CPR owners sue Parents Council over ‘burdensome’ burden amid sector exodus | Franchise Insights


Beth Ewen

Many cellphone repair operators were thrilled when their new parent company, insurance giant Assurant Inc., bought the brand from investment firm Merrymeeting Group in 2019, with typical exuberance from both parties.

“Assurant is well positioned to help drive continued traffic to CPR stores,” Merrymeeting Group founder John Davies said in a statement at the time.

The kind words are history as the CPR Independent Owners Association sued Assurant, claiming it “changed the deal” and imposed “onerous new burdens on its franchisees to enrich themselves at their expense,” according to a lawsuit alleging the Class action status sought last June.

The “climaxing factor” in their complaint, said Johnston Clem Gifford’s outside counsel Dan Klein, is when Assurant began “competing directly with CPR franchisees,” including for employees who, in some cases, were seconded by franchisees at higher wages to run repair kiosks at T-Mobile device stores.

Assurant insures nearly 50 million mobile devices including phones, tablets and laptops. By 2020, CPR operators were told that Assurant would send T-Mobile customers to franchisee stores for repairs covered by Assurant’s insurance, the lawsuit says.

“Franchisees have opened branches, renovated branches and hired employees,” according to the accounts. “They then learned that Assurant would serve T-Mobile’s customers directly themselves,” the lawsuit reads.

“Since then, Assurant has opened hundreds of repair kiosks in T-Mobile locations – many are in CPR franchisee territory and are staffed. CPR had franchisees trained on T-Mobile repairs.”

To confuse matters further, franchisees learned in late September that Assurant reversed course, closing about 500 kiosks in T-Mobile stores and returning the business to Cell Phone Repair franchisees after their lawsuit was filed, it said Small.

Franchisees have had a “mixed reaction” to what Klein calls the turnaround, said Eric Farr, chairman of the owners’ association. “We are happy to finally receive claims. But at the same time, it doesn’t undo some of the heartache and pain and financial hardship we’ve been through.”

Farr was new to the industry when he became a franchisee in 2018. Is additional traffic “a positive or negative impact on our business model? Personally, I’m waiting to see it,” he said.

Klein said in early December that the lawsuit was subject to arbitration, as is customary in franchise disputes, so his firm will pursue that avenue with the original plaintiff. As many as 40 shopkeepers claim they have closed stores or lost money as a result of Assurant’s actions since the takeover, he said.

Blair Frock, Assurant’s vice president of retail, connected living, did not respond to a request for comment. Andy Mus, Assurant’s director of external communications, said via email that the company is not commenting on any pending litigation. Frank Burt, a partner with Faegre Drinker and Assurant’s outside counsel, declined to comment, citing the company’s ban.

Changes in uBreakiFix

Other mobile device repair chains changed hands in 2019 as insurance carriers went commercial. State-owned SquareTrade bought cellphone repair company iCracked, and global insurance provider Asurion bought uBreakiFix, a franchise co-founded by Justin Wetherill.

In November 2019, Wetherill told the Franchise Times he was glad to be a subsidiary of Nashville-based Asurion and check off their fortunes. “You are a great supply chain operation. They have a lot more marketing power,” he said, adding he expects to remain CEO.

“And then the capital,” which Asurion had plenty of. He wanted to “expand departments in anticipation of growth” instead of working “on a cash basis” as before, meaning he’ll wait for enough franchisees to sign on before adding executives at the Orlando headquarters.

Asurion retained Wetherill as CEO until June 2021 when Dave Barbuto took over the role and Wetherill became Senior Advisor. This fall, Asurion announced a rebranding of uBreakiFix to Asurion Tech Repair & Solutions to roll out across all 650+ US stores and nearly 600 mobile vehicles.

Asurion also began to increase the number of company-owned stores compared to franchised stores, including through buybacks. At the end of 2019, uBreakiFix had 551 stores, of which only 23 were owned by the company. According to the Franchise Times Top 500, as of the end of 2021, the chain had a total of 698 stores, of which 361 were company-owned and 337 were franchised.

A footnote in its 2021 FDD states that in 2020 a subsidiary of UBIF reacquired 106 franchises, 13 in Canada and 93 in the United States.

Asurion’s Barbuto said there were no plans for a de-franchise. “We believe that both franchise stores and corporate stores are key to our success as a company and we will continue to operate as a franchise organization,” he said via email. Operating corporate stores “allows us to innovate, test and learn from pilot programs and initiatives before introducing them into our franchise system,” among other benefits.

Asurion’s network of 770 stores is now about 60 percent franchised and 40 percent corporate, “with no plans to further expand the corporate presence.”

‘A seat at the table’

Farr, the cell phone repair operator and association president, said consolidation, a shift toward corporate deals, higher prices for parts like batteries and other factors are making it harder for an independent operator to make a profit and also reducing consumer choice.

The goal of merging with Assurant is simple. “We want to be able to sit at the table and create a healthy, profitable network. What we see is that this business is constantly evolving. We must be prepared to defend the health of our owners, that is our primary responsibility,” Farr said.

Beth Ewen is the Editor-in-Chief of The Franchise Times and writes the Continental Franchise Review® column in every issue. Submit interesting legal and public cases to [email protected].