Each store’s vases and kitchen supplies, for instance, must come from Farid’s global sourcing company, BerryDirect. It’s not illegal-it is, in fact, pretty common-for franchisors to have exclusive arrangements with affiliate companies. Thus, the franchisees were being forced to eat the cost of new machines and new services, knowing that much of their lost money was going back to the CEO.Īccusing the company and Farid of “self-dealing,” being “motivated by greed and self-interest,” and “acting unfairly and improperly to financially line its own pockets,” the suit says Edible is price-gouging franchisees, in part by requiring them to buy supplies from a series of companies that are all owned by Farid. At Edible, a lot of those vendors are owned by Farid and his family. What’s more, franchisees are typically required to buy supplies from vendors that the corporate entity chooses. When the company began selling baked goods, franchisees who’d signed up to run a fruit business had to buy ovens and expend extra labor making brownies. When Edible made a push to get customers into the stores to buy smoothies, some franchisees spent hundreds of thousands of dollars installing new counters, buying new blenders, and making other upgrades-only to see the strategy fail. ![]() Edible as a whole could have a blockbuster year while some individual franchisees barely turn a profit. Franchisees are the ones managing employees and serving customers-and they only make money if their store does. ![]() And each store must function as its own business. More sales at a store in Youngstown, Ohio (where Edible’s highest-grossing store brought in more than $2 million last year), means more money for the national advertising fund, which means a stronger national brand, which could lead to more sales at, say, a store in Miami.īut franchisees have no say in the big decisions corporate makes about launching or discontinuing product lines, which must remain relatively consistent across stores in disparate locations. Theoretically, in a broad sense, the franchises could succeed or fail as one company. On top of that, each store must put 3.5 percent of its sales into a national marketing fund, and another 1.5 percent toward local advertising. Each of those franchisees pays for the privilege of joining and selling the Edible brand.Įach store pays 5 percent of its sales to the company, according to annual financial filings. So, a quick primer: Edible is a franchisor, which means all of its stores (save a few company-run locations) are owned and operated by independent business owners. To understand the troubles afoot at Edible, you have to appreciate the quirks of the franchise industry. (When you’re a hammer, everything looks like a nail.) But the push to increase foot traffic never paid off. Rotondo wanted to make the stores destinations worth visiting, with counter-service treats like chocolate-dipped fruit and, wouldn’t you know it, smoothies. In 2018, Edible brought on its first outside CEO, Mike Rotondo, who’d recently led a substantial expansion of another fruit-forward franchising business, Tropical Smoothie Cafe. It took a couple of fallow, anxious years for Edible Arrangements to figure out that its titular innovation could no longer support the business on its own. And maybe, just maybe, the novelty of sending a friend some underripe fruit on a stick had worn off after two decades. ![]() When users Googled “Edible Arrangements,” the search engine was serving them ads for “ fruit bouquets” from. Digital direct-to-consumer gift shops were popping up everywhere. The marketplace had changed, and the company was scrambling.
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