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AAFD's Statement Regarding the Suspension of Cuppy's Coffee Accredited Contract Status

Other Topics: Coffee Contract

AAFD
August 9, 2008

The American Association of Franchisees and Dealers (AAFD) announced today that it has suspended its recognition of Cuppy’s Coffee and More, LLC as an AAFD Accredited Contract recipient, pending a determination of the Association’s Board of Directors that AAFD’s Accreditation of the Cuppy’s contract should be withdrawn.

In an Email to Cuppy’s CEO, Dale Nabors, AAFD Chairman Robert L. Purvin stated, “Due to the serious allegations that have been raised [regarding Cuppy’s failure to honor various contractual commitments], and your apparent decision to cease our communications, I have determined to suspend your Accredited status with the AAFD pending consideration and action of the AAFD Board of Directors.”

In a formal notice being delivered today to Cuppy’s Coffee, Purvin added, “In that the AAFD Board of Directors next meeting is set for September 4, 2008, I am acting to immediately to suspend Cuppy’s Accredited Contract status pending action of the AAFD Board. I am causing this action to be published on the AAFD Website, and to appropriate media. All listings of Cuppy’s Coffee will forthwith be removed from the AAFD Website, and we are instructing Cuppy’s management to remove all references to the AAFD from its Website and franchise marketing literature.”

Cuppy’s earned AAFD Accredited Status in May of 2007 in an admitted effort to reinvent its corporate personal and ‘arise from the ashes’ from legal and economic difficulties of its predecessor brand, Java Jo’z.

As part of its commitment to collaborative franchising practices, Cuppy’s adopted a new franchise agreement that substantially complied with the AAFD’s Fair Franchising Standards and further agreed to support the formation of an independent franchisee association, to collaborate with the development of a purchasing cooperative to be jointly owned by Cuppy’s and its franchisees, and to submit claims and disputes to mediation upon the request of any party.

In February of this year, the AAFD became aware of several claims that Cuppy’s or its affiliate, Elite Manufacturing, was not honoring promised construction deposit refunds. The AAFD commenced a publicly announced investigation of these ‘refund’ claims, including tracking some 22 refund demands that had been made between October, 2007 and April 2008. The AAFD reported that if it was determined that Cuppy’s was not honoring the provisions of its Accredited Contract that the AAFD would act to suspend or withdraw AAFD Accredited status to the company.

The AAFD was able to confirm that 18 claims had been resolved in a commercially reasonable fashion, and four claims were disputed. Cuppy’s issued a public statement of its intent to honor its contractual commitments, and to submit disputed claims to mediation through the AAFD. Through April, Cuppy’s fully cooperated with the AAFD’s investigation.

In April, 2008, Cuppy’s was sold to a new management team. The AAFD was subsequently advised that the company would abide by all written commitments, but that any oral commitments, including publicly acknowledged commitments to promised initiatives regarding an owners association, the purchasing cooperative and to mediate claims and disputes would be subject to further review.

Between July 15 and August 5, the AAFD became aware of a new series of complaints that Cuppy’s and/or Elite Manufacturing was not performing promised build outs of franchisee storefronts. Some claimants contended that they had been waiting for promised construction for months (and in some cases for more than a year), during which time the claimants were unable to open for business but were bound to pay rent on their premises. Around this time, the AAFD also learned that Cuppy’s had been sued by its retained general contractor for non-payment of construction invoices.

Despite diligent efforts of the AAFD to complete its investigation and to gain Cuppy’s fulfillment of promised initiatives with its franchisees to avoid sanctions from the AAFD, Cuppy’s new management has ceased to be cooperative, and since June 12, 2008, Cuppy’s has not replied to repeated invitations from the AAFD to respond to this new waive of complaints and allegations.

Mr. Purvin added that it is still not too late for Cuppy’s to avoid ultimate consequences by the AAFD. Said Purvin, “Our purpose remains to inspire fair contracts and collaborative relationships, and we are open to negotiating and mediating effective relief for all Cuppy’s franchisees in a manner that will effect restitution from injuries and will allow Cuppy’s Coffee to achieve the corporate goals set by new management upon its acquisition of the company.”

Purvin added, “The path to a successful resolution of the Cuppy’s quagmire is through communication, negotiation, collaboration, and if necessary, mediation. The path to certain destruction is to ignore the problem and face an inevitable and costly litigative path.”

About the AAFD
The AAFD is a national non-profit trade association representing the rights and interests of franchisees and independent dealers throughout the United States. Formed in 1992, The AAFD is focused on market driven reform to achieve its mission to define and promote collaborative franchise cultures that the AAFD describes as Total Quality franchising. Since its formation the AAFD has grown to represent more than 50,000 franchised businesses

throughout the United States. The AAFD currently has members in all 50 states and represents more than 100 different franchise systems.

The AAFD's Fair Franchising Standards, Fair Franchising Seal, Trademark Chapters, and emphasis on Marketplace Solutions led to the Association's recognition as a growing force in franchising. The AAFD’s Branded Partner

programs add a new dimension to the value of AAFD membership. The AAFD provides a broad range of member services designed to help franchisees build market power, create legislative support of interest to franchisees, provide

legal and financial support, and provide a wide range of general member benefits.

For more information about the conference or the AAFD, please call toll free 800-733-9858 or visit www.AAFD.org.
 

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