Complaint Review: Saxbys Coffee Worldwide/Saxbys Coffee/Proven Record/John Larson/Nick Bayer - Philidelphia Pennsylvania

This scam is not a traditional one because there is a product being sold here. Saxbys is one of several Starbucks alternatives that have popped up the past 8 years. However there are several instances and issues of illegal and sneaky behavior that have occurred as a result of the managements (John Larson -Founder and Nick Bayer -President) actions.

1.Disclosure: Or lack of! Saxbys has time and time again failed to disclose required information in their UFOC. For awhile they were actually using fraudulent financials, till an advisor trying to take them public suggested they clean up their act. Currently Saxbys is suspended from selling new franchises in Virginia and California. In fact Saxbys has sold ILLEGAL franchises in 7 states! This was one of the main reasons the last sale of the company occurred. The law states if you do something intentionally or with malice you can't be protected by the corporate veil. Failing to register time after time even after judgments have been declared can't just fall under an accident. Some states have fined Saxbys in the past such as California, others such as Maryland required Bayer go to compliance class. Bayer's reasons for not disclosing information range from blaming John Larson to poor lawyers. Those who wish to challenge this merely call up either the California or Virginia SEC and they will verify this information.

2. Taxes: Another one of the reasons Saxbys was sold to a Philadelphia real estate group in a fire sale. The new owners who only had to put 5,000 down (or 20,000 to 25,000 less then the franchise fee for a single store) were also responsible for up to 250,000 in back employment taxes the company ran up under the esteemed leadership of John Larson and Nick Bayer. Yet another bailout for these two geniuses. The question the IRS should ask is what happened to all the area development money that was obtained during 2005 and 2006? Several hundred thousand were paid but was that money ever accounted for?

3.Shareholder Dilution: Saxbys currently has at least 2 shareholder cases against it. One of these is in Colorado and the other in Illinois. There are several others in the works. You see Saxbys and its previous incarnation Proven Record Inc loved to give out shares to solve problems or drag new capitol in. They would even give out stock certificates. Yet as soon as the company (which has gone from Las Vegas to Chicago to Atlanta to Philadelphia) moved and changed names, Saxbys would tell many of these same shareholders their shares were lost in such move. Once again both Larson and Bayer were guilty of this, but the most recent sale falls clearly in Bayer's lap. After failing to reach an agreement on a buyout for Larson and Greg Bayer (yes we have in family fighting here) Bayer went the dilution route. He failed to reply to letters of at least two shareholders who asked for information of the consequences of a sale to the Philadelphia group in advance of the vote. His concern was that even a minority shareholder could get a TRO if they knew what was really going on. In the months proceeding the sale, the President of Saxbys Nick Bayer even gave out shareholder deals he himself would acknowledge were BAD for the company. His reasoning was to dilute the value of shares individuals he felt would be against the sale had (hello John Larson). The problem is this is totally illegal! During this time Bayer's parent's Dave and Lin also received more shares from the company. Many shareholders are upset with the leader of the Philadelphia group Joe Grasso for their loss, but Mr. Grasso had no responsibility to the shareholders at that time. He was trying to acquire a company for 5 cents on the dollar and bargained hard as any takeover head would. It was Nick Bayer who owed those shareholders. He was the one who sold them on this coffee dream that was to be Saxbys, and he was the one who was still President. While Bayer claims he acted within his Fiduciary Duty as President, the majority of these shareholders are now told they have nothing while Nick Bayer remains President of the new company Saxbys Worldwide. In fact if you ever get the chance to meet Nick, a charming fella called the "handsome b*****d" by some, ask him how much back pay he received for seeing the deal through, and the indemnity clause he needed along with it. As for asking about the steps of how the company was actually dissolved? That would be complicated for Nick to remember so one should ask Kevin Meakim and Bob Carroll for that answer!

4.Others who were not paid: Saxbys does not merely stop with shareholders and franchisees, the little guy, the employees get screwed too. You name it, from the webmaster to corporate trainers many have left the company after not being paid for services performed. Some had to get State Department of Employment offices involved before Saxbys paid up. Friends fared no better. Even a few of Nick's fraternity brothers and their relatives are owed money! The poor roaster Scottish Roasters is owed thousands by the Atlanta store that while franchisee owned was managed by (you guessed it) corporate and Nick's parents. Commercial realtors beware! There are some realtors in Colorado, Chicago and Virginia who would be happy to tell you about how "smooth" dealing with Saxbys on a lease is (Yes that is sarcasm).

5. Franchisee Realtionship and Hidden Costs: Saxbys is not the first franchise that has had a problem here and they wont be the last. However you would think a startup would try and make more of an effort considering they don't have name brand value yet. Corporate support has always been a problem, but that can be explained by the lack of money the company had. Most franchises build up successfully in one city before expanding, but the Larson and Bayer plan sought quick national expansion (they call this momentum in mlm) without regard to store profitability. This would be followed by a public stock offering and a cashout. When that didnt work, and with the news of the pending sale to philly all hell broke lose. Larson and Bayer each sought to appeal to all the franchisees and area developers as the man who had peoples best interest in hand. What few ever realized, was that as these two con men acted as enemies, they were indirectly each others best friend. How? As long as the other was still around both Larson and Bayer could continue to blame the lack of profitable stores and company woes on each other. Stories of breakins, illegal signatures, and Nixonian like paranoia occured during this time, with one franchisee even having equipment cancelled on him right before his store opening for merely being cced an email by John Larson. Now Larson himself has a lawsuit against Saxbys. However if history means anything, as soon as John Larson is given the right settlement figure he will hit the road. He is no innocent victim here. Bayer made it clear he was on a witch hunt to take out anyone who Larson had put in the company before he became involved. One of his arguements that Larson gave out unfavorable contracts to origianal area developers and franchisees was totally valid! Nick was also right in feeling these early deals would not benefit the company long term. Lets be clear no one is saying John Larson is CEO of the year here. However a deal is a deal. Unless the deal is broken, or specific language is there that allows for it, you can't just terminate something because you don't like it. Also many of these earlier deals were given better terms because the company was a total startup at the time. That is quite common in the business world. Other issues that still occur today include the failure of Saxbys to disclose to area developers how they reach the numbers paid on residuals. The latest hidden charge is the 3,000 -3,500 public relations bill. This comes from a marketing company in Philadelphia (big surprise) who while never talking to the franchisee they are billing till after the bill arrives, are working hard to build community relationships in anticipation of a stores grand opening. Corporate will explain all this to you in detail AFTER you get that bill. Why the marketing company never works with the new franchisee before the billing, hand in hand as a team is beyond me? Why this charge is not disclosed is another question for the ages? It will be interesting if anyone challenges this to the point where a kickback to corporate is revealed. Yes, kickbacks will and have occurred. Saxbys is not alone in this in the franchise world, but remember when they hype up to you the benefit of required franchise contractors and vendors for millwork, signs, architects etc, do realize their fattening their wallet as well. The only added issue with Saxbys is even after you use their designated architects and signage they still may complain and ask you to do it over again, costing the new shop owner more money. Believe it or not this just recently happened!

Conclusion: It comes down to this: At every level, area developer , franchisee, shareholder, contractor, and employee Saxbys has hurt innocent people's lives. This is not merely an uneducated opinion as you will find the facts and history of the company support this. Those with stores open have to deal with the impossible task of going after corporate while they still need support for their store, and with rent and business loans to pay. Many area developers have paid hundreds of thousands and can't even sell in some or all of their territories becacuse of state suspensions. Even if the suspensions are lifted, the Ad's will be in the difficult situation of bringing more innocent people into the very system that has screwed them. Some consciences can't deal with this and they sell out at bottom prices to get away from it all. Others stay in, but the pressure of working with a company whose values are polar opposite is not easy. Saxbys has opened (not signed agreements ,but actually opened doors) to right around 40 stores since formation. Right around 15 have closed, including locations in California, Colorado, Illinois, Texas, New York, Georgia, and Virginia since January 2007. That is a startling high percentage of total stores opened that have shut down. I strongly advise you DO NOT give any money to Saxbys Coffee Worldwide or whatever name they change to next. Don't take this posts words on merit. I dont ask or expect you to . Call any of the state offices mentioned. Google the states where I metioned stores have closed and the information comes up. Likewise with the shareholder lawsuits. If you were considering investing in Saxbys ask Nick Bayer if these events occurred, and if he says no have him put it in writing as part of your contract. Dont accept a verbal denial, it means little. That silence you will hear or non response to that request will provide your answer. There are lots of Starbucks alternatives out there, but I find it hard to believe there is one with as much intentional deceit and lack of integrity as Saxbys. While Joe Grasso has been a successful business man and has a great track record, as long as the Bayer's are attached to this company in any form its a horrible risk no matter who the new owner is. That's because the Bayer's very involvment is a condonement for how things have been run to this point!

Sal

Scottsdale, Arizona

U.S.A.