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Stumbleeconomy:
Where’s the dough?
Dunkin’ Donuts contractors want franchise owner to pay
Freshly built: Work stopped on a Dunkin’ Donuts franchise on Sahara Avenue near Fort Apache Road.
Fri, Apr 10, 2009 (2 a.m.)
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Local contractors say a Dunkin’ Donuts franchise group owes more than $1 million for construction work at four area locations and has cash available, but will not pay up.
Kainos Partners entered the Las Vegas market in 2007 and has 18 Dunkin’ Donuts stores operating in the area, but late last year the company stopped making payments on four stores under construction, contractors say.
Larry Monkarsh, owner of LM Construction, says Kainos Partners representatives have told him they are holding their cash reserves for operating capital and future expansion, while trying to negotiate a loan to pay the money owed to the contractors. Monkarsh said he sympathizes with the group and recognizes that a lot of companies are struggling to obtain financing, but he thinks Kainos has an obligation to satisfy its current debts before focusing on future projects.
“Right now we feel like we’ve been left holding the bag here.”
Bart Thorne, chief operating officer at Kainos Partners, admits the company owes money to some local contractors and said it is trying to obtain financing, but would not discuss the amounts owed or its business strategy.
“We are working diligently like other people are in Las Vegas and across the country,” Thorne said. “We found ourselves in a little bit of a pickle from a lending standpoint and in having access to capital.”
Thorne added that he hopes to have a resolution in the near future.
“It doesn’t benefit us to have four stores sitting there in Las Vegas, either,” he said.
Kainos Partners has 56 Dunkin’ Donuts franchises in three markets. The company has 21 shops in South Carolina and 17 in Buffalo, N.Y., in addition to the 18 in Las Vegas.
Monkarsh says he understands the problems Kainos is having, but feels the company should use cash reserves or proceeds from its other stores to help satisfy its obligations here. He said his fears have escalated recently because Kainos has failed to maintain consistent contact with his company.
“If you have dialogue between the companies there is usually a way to work things out,” Monkarsh said.
Thorne said Kainos has maintained some contact with the contractors, but until the company obtains financing, there is really not much to talk about.
Monkarsh said LM has not been paid since October and is owed about $750,000 for work on two stores. Another local contractor, Strata Building Group, also has two Dunkin’ Donuts stores under construction in the valley.
Charlie Mitchener, president of Strata Group, said his company is owed about $400,000.
“The problem is that it trickles down,” Mitchener said. “We can’t pay our subcontractors, then they can’t pay their suppliers.”
The Strata projects are on West Sahara Avenue, one near Palace Station and the other near Fort Apache Road. LM Construction’s work was done on stores at South Jones Boulevard and Moberly Avenue and on Lake Mead Boulevard at Simmons Street.
The store on Sahara Avenue near Fort Apache Road is close to completion, with signage already installed, a large “coming soon” banner on the building and a local phone number already listed.
The “See you tomorrow” sign at the drive-through window, however, serves only to tantalize passers-by.
Greg Layton of Western States Framing is a subcontractor who worked with LM Construction on the Dunkin’ Donuts shop on Jones Boulevard. He said he is still owed $30,000.
“A $30,000 hit is not looked on lightly by the vendors we have to pay,” Layton said. “We’ve worked with LM since the beginning on this project, and it’s just unfortunate that their customer isn’t performing.”
Dunkin’ Donuts did not want to talk about the issue, but released a statement.
“As all Dunkin’ Donuts stores are independently owned and operated by our franchisees, we are unable to comment on a specific franchisee’s business,” Margery Myers, senior vice president of global communications, said in the statement. “However, Dunkin’ Donuts is committed to the Las Vegas market and excited about building and strengthening our presence there.”
Because the company refused to respond to specific questions, it is unclear exactly what that means. Kainos officials said in 2007 it wanted to open at least 40 Dunkin’ Donuts stores in the area and Thorne said that is still a realistic number based on the company’s strategy of one store per 25,000 people.
Another Dunkin’ Donuts franchisee, LVDD, has four stores in the area and is current on all of its obligations.
Monkarsh said Kainos representatives told him it would be able to obtain financing for the outstanding debt in March, but it is now April and there is still no indication payment is forthcoming. Both LM and Strata have halted construction until Kainos works out a satisfactory payment schedule.
All parties admit that a main culprit is the sagging economy and the strapped cash markets.
Thorne said Kainos was confident in its ability to obtain financing when the projects were planned and Monkarsh acknowledges that in better times, he might be able to pay his subcontractors and wait for cash.
Of course, in better times, he probably wouldn’t have to.
Discussion: 12 comments so far…
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"As the dough turns" should be a new show on Faux.
Yea it could be, no room on MSNBC 23 hours of obama worshiping plus 1 hour to clean the place.
They need to go to an existing Dunkins', and stand on the sidewalk with signs protesting their shabby treatment. There's one here in Henderson I see every day, and it would be a great place to get exposure. I would think this might motivate the big boys from the Northeast to help the the franchisees. Of course, it would be important to check with the Henderson Police to make sure picketing is legal-otherwise they might send Officer Morrison by, and we all know what might happen...RIP, Selima.
Time to boycott Dunkin Donuts
The company has requirements of franchise owners in order to use the brand. They are partners and should pay up if the franchise owner can't or wont. I agree with the other poster about picketing until the company pays up. This business has franchises all over the world bringing in millions on a weekly basis and needs to settle up.
18 more empty retail stores when these donut shops close and a hundred employees soon out of work. When will the President find a stimulus for Las Vegas instead of sending it all to the auto companies? Where is harry Reid, besides planning his big fund raiser with the President's help?
Speaking of "where's the dough," why donuts have holes?
So they can sell donut holes
LM Construction should take Kainos Partners to court for non-payment. The court should rule that the cash reserves and operating capital held by Kainos Partners be used to pay LM Construction for the work they completed. LM Construction has to go the legal route in this situation.
time for a good lawyer...perhaps even some air time on the evening news. How about a few calls to the Attorney generals Office. Any number of things will shake um up....
This Company makes commitments and then doesnt honor them. They use other people money and expand past what their cabibilites are. This Company needs new leadership. Their causing Landlords lots of harm and are now being sued by mulitple developers or Landlords. Maybe they should try honoring their current commitments to their obligations before thinking about future expansion plans. These kind of actions harm everyone from Landlords to employess and the tax payers. The leaders in charge of this Company should personally step up to the plate and make their wrongs right rather than put their mishaps on others.
Both contractors are excellent. It is the tenants responsibility to follow the laws of the state and pay timely for services rendered. How would Dunkin' like it if we all went down to the store, ordered some doughnuts and coffee, ate them, and then walked out and not pay them for six months? or re-negotiate the payment price after we are done eating it? thats what is so frustrating for the people in the construction business. There is hope if Tenants would follow the laws (NRS 108) which states they are suppossed to provide payment timely. I wish everyone the best!