Franchisee breaks away from LaMar's

A well-known south-side doughnut shop has changed its name, and according to the attorney for its franchisor, a lawsuit may follow.

LaMar’s Donuts, 3654 S. Campbell Ave., officially became Ray’s Donuts on Nov. 1, after its owner said his dissatisfaction with the franchise led to a decision to dissolve their relationship.

Bill Risberg, owner of Ray’s Donuts, said the new name is in honor of Ray LaMar, who opened the original LaMar’s in 1960 in Kansas City. Risberg’s move comes nearly a year after two other franchisees broke away from Lincoln, Neb.-based Donut Holdings Inc., franchisor for LaMar’s Donuts.

Franchisee dissent was brewing since spring 2009, Risberg said.

“More than half of the franchisees initially got together to discuss some issues we had in terms of support, things that were guaranteed in our agreements that weren’t being taken care of, including advertising that wasn’t being catered to local markets,” Risberg said.

Last year, according to Risberg, a settlement through mediation was reached between LaMar’s and about seven franchisees.

However, two franchisees, in Denver and St. Louis, decided to part with the brand. The Denver shop became Laurie’s Donuts, and the St. Louis franchise and its two locations took on the Ray’s Donuts’ name.

Risberg, who never agreed to the terms in mediation, said he had been in negotiations since last year to keep the LaMar’s name. In October, Risberg notified the franchisor that his store would be leaving the company.

The Springfield Ray’s is not associated with the St. Louis franchise and is currently operating as an independent business.

Terry Barber, a Lincoln-based attorney at Barber & Barber representing Donut Holdings Inc., said Risberg had only paid a small fraction of his franchise fees since June 2009 and that a lawsuit was under discussion.

Barber said Risberg stopped providing the corporation his sales figures in 2009, and as a result, Barber could not say how much the local owner was behind on royalties and fees.

LaMar’s officials referred all questions to Barber.

Barber said one issue of contention is that Risberg has not provided LaMar’s with an opportunity to purchase his store and equipment. Barber said that Risberg had agreed to terms to leave the franchise at one point this year, but then he backed out.

One thing that is holding back LaMar’s headquarters from seeking monetary reimbursement from Risberg, according to Barber, is Risberg’s ability to pay any judgment it might receive.

Barber pointed to a recent eviction notice that was served to Risberg by his Kickapoo Corners store’s landlord, Bill Beall Co., as evidence of his financial trouble.

“Let’s say that we get a judgment. If he doesn’t have the ability to pay, then we’ve wasted our time,” Barber said.

However, Barber said the franchisor could decide to pursue legal action even if it may not be able to recover any money.

“Sometimes the point is the principle,” he said.

Risberg confirmed that he was served with an eviction notice this summer, but said he has since made arrangements to pay his landlord what he owes. He declined to say how much he owed, and a call to Bill Beall Co. was not returned by press time.

Risberg said that he has not paid LaMar’s his franchise fees – roughly $30,000 a year – since September 2009, but he did not believe Donut Holdings Inc. would pursue legal action.

“I’ve been told that if anyone has a lawsuit, it’s me,” Risberg said.

He said that he believes Barber had encouraged the real estate company to evict Risberg’s company for back-rent.

Risberg said he has spoken with St. Louis attorney Rob Hellweg of Stone, Leyton & Gerschman regarding franchise disputes and with independent Springfield attorney Kendall McPhail regarding past-due rent.

Still, he says he is hopeful that legal action, by either party, wouldn’t be necessary. 

Risberg said the new doughnut mixes are not LaMar’s products but are from Dawn Foods, which produces LaMar’s ingredients. He said the new doughnuts are almost identical and he hopes to add new items to the menu now that his shop is an independent proprietorship.

According to Risberg, LaMar’s Donuts opened in Springfield in 1994, and he purchased the store from Kevin Keyes in 2002. He said his franchise agreement, which he assumed when he bought the shop, ran out in September 2004. He said he was never notified that he needed to sign a new agreement and only found out that he was operating without one when franchising issues arose last year.

The Springfield’s Ray’s is a separate entity from two former LaMar’s stores in St. Louis, now also called Ray’s. Risberg will, however, pay the St. Louis Ray’s owners to share in artwork, packaging and development ideas. At least one other Ray’s Donuts, not affiliated with Risberg or the two in St. Louis, is located in Kansas City.

Lamar’s Donuts currently has 28 locations across the nation, most of which are in the Midwest.[[In-content Ad]]