MINNEAPOLIS, Oct 25, 2000 (BUSINESS WIRE) -- A majority of franchise owners of Weddingpages, a regional bridal publication with local editions in more than fifty cities, have now filed motions for preliminary injunctions against The Knot.com (NASDAQ:KNOT) in the Supreme Court, State of New York. The suit alleges that the franchisees paid for the exclusive right to use the "Weddingpages" name in their territories. When The Knot, a start-up company that markets to brides over the Internet, purchased the franchisor of Weddingpages earlier this year, it required the franchisees to use "The Knot" name in addition to Weddingpages in their territories. "The Knot has now done an about-face and is threatening to take away our right to use The Knot name and to circumvent our franchise agreements by competing against us in our own territories," explained ToddKabes, San Antonio franchise owner. The request for injunctions stems from a lawsuit filed on August 14, 2000 by the franchise owners of Weddingpages. The suit seeks equitable relief and monetary damages, contending The Knot has committed fraud and misrepresentation; violation of state franchise registration and disclosure laws; breaches of the claimants' franchise agreements; violations of the implied covenant of good faith and fair dealing and numerous other violations of franchise and statelaws. "The Knot's management has refused to acknowledge the franchisees' concerns or even meet with us. We had no choice but to file suit," Kabes said. W. Michael Garner of Dady & Garner, P.A. counsel for the plaintiffs stated, "We are asking the Court to protect the fundamental bargain that the franchisees made -- that they would have exclusive rights to the Weddingpages and Knot names and concepts in their territories. The fact that The Knot bought out thefranchisor does not change that." In a similar case last month, Dady & Garner obtained an injunction against a franchisor's internet sales into franchisee territories.The Knot.com was launched in 1996 with Greenhouse funding from America Online (AOL). Additional investors include Hummer Winblad Venture Partners as well as QVC. With funds generated from a recent IPO, The Knot acquired Weddingpages Inc., in April of 2000 at a cost of 8.5 million. Weddingpages Inc., isrecognized as the largest publisher of regional wedding magazines in the U.S.
I sold this morning, feeling kind of blindsided by this lawsuit. Shook my faith in the management team. It's too early in our business cycle for us to be getting sued, by anybody, and I consider it to be a bad sign. It suggestsa) we bought Weddingpages without knowing what the hell we were doingb) management is unable to effectively deal with problems when they ariseThe competing press releases are a frigging joke. Apparently the theory is, The Knot won't have to deal with its franchisees in the future, might as well burn the bridges now. Unbelievable. I still like this business model very much, but I have lost my faith in management's ability to execute the model. So I'm out. Best of luck to all investors.Taylor
So, this is what it takes to get some attention to KNOT here? Figures. Anyway, cnet news and business wire have reported that the franchisees failed to get their injunction and the case is going to mediation with the key deadline reporting back to the judge Nov. 27. Will there be a compromise or is it all-or-nuttin'? I'd bet on a compromise (and prefer it), but we'll find out. I would defend KNOT's right to control the use of their name, just as any other company would. The upcoming quarterlies are more important to me right now - what will the trends show? People still argue about AMZN's survival when their losses are larger. Again, no one should bet the ranch here, and I don't either (which is why I refuse to complain about it). Staying in - for now. Good luck.
Best Of |
Favorites & Replies |
Start a New Board |
My Fool |