Freshii is trying to lure franchisees of rival fast-food chains to switch

With an open letter to Subway franchisees, Freshii founder Matthew Corrin takes a second run at a tactic that previously brought a $10 million lawsuit

Subway restaurant

(Joe Raedle/Getty)

Freshii Inc. founder Matthew Corrin has a penchant for using open letters as a marketing tool to promote his health-conscious restaurant chain. His latest, released today, is aimed squarely at Subway Restaurants. Corrin writes that Subway has “too many restaurants chasing fewer customers” and proposes the two chains work together to convert some of those locations into Freshii outlets.

Corrin’s letter is much more collaborative and polite in tone than his last missive. Back in May, Corrin targeted frozen yogurt and juice bar operators “struggling to stay relevant” and offered to waive the company’s franchise fee for those who converted their shops to Freshii restaurants under a program called From Froyo to Freshii. “The time to act is now—before your froyo or juice business goes out of business,” he wrote.

So what explains the shift in tone? “The person I trust the most told me that life is more fun and prosperous when you’re kind,” Corrin said in an email. “So I evolved.”

It’s also true that Freshii was hit with a $10-million lawsuit following the publication of the froyo letter. Yogen Früz and Yogurty’s, the frozen yogurt chains founded by brothers Michael and Aaron Serruya, and a related firm called International Franchise Inc., filed a suit in the Federal Court of Canada against Freshii in June. International Franchise owns the trademark to “froyo,” which is licensed to the two yogurt chains. The companies alleged Freshii used the trademark in a way that is “likely to have the effect of depreciating the value of the goodwill” attached to the word. Further, the lawsuit accused Freshii of issuing false or misleading statements to promote its own business interests. In addition to damages, the frozen yogurt chains sought to have Freshii publish a retraction to its open letter. (Freshii disclosed the previously unreported lawsuit in its prospectus in December ahead of its initial public offering.)

Corrin never mentioned Yogen Früz or Yogurty’s specifically in his letter, but he did paint a dire picture for froyo operators. “The challenge you face is real,” Corrin wrote. “Froyo is finished.” He implored would-be franchisees to act quickly “before your bank account goes to zero.”

In a statement of defence, Freshii denied the allegations made in the lawsuit. The company also fought back with a counterclaim seeking to have the “froyo” trademark expunged, arguing the term is generic in the same way that “shake” is now short for milkshake. (There’s a whiff of moral superiority to Freshii’s filing, too: “In stark contrast to the sugar-heavy desserts sold by the Plaintiffs, Freshii branded restaurants provide quick, fresh and nutritious meal choices to customers around the world.”) In a reply, the frozen yogurt chains contended froyo is not a generic term, and that it is, in fact, “extremely valuable.”

Yogen Früz and Yogurty’s, along with counsel to Freshii, did not reply to a request for comment before publication, and no records have been filed in the case since August.

The suit may ultimately be of no consequence to Freshii, but the game has changed since the company went public in January. Bombastic open letters generate headlines, appeal to would-be franchisees and build a reputation for Corrin as a tough-talking leader. But conservative investors might think differently, which the company now seems to recognize. Among the risk factors listed in Freshii’s prospectus, the company notes “investors’ general perception of us and the public’s reactions to our press releases [and] open letters,” and cites the froyo missive. Indeed, Freshii would do well to avoid lawsuits—frivolous or not.