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Attacks from the blogosphere

What Cuppy’s learned the hard way


Last winter, Doug Hibbing, president of Cuppy’s Coffee and More in Fort Walton Beach, Florida, learned about blogs the hard way.

Hibbing had been working for Roy Snowden, the owner of a coffee licensing concept called Java Jo’z until May 2006, when Snowden was sent off to federal prison for tax evasion. Hibbing and an associate, Robert Morgan, pledged $3 million for the assets of Java Jo’z and for a second company, Medina Enterprises, that equipped the company’s drive-thru coffee stands. By July 2006, they had started a new company, Cuppy’s Coffee, and turned it into a franchise.

According to a UFOC they filed this July, Cuppy’s then spent $189,557 on Internet advertising, promoting their offering as a less expensive option to Starbucks. Leads poured in like latte and by the end of December they’d sold 100 franchises.

“Then at the first of this year,” Hibbing said, “we saw our leads dry up by 80 percent. We had no idea what the problem was until someone asked us about a couple of franchise blog sites. Google led us to blog postings that said Cuppy’s was still being run by the people who had run Java Jo’z and that we had cheated a lot of licensees out of their deposits. We were absolutely blindsided.”

Cuppy’s had, in fact, been run over by the Scobleizer. Robert Scoble, author of “Naked Conversations: How Blogs are Changing the Way Businesses Talk with Customers,” is a technology expert who operates www.scobleizer.com, one of the Web’s most popular blogs. It seems that Robert’s brother, Ben, had paid $30,000 to Java Jo’z, but had never found a location for his drive-thru coffee shop and felt he deserved a refund. When the Cuppy’s executives turned him down, Ben asked his brother for help.

Which was the cyber equivalent of opening the steam valve on an espresso machine. “Many blogs are interconnected,” said Sean Kelly, of IdeaFarm, based in Leola, Pennsylvania, whose own blog, www.franchisepick.com, is interlinked with 200 business-related blogs via the B5 Media Network. So many other blogs picked up the Scobleizer’s account of his brother’s dispute with Cuppy’s that the controversy shot to the top of Internet search engines. If you were a prospective franchisee who Googled Cuppy’s, the first thing you’d find was Scoble’s posting.

If the Internet is the Wild West, is your intranet a private rodeo?

Most franchisors today provide their franchisees with an intranet connection, so they can talk to each other online, just like a private blog.

IFX CEO Dan Martin, who has set up intranet sites for 207 clients, says franchisors can keep their intranets from turning into gripe-fests by applying the following rules:

  • Establish a ‘terms of use’ policy that franchisees must sign before they’re given access to the intranet site. The policy’s rules should forbid personal attacks, swearing and anonymous postings, Martin said.
  • Avoid an online free-for-all by offering two or three discussion topics a month, like new marketing ideas. “If someone posts a comment that’s way out of line, another franchisee will jump in and defend you,” Martin said.
  • Control your staff’s access to the intranet. Too many postings by corporate employees can weaken its credibility.
  • Invite the CEO to participate. Martin said one of his clients had its CEO moderate a two-hour intranet forum that allowed franchisees all over the world to interact with him. “Afterward,” Martin said, “the franchisees said it was one of the best things the company’s ever done.”

—Julie Bennett

Kelly and others who run blogs devoted to franchising soon heard from more Java Jo’z licensees, who posted their own tales of woe. One woman wrote that she lives only a few hours away from Cuppy’s headquarters. “I will picket this place and warn every person I can about the practices of this tax-evading, money-stealing company,” she posted.

Complaints even poured in from employees of previous Snowden ventures, including a magazine sales company that, according to one woman, “dropped off kids to work in freezing weather for 12 to 14 hours a day.” More damaging were comments claiming that Cuppy’s was simply Java Jo’z in disguise, since the new company kept the same offices and many of the same workers.

Hibbing’s next move turned his short problem into a grande one. “We felt we were being libeled and slandered on the Internet,” Hibbing said, “and we wanted to know what our legal rights were. We did a Web search and found John Dozier, (managing partner of Internet Law, P.C., in Glen Allen, Virginia).”

What happened next is something of a mystery. According to Kelly, “almost overnight,” negative posts about Cuppy’s started disappearing from other franchise Web sites. “When the anti-Cuppy’s authors asked me to delete their comments from my site, I said, ‘No. Our policy is not to take down postings, but you can retract them.’ So in the next few days I received several e-mails, including one from the picket lady, saying ‘We were wrong. The people who run Cuppy’s are great guys,’” Kelly said. Even Ben Scoble sent in a new posting, saying he’d been mistaken about Cuppy’s.

No one asked that anti-Cuppy’s postings be removed from Blue Mau Mau, said Don Sniegowski, who started the franchise blogsite Blue Mau Mau in Salt Lake City in November, 2005. But at about the same time, “someone inserted a malicious piece of software into our program, which took down our entire Web site for a 12-hour period and kept it going on and off for a few days,” he said. Sniegowski told Franchise Times this summer that he still doesn’t know who planted the software.

Kelly wrote about the Blue Mau Mau hacking episode on his Franchise Picks Web site and pondered the reasons behind the suddenly missing postings. Were the disgruntled licensees threatened with cease and desist letters? Or were they told if they posted a follow-up retraction, they’d get some of their money back? he questioned.

His ponderings were picked up by other blogs, which, of course, brought even more attention to Cuppy’s.

“Instead of squelching the story, the disappearing complaints sparked it,” Kelly said. “We heard from people all over the world, who commented on whether the ability of a company to quash negative rumors was a threat to free speech. The Cuppy’s saga turned into a lesson on how franchisors should not deal with the Blogosphere.”

Advice for not getting blog on your face

Hibbing, Dozier and others involved in the Cuppy’s saga agreed to be interviewed to help other franchisors deal with negative blog postings. But first, here’s some background on what blogs and blogging is all about.

Blogs—Web sites where individuals can put their comments, called postings, online—have proliferated. The U.S. has an estimated 12 million blogs, most of which are operated by individuals who post their personal opinions and vent their frustrations daily. But millions more are industry-specific, like the 900-plus Web sites that are related to franchising.

Some of these sites see themselves as franchising’s daily newspaper, putting comments from franchisees and prospective franchisees directly onto the Internet, without the filter of an editor or pressure from advertisers to tone down negative comments. “This is the future of publishing. Citizen journalists send us information that would never get out in the old media. We’ve gotten unbelievable leads that start as rumors. The evidence builds until we have a front page story,” Blue Mau Mau’s Sniegowski said. Sniegowski would not reveal just how many people read his blog, but said the number is in the thousands.

Obviously, franchisors and franchisees must learn to deal with blogs. To begin, let’s look at the rules that govern the Blogosphere.

The Internet rules

Blogs really do have free speech protection. “Section 230 of the Communications Decency Act of 1996 was enacted by Congress,” said Bill Baker, an Internet law expert with Wiley Rein in New York, “in an effort to shield online bulletin boards from having to verify everything posted on them. If they had to check everything out, they’d all shut down.”

Section 230 also gives immunity from lawsuits to ‘interactive computer services’ like blog sites that publish material provided by others. This means, Baker said, if you feel you are being defamed or libeled on a Web site that publishes blogs, you must sue the author of the posting, not the site. If you can find him (or her), because most blog sites accept anonymous postings.

Sniegowski said, “At Blue Mau Mau, I’ve promised my readers I’ll keep anonymous postings confidential. The way our server’s set up, it’s just about impossible for me to find out, anyway.”

To sue an anonymous poster, said Dozier, you must first subpoena the service provider for his identity, and most Internet service providers only keep that information for 30 to 90 days.

Asking the publisher of a blogging Web site to remove defamatory comments also won’t work. If the site operator edits what’s there, Dozier said, he can lose his immunity, “giving him a disincentive to pull down defamatory comments.”

Asking your attorney to send an author you can identify a strongly worded “cease and desist” letter can also backfire, because most bloggers put those letters on the Internet, too. “All it does is bring more traffic to the blog site, and move it higher on Google,” Dozier said.

Dozier said his law firm does manage to get defamatory postings removed from the Web frequently, “but it takes a tremendous amount of finesse, strategy and tactics.” Dozier would not reveal what tactics he used to make the anti-Cuppy’s postings disappear. “We did what we had to do to get the job done,” he said.

Blogs can be a boon for franchisees

“In the old days,” said Robert Einhorn, an attorney in the Miami office of Zarco Einhorn & Salkowski, “a bad franchisor could keep trucking along, terminating unhappy franchisees and adding new ones. Today, the Internet and blogs shine a spotlight on abusive franchisors. It’s more important than ever for franchisors to address problems early on, before a disgruntled franchisee tells his tale on a blog.”

When the I Sold It eBay drop-off franchise opened by Gene Bowen and Karen McGinn of Woodstock, Georgia, for example, failed to make any money, the couple wondered whether the problem was the concept or their own inability to run it properly. They started a Web site, www.amitheonlyone.org, and heard from hundreds of other unhappy eBay drop off franchisees. “Sometimes the phone calls came all night long,” McGinn said. “One woman was close to suicide, another pulled out her own molar because she couldn’t afford to go to the dentist.”

Am I the Only One? caught the attention of bloggers, including Kelly, who again wondered publicly why I Sold It held the No. 110 position on Entrepreneur Magazine’s Top 500 Franchises for 2007 and was No.1 on its New Franchises list if franchisees were doing so poorly. At first, I Sold It CEO Ken Sully defended his system, but in April he sent a letter to his franchisees admitting that “a significant number of stores are operating below break-even, contributing to more than 60 stores closing. Tragically, many individuals who believed passionately in the potential for the category have lost sizable investments, including homes and retirement savings.” He said I Sold It would suspend new franchise sales “until we get the failure rate lower.”

One franchisee forwarded the letter on to Blue Mau Mau, Franchise Pick and other sites and soon Sully’s private apology was posted all over the Internet. Entrepreneur pulled I Sold It out of its rankings, leaving a gap between Numbers 109 and 111 and moving its No. 2 New Franchise up to No. 1.

Said Kelly, “I’m not The Wall Street Journal. I’m just a guy sitting here posting. But we’re having an impact on franchising, by sorting out the bad and mediocre guys from the good ones.”

A Happy Ending

Cuppy’s is back on track after its Blogosphere blow-up. Hibbing said, “In hindsight, we could see how our purchase of the Java Jo’z assets caused so much confusion. We finally hired a PR firm, but I wish we’d done so earlier.”

Cuppy’s new PR consultant, Rhonda Sanderson, sent a long letter to all the blogs, with details about the Java Jo’z asset purchase, including a timeline.

Hibbing started contacting the unhappy licensees in person, offering to sell them products whether they chose to convert to Cuppy’s or remain as Java Jo’z. So far, 33 have converted, he said. He also contacted the American Association of Franchisees and Dealers in San Diego for help in re-writing Cuppy’s UFOC and Franchise Agreement. The new documents won the AAFD’s Accredited Contract approval status.

Best of all, Internet leads are streaming in again. Hibbing said, “As far as blogs are concerned, it’s the Wild West out there. We survived this off the Web, by talking to people about their concerns. Blogs hold themselves up to be the court of public opinion, but if that opinion is not based on proven fact, they’ll lose their credibility. My advice to other franchisors is, if you’re attacked on a blog, make a simple statement of your position and let it stand on its own.”

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