most litigious company in franchising, with over 350 pending franchisee lawsuits. Coen says CNBC “was aware of the stiff in our system” but left it out because Dunkin’s new management team is working to resolve most of the cases.

It all comes out in the wash
Another issue was also resolved. During the Procter & Gamble segment a company executive said Mr. Clean Car Wash and Tide Dry Cleaners franchisees pay royalties on their net (less expenses) revenues, instead of on their gross receipts. Franchise attorneys were abuzz and had posted lengthy opinions on the ABA Franchise Forum listserv about the statement before P&G was even aware of a problem. “CNBC reached out to us,” says FutureWorks, P&G’s franchising arm, “and we worked with them to clarify it.” Within 48 hours, the piece had been edited to remove all references to royalties and the dialogue ended.

In response, franchise blogs are flush with commentary. Don Sniegowski of Blue Mau Mau franchise news site says CNBC sent a film crew to Lebanon, Kentucky and interviewed him for five hours. “But I had less than a minute in the final piece,” he says.

IFA had no time at all. Alisa Harrison, the association’s vice president of communications and marketing, says the trade group contacted by Darren Rovell after being tipped off about the documentary and spent “a lot of time with him on the phone.” The IFA was never mentioned.

Most blog threads are about Cold Stone. Over half of Zarco’s letter to CNBC attempts to discredit Cecil Rolle as a source, while dozens of blog posts claim Rolle is a hero. Rolle, who was identified as a “Florida attorney” on the show, admits he is not a licensed layer, but stands by everything else. To stave off confirmation of his allegations, Kahala sent a letter to all Cold Stone franchisees, urging them not to respond should CNBC try to contact them.

Blogs also speculate whether CNBC will change the Cold Stone segment of “Behind the Counter” or air a second piece on just the ice cream franchise. Boston attorney Erick Karp, of Witmer, Karp, Warner & Ryan was interviewed by CNBC for the follow up program, “but they would not tell me what form it will take and when it will air,” he says. P&G’s Holthouse just hopes it returns soon. “We’ve heard from many people interested in becoming our franchisees and would like to hear from even more.”

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