Battle for bread: traders engaged in litigation with the franchisor

Borzooyeh Taghabi says he needs to thaw bread from DD Bakery in the morning. Photo by Edward Smith.

In 2018, Borzooyeh Taghabi was named first operator by Deli Delicious. In 2020, he was sued by the organization for violating his franchise agreement.

The sandwich has risen to the forefront of a legal fight between the franchisee and the franchisor of the local sandwich chain, according to some operators, promotes a “toxic relationship” between them and their parent company.

In question, the quality of the bread and the definition of “fresh” and “organic”. Three franchisees have been named in lawsuits over bread, with a handful more anticipating legal action. Taghabi has filed his own counter-suit, and now a client has entered the legal battle over ingredients, with franchisees and the franchisor accusing each other of degrading the brand.

Change of bakery

In 2018, Deli Delicious President Mohammad Hobab opened DD’s Bakery in Fresno to supply the chain with bread. In 2019, it became the channel’s only approved supplier.

A handful of franchisees still use bread from the Fresno-based French Basque bakery, their original bread supplier, in violation of the terms of the franchise agreement.

Franchisees who still use the French Basque bakery claim that the bread is superior because it is never frozen. Deli Delicious management says it’s hurting the brand.

“The Deli Delicious franchise system is successful because of its commitment to providing consistent and consistent customer experiences,” states a lawsuit filed on behalf of Deli Delicious against franchisee Vahid Misaghi.

David Schneider and Ross Coker of Fennemore Dowling Aaron represent Deli Delicious.

DD’s Bakery bread is made with organic flour. The product of the French Basque bakery is not, prompting the transition, according to the lawsuit.

Best quality?

Deli Delicious vice president Ali Nekumanesh declined to comment on the ongoing litigation. But he did provide a statement insisting that the licensed bread is top quality and made with organic flour.

“The bread is made from 100% organic flour, the wheat bread is made from 100% whole wheat and its Dutch Crunch bread recipes have been developed under the supervision of a third generation Dutch baker,” said Nekumanesh. .

DD’s Bakery has received certification for product handling by the

Organization of Certified Organic Farmers in California. The flour used in bread is also certified by the US Department of Agriculture National Organic Program.

But franchisees claim the bread is substandard, in large part because it comes frozen.

Taghabi says the organic certification is misleading because only the flour is organic. Other ingredients are added to the bread.

“What’s the point of using 100% organic flour?” Said Taghabi.

His cross-suit claims the bread is falsely presented as fresh and inferior to French Basque bakery bread, according to his lawyer, H. Ty Kharazi of the Yarra Law Group in Fresno.

The lawsuit says that because organic flour makes up 70% of the product, Deli Delicious restaurants are legally allowed to market their products as made with organic flour.

This case between Deli Delicious and Taghabi is heading towards arbitration.

Customer complaint

A customer has now filed a complaint for these same claims. Kharazi also represents the complainant, Letitia Sanches. In November 2020, Sanches bought two sandwiches for herself and a colleague. She described the bread as “stale and dry,” according to the lawsuit. After doing her own research on the internet, she discovered that the bread was frozen. The lawsuit also calls into question the authenticity of organic certification. It was in her research that she discovered that Kharazi had advocated on behalf of the Deli Delicious franchisees, Kharazi said.

She filed a false advertising complaint for Deli Delicious to stop advertising its bread as fresh as well as “nominal damages,” Kharazi said.

Misaghi said he was afraid of DD bakery bread for fear of litigation.

On February 10, at a preliminary hearing, a judge issued a temporary restraining order requiring him to use bread from the DD bakery. He has since switched to DD’s Bakery bread, but told the judge he was afraid of false advertising. Part of the lawsuit against him includes the failure to post marketing signs. He also posted a sign with a QR code directing customers to a petition asking Deli Delicious to return to bread from the French Basque bakery. Lawyers claim that Misaghi “intentionally and maliciously” posted signs “with the aim of injuring and harming the goodwill associated with [Deli Delicious Franchising Inc.]”

“Weird” taste

Misaghi says he used bread from DD’s bakery for a short time at his location on Ashlan Avenue and Highway 99. He was trying to sell the location, and in order to sell it he had to comply with this. that requires an approved sale. bread. In the four days he served bread, he said he received numerous complaints from customers.

Customers told him they were going to the location of Clinton and Brawley avenues because his sandwiches tasted “weird.” Misaghi said the only difference between her location and this one was the bread.

He ended up selling the location for a fraction of what he bought it for.

The problems go beyond simple bread, says Taghabi. Deli Delicious also controls many leases that franchisees sign with their owners, he said. Taghabi’s franchise contract ended in December 2020. Because of this, along with many other issues, he says he wants to quit Deli Delicious. But the lease contract he signed with his landlord requires the location to remain a Deli Delicious for another five years. Because Deli Delicious has not renewed its franchise disclosure document with the State of California, it says it cannot renew its franchise agreement and is on a monthly plan.

In order to break with Deli Delicious, he would have to give up the investment he made in the restaurant.

Kharazi said it was not uncommon for franchisees to invest more than $ 500,000 in their businesses.

“What they have is one of the most oppressive franchise deals I’ve ever seen,” Kharazi said.

Feel targeted

Misaghi also says that the new Deli Delicious locations sometimes “cannibalize” each other. His first store opened on the Fig Garden Loop. A few years later, the franchise envisioned a space on Herndon and Milburn avenues, just over a mile away. They gave him the option to buy the location, which he did because he thought if he didn’t, he would go to another franchisee. The franchise opened a location on Clinton Avenue and Brawley Avenue, near its other location on Ashlan Avenue near Hwy 99, selling it to another franchisee.

In 2019, franchisees came together to form Deli Delicious Franchise Association as the franchisee’s negotiating arm for transparency, franchise support and marketing issues. At one time, up to 80% of franchisees belonged to the association, despite the wording of their agreements prohibiting them from doing so. Currently, that number has dropped to about a dozen, according to Eric Sha, a franchisee of Deli Delicious. This represents about 50% of franchisees. The drop in numbers is largely due to the closure of restaurants during the Covid era, Sha said. Misaghi says franchisees who belong to the association have not received relief like others. Many of the association’s franchisees feel targeted, he said.

“[Deli Delicious Franchising Inc.] has always acted and will continue to act in the best interests of all of its franchisees and to protect its brand by ensuring that its restaurants provide the same quality and experience to our loyal customers, ”said Nekumanesh.

Kharazi said that due to the issues with Deli Delicious, many potential franchise buyers are reluctant to buy. A selling franchisee should disclose the reasons or face potential litigation in the future.

Taghabi says he feels stuck.

“How can I work as a franchisee for this kind of franchisor,” he said. “They sued me amid the coronavirus. “