Merger Won’t Solve Yogurt Firm’s Problems, Heidi’s Franchisees Say

Problems with disgruntled franchisees apparently are not over for Heidi’s Frogen Yozurt, despite last week’s announcement of a planned merger with Johnston Foods.

Interviews this week with dissatisfied franchise operators reveal that although virtually all are pleased that the chain plans to bring in new management, some are still calling for the ouster of Heidi Miller, who founded the Laguna Hills-based company.

At least some of the 29 franchisees who have filed legal actions seeking millions from Heidi’s say they will continue to press their lawsuits and claims. Others want current problems addressed before the new management turns its attention to expanding the chain.

And new trouble could be brewing with the new majority owner, C.E. Prichard of Pasadena, if Heidi’s is unable to quickly settle its differences with franchisees over payments into the chain’s advertising fund.

Prichard, the sole shareholder of Los Alamitos-based Button Industries, last week announced that he will gain majority control (about 45%) of Heidi’s stock and will install a new management team at the company. Button owns Johnston Foods. After the merger, Miller will own 24% of Heidi’s stock, instead of her current 43% interest.

Heidi’s has been losing money for some time. Most recently, for the nine months ended June 30, the firm reported a net loss of $1,023,292.

In an interview last week, Prichard seemed to be trying to end squabbles with angry franchisees, saying he hopes to meet with them soon. He and Heidi’s new chief executive officer, William P. Evans, could not be reached for comment this week.

Miller downplays the complaints, saying that “differences of opinion are a daily occurrence in a franchise company.” She will retain her title of president when the merger is completed--a role that will at least include responsibility for marketing activity of franchise operations.

Uncertainty about Miller’s role in the company once Heidi’s acquires Johnston Foods has caused concern among some franchisees.

“The franchisees want to meet with the new management team to find out what direction the corporation is headed in and who has what responsibiltiy,” said Skip Villerot, owner of three Heidi’s stores and president of the Assn. of Heidi’s Franchisees.

“I’m very encouraged that we’ll get good, professional management,” added Vince LoFranco, owner of six franchises in Santa Clara County. But LoFranco, who has filed a lawsuit seeking more than $2 million from Heidi’s, said his legal claim won’t vanish. “I’ve been severely financially hurt . . . and that has to be squared away,” he said.

Another franchisee who asked not to be named said he has spoken with many others who own Heidi stores. “A lot are concerned--especially about (the new owners’) plans to expand into Japan and Great Britain. They haven’t fixed the problems here domestically, and it looks like they’re wanting to head off and leave us in the dust.”

To be sure, there are franchisees who say they are pleased with Miller’s performance and with the Johnston Foods merger. “The Escondido (franchisees) seem to be quite happy,” said Fred Knorr, who has a Heidi’s in Escondido and sees the merger as good news.

Even so, there could be other problems again for Heidi’s.

Attorney Gerald Grenert of Encino, who filed many of the claims against Heidi’s, said Monday that he has been notified by Heidi’s legal counsel that franchisees who are withholding advertising fees or royalty payments from the company will be in default of their franchise agreements if payments are not made.

A number of franchisees have been paying royalties and/or advertising fees into a trust fund until their legal claims are settled or an accounting of advertising fees is made.

“It takes two to make peace and war. We’re willing to sit down and discuss peace,” Grenert said. “I’m hopeful the new management will be willing to meet with the franchisees and establish a positive program in the future.”

Asked about plans to default franchise agreements, Heidi’s attorney, Ron Gagnon, said, “We prefer that people respond to the positive changes that are being made--and work with the company, not against it. . . . We are extending every opportunity for everybody to come back into the fold as a satisfied franchisee.”