Cuppy's Coffee - Java Jo'z Blog Fiasco Offers Lessons All the Way Around

For the past week or so, a firestorm has been raging in the blogosphere regarding a case of corporate identity with coffee franchiser Cuppy's Coffee. The case has directly involved A-list blogger Robert Scoble and has raised important questions about free speech and defamation in blogs.

The story may not be completely over, but I've opted to wait until both sides of the story were told before reporting on it. Here's a quick synopsis of the story:

According to the Cuppy's Coffee release posted today by their newly-hired PR firm, Sanderson & Associates:

When Cuppy’s Coffee & More, Inc., was formed in 2006, it hoped to capitalize on Americans’ never-ending thirst for specialty coffee. Cuppy’s Coffee & More and its new associates, however, never expected to dodge obstacles intended for another company.Cuppy’s Coffee & More awards franchises to its franchisees who purchase either a double drive-up building, an in-line coffee café or a tow-behind your automobile mobile unit from Cuppy’s approved vendor, Elite Manufacturing, LLC. Elite Manufacturing is a wholly-owned subsidiary of Medina Enterprises Inc.

Medina Enterprises purchased equipment, telephones and assumed the leases from another company that licenses coffee businesses. Adding to the public confusion, Cuppy’s Coffee leased offices in the same business complex and some of the employees from the former coffee business were offered positions and are now employed at Cuppy’s Coffee.That’s how Cuppy’s problems began. Although the other coffee company, Java Jo’z, still exists as a licensing company, the owners of Java Jo’z have no financial, operational or legal association with Cuppy’s Coffee, Elite Manufacturing or Medina. The legal relationship separating the businesses is clearly defined, but some individuals who have had disputes with Java Jo’z didn’t readily understand the distinction.

“They would say we’re at the same location, we have the same phone number and we have a similar looking logo, so therefore we must be the same company,” said Doug Hibbing, president of Cuppy’s. “But that’s simply not the case. Whenever I talk to a CPA or an attorney and provide documentation, that CPA or attorney clearly realizes that we are two separate unrelated entities. This confusion even lead to the IRS initially thinking that we were the same business. Fortunately for us, even that initial perception was corrected by the IRS’s review of our documentation.”

Among the people who had a dispute with Java Jo'z was Ben Scoble, brother of prominent tech blogger Robert Scoble. It seems Ben had paid $30,000 for a franchise, but was unable to find a suitable location and was seeking a refund, as (allegedly) verbally committed by Java Jo'z. The blogosphere controversy started when Ben set up a blog at http://bscoble.blogspot.com to make a public record of his dispute with Cuppy's (the "heir apparent" to Java Jo'z), presumably in the hopes of sparking the company to action, connecting with others in a similar situation, and warning potential franchisees away from the company. The other Scoble brothers, Robert and Alex, joined in, blogging in support of their brother.

But some time last week (1/24-1/25), the various Scoble brothers all deleted all their references to the Cuppy's-Java Jo'z issue. In place of Ben's ongoing account of the situation stood a single post, exculpating Cuppy's and assuming all the responsibility himself. The problem was... to those who knew Ben, it was clearly not written in his style. Alex featured a post saying, "Let's cut Cuppy's some slack." Furthermore, the deletion of all the posts stood in stark contrast to Robert Scoble's previous assertion that blogs should never be erased for any reason.

Blog postings and comments by several others were deleted as well, causing Franchise Pick blogger Sean Kelly to ask, "Who’s Killing the Cuppy’s Java Jo’z Blog Dialogue?". And then came the flood of "happy happy Cuppy’s blogs and comments" on Live Journal and Xanga, pushing the negative posts out of the search engine rankings, as well as negative comments and accusations towards some of the people who had been posting about the controversy. Perhaps coincidentally, perhaps not, franchise news/discussion site BlueMauMau, which had featured much of the discussion of the story, suddenly started experiencing technical difficulties, possibly the victims of some kind of deliberate denial-of-service attack.

While I have not seen anyone specifically state that they received a cease-and-desist letter, there was much speculation (certainly not unreasonable) that the deletions were the result of heavy-handed legal tactics on the part of Cuppy's and that the sudden wave of pro-Cuppy's comments were a misplaced PR tactic at best, shilling at the worst. In any case, NOT the way you want to deal with bloggers.

This week, though, Cuppy's seems to be singing a different tune. On Tuesday, Cuppy's in-house attorney sets the record straight in an interview with BlueMauMau reporter Janet Sparks. And on Wednesday, as mentioned above, Cuppy's new PR rep Rhonda Sanderson attempts to take the high road, pointing out:

Even though Cuppy’s Coffee has no legal liability to the previous licensees of Java Jo’z, Hibbing and Morgan have worked to accommodate their concerns. They have arranged a no-cost conversion option to former Java Jo’z licensees. In addition, Hibbing has offered a personal invitation and complimentary accommodations to licensees who want to visit the corporate headquarters in Fort Walton Beach, FLA. to see and learn first-hand the opportunities at Cuppy’s Coffee.

As evidenced by the comments on both of these posts, this hasn't completely satisfied all of Cuppy's critics, but it's certainly a first step in the right direction. And there are still some big unanswered questions that Cuppy's need to come clean about, such as:

• Did Cuppy's send cease-and-desist letters or other legal threats to one or more of the Scoble brothers and other bloggers accusing Cuppy's of just being Java Jo'z reborn under another name?
• Were the various "I Love Cuppy's" posts and comments on Live Journal, Xanga, et al., a case of shilling?

So what are the lessons in all of this?

In her posting, Sanderson offers some excellent suggestions for anyone buying a business or a portion of the business assets of a distressed company:

1. When such a transaction takes place, produce via a professional source a very thorough and concise press release explaining the deal.
2. If facts and/or dates are confusing, put together a precise timeline of events with bullets representing each step.
3. Make sure your facts are consistent and delivered by a spokesperson who is preferably an officer of the company.
4. Do not “dodge” questions. Answer them in a very clear and concise manner. If there are matters you choose not to discuss, have an answer ready such as “we are not prepared to discuss that matter at this time”. Then offer to get back to the reporter eventually with a proper answer.
5. Once negative items are revealed in the press, or accusations made by others, answer these with ONE clear statement stating your position and the facts.
6. Do NOT get into a “match” with the accusers, constantly going back and forth making claims and denials. One dignified statement should suffice. After that if it truly becomes an issue of libel or slander, it is time to speak with your legal counsel.

I would add to this list that once the matter has gone public in the blogosphere, you probably have to address it publicly. Private legal tactics that lead to deleted blog posts is a sure way to have exactly the opposite effect you desire, because it will lead to ten, fifty, a hundred times as many people questioning what happened and deducing that your heavy-handed legal tactics are behind it. And while some individual bloggers may be intimidated, if the case garners the attention of a blogger with the backing of a larger company, the leaders of those companies don't tend to react well to attempts to shut down open blog conversation.

Now what about the lessons for the folks on the other side of this issue? I think there are several:

• Perform due diligence. As Ben Scoble suggests in the one post now up on his blog (whether it was actually written by him or not, it's still good advice): "Review the company financials, drop in unexpected on the company HQ, get a complete list of franchises."
• Don't jump the gun when you have a problem. I'm not saying the Scobles were wrong for taking the issue public, but it certainly seems they may have jumped the gun, setting themselves up for potential legal issues (defamation) in the process. The keyboard may be mightier than the courtroom, but you must tread carefully, making sure you clearly distinguish fact from opinion. You're allowed to have a negative opinion about a company, even a suspicion of wrongdoing on their part, and publish that -- you just have to clearly distinguish that from fact. For some excellent guidelines on where the boundaries lie, see Chilling Effects Clearinghouse's Defamation FAQ. That said...
• Stick to your guns. If you have been conscientious about separating fact from opinion, don't be intimidated by a cease-and-desist letter from the company in question. Yes, it's true that it can be costly to defend yourself in a defamation suit, should they actually try to file one against you. Even if you decide not to hire an attorney and actually defend yourself (a dubiously wise decision), just the matter of traveling to the court (probably in the company's home state) and missing work will be costly. That said, while you certainly can't rely on it in advance, organizations like the ACLU, EFF (Electronic Frontier Foundation) and others have a good history of helping in the defense of cases like this. Also, if you can leverage public opinion in your favor, it's certainly possible to make the company realize that it's in their better interest to address your concerns publicly rather than take you to court. There are of course no guarantees in this regard -- it's risky. But as an entrepreneur, you should be used to risks -- just make this a calculated risk like any other and decide if it's worth pursuing.

If you're interested in more details about the story, below are a few of the key posts with the bulk of the story and links to others for more details:

• Java Jo'z Controversy Gaining Attention Via Blogs - January 8 post on BlueMauMau that become one of the major hubs of discussion (see the comments)
• Cuppy's Coffee and Java Jo'z - January 14 post on BlueMauMau, another major hub of the discussion.
• My Mea Culpa….Cuppy’s is Okay - Ben Scoble's questionable replacement post that helped kick off the free speech controversy in the blogosphere.
• Why Java Jo’z problems are Cuppy’s problems - Franchise Pick's Sean Kelly links to a now-deleted post from Alex Scoble, prompting a response from Cuppy's.
• The Death of the Blogosphere OR Who’s Killing the Cuppy’s Java Jo’z Blog Dialogue? - January 26 Franchise Pick post calling attention to the disappearing blog posts and sudden wave of pro-Cuppy's posts.
• Cuppy’s Coffee: In-house Attorney Attempts to Set Record Straight - January 30 Blue Mau Mau post - the title is self-explanatory.
• Taking the High Road - January 31 post from Cuppy's PR spokesperson Rhonda Sanderson.

For now, it appears things are dying down. Some are still unsatisfied, and there are still unanswered questions regarding Cuppy's actions during the past month, but they do appear to be taking a proactive approach to working with former Java Jo'z licensees. We'll see what develops, but all in all, a lot of lessons learned for everyone involved and observing.