Picture’s not so pretty at Beautiful Brands, some partners say
Reality has finally caught up with a well-known Oklahoma restaurant franchisor and franchise company developer.
For years, restaurant trade magazines ran articles about David Rutkauskas of Tulsa, Oklahoma, the franchisor of Camille’s Sidewalk Cafe and the president of a franchise development company called Beautiful Brands International. Articles touted the success of Camille’s and BBI’s partner brands, noting 1,000 to as many as 3,000 units in development around the world. In interviews, Rutkauskas placed his company at the top of the fast-casual category, right next to Chipotle and Panera.
But in recent months, the promotions surrounding Beautiful Brands have given way to claims of failed franchisees and disappointed franchise partners.
Rutkauskas refuted the claims, countering that Camille’s in particular is thriving, and defending his company’s track record.
By the numbers
Numbers tell a sobering story. Instead of the “hundreds and hundreds” of units Rutkauskas had predicted for Camille’s, the company barely topped 100 at its peak and has dwindled to 29 franchises listed on its website. Last summer, when the Small Business Administration published a list of franchise loan defaults, Camille’s was in the top 10, with 58 percent of franchisee loans unpaid.
In a November 1, 2011, press release, Rutkauskas wrote, “In the last 10 years alone, the company has sold over 3,000 franchises in 38 states and 27 countries, spanning three continents worldwide.” But when we contacted the partner brands he mentioned in the release, we found that the Dixie Cream Donut Co. never grew beyond its original single unit, which is now closed.
BBI did sell one Rex’s Chicken franchise, now closed, and about nine co-branded units with Smallcakes and its own brand, FreshBerry Frozen Yogurt, but five are now closed. Partner brands listed in other press releases include Sushi Freak, Ludger’s Bavarian Cakery and Le Beau Rouleau Crepes, none of which sold a single franchise during their affiliations with BBI.
According to the website unhappyfranchisee.com, the promotion of Beautiful Brands attracted at least 21 restaurant operators who paid Rutkauskas an average of $50,000 to develop their restaurants into franchise companies. Of those, five are still affiliated with BBI and one, CherryBerry Frozen Yogurt, opened franchises while under contract. A spokesperson for CherryBerry, in Broken Arrow, Oklahoma, said the 121-unit company is using BBI solely for legal work.
‘It should have been a red flag’
One of the former franchise partners is Casie Caldwell of Dallas, who told Franchise Times that Rutkauskas contacted her about developing her three-unit Greenz salad restaurants into a franchise company. “I was familiar with Camille’s,” Caldwell said, “and David was very compelling in listing what he would do for us. He can certainly talk the talk. He wanted to sign a deal without ever stepping into my locations, which should have been a red flag, but he finally agreed to come here.”
In March 2009, Caldwell signed a two-year contract with BBI, for franchise document development and franchise sales. A press release stated Beautiful Brands would “market Greenz across the globe.” But, Caldwell said, the franchise documents she received were templates, “of the insert-brand-name-here” variety. When her contract ended and she sold a Greenz franchise on her own, BBI took the credit in another press release. “David Rutkauskas is taking our hard-earned money and driving around in an expensive Mercedes,” Caldwell said.
The owners of six other “partner brands” Franchise Times contacted echoed Caldwell’s opinion, but several asked not to reveal their names because they didn’t want their companies associated with Beautiful Brands, or because they feared retaliation. One said he had contacted Beautiful Brands “after reading articles about how successful David is,” adding it was only later he “realized the articles were self-written.”
Said another, who is now franchising on his own: “David is a gifted salesperson, but the money I spent with him was wasted.”
Lawsuit for Blazing Onion
David Jones, of Snohomish, Washington, is a longtime Subway franchisee who hired BBI to write franchise documents for Blazing Onion, a gourmet-burger chain he developed and will start franchising this year. “I thought I did really well with Rutkauskas,” Jones said, “until the lawsuit.”
Last fall the Emirates Associated Business Group (EABG) in Abu Dhabi filed a lawsuit against Beautiful Brands, David Rutkauskas and the Camille’s, Dixie Cream Donuts, FreshBerry frozen yogurt and Blazing Onion franchise systems. The lawsuit claims the EABG paid Beautiful Brands $500,000 for exclusive rights to develop its brands in the United Arab Emirates, yet never received franchise documents from BBI and that “a third party” has since been sold rights to some of the same BBI brands in the area. Jones said, “I never signed anything giving BBI the rights to sell Blazing Onions anywhere, nor was I ever asked if I wanted to.”
When Franchise Times asked Rutkauskas about the lawsuit, he said, “I did not have a contract to develop anything there but Dixie Cream Donuts. The EABG representatives must have forged the documents and collected the money themselves. We are in the middle of defending this ridiculous lawsuit.”
Howard Morrill, of Simburg, Ketter, Sheppard & Purdy in Seattle, who is representing EABG in the lawsuit, said no documents have been filed by BBI although the deadline for them has passed.
Rutkauskas defended himself against franchisee failures, saying, “My wife Camille and I started Camille’s in 1996 and outsourced all sales to Fransmart for five years.” (Fransmart is a restaurant-development company in Alexandria, Virginia.) “Some of the franchisees Fransmart sold to were not qualified. Some left and we terminated others.” Fransmart CEO Dan Rowe verified that he had worked with Camille’s, but would not comment further.
Rutkauskas said Camille’s is thriving with “almost 40 units.” Asked why the website lists 29, he said his webmaster is not keeping up. He also said he has stopped selling Camille’s franchises domestically and is concentrating on selling franchises in the U.S. for his other wholly owned brands, Rex’s Chicken and FreshBerry, and internationally for all three brands.
According to its website, David and Camille Rutkauskas developed the first FreshBerry frozen yogurt store for Camille’s sister, Carolyn Archer, in Tulsa in 2006. That store has since closed, although a video with Archer promoting her store is still available. The site also contains 24 press releases or articles about FreshBerry expansion, including an interview in which Rutkauskas says, “We have another 40 groups in the pipeline for meetings. It wouldn’t surprise me if we had 100 franchises inked by the end of 2008.” According to our count, FreshBerry has 12 open units, although more locations are listed on the website. Franchisee Francy Bauer in Wilmington, North Carolina, said her store also sells cupcakes from another former BBI partner, Smallcakes, and “it’s a fun business.”
After the website unhappyfranchisee.com pointed out that franchise partners were still listed as portfolio brands on the Beautiful Brands website after they had canceled their contracts, the logos were removed and replaced with the names of more than 40 mainstream franchise companies including Relax the Back and Sport Clips. Sport Clips CEO Gordon Logan said he had never heard of Rutkauskas or Beautiful Brands.
When asked about the new listings, Rutkauskas said he had joined the International Franchise Professionals Group “and they basically told us we could throw up other members’ brands on our website.” IFPG founding member Peter Casey said the Newtown, Pennsylvania, group has no such policy. “We advise our members to speak to other members before putting them on their websites. Rutkauskas had only been a member for a month, and when we found out what he was doing, we kicked him out.”
Casie Caldwell said she did her due diligence on Beautiful Brands, but it was hard to find the facts.
“I flew up to Tulsa and toured their big, glamorous offices. And I Googled all I could, but I never found anything bad about him, just all those positive articles.”