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 user 2005-04-26 at 10:07:00 am Views: 49
  • #9127
    Ink Cartridge Refillers Wage Messy Spat

    Stop the presses. Or more precisely, stop the

    The battle between two of the fastest-growing ink cartridge refillers is
    heating up as the firms trade charges — some of them in court — over each
    other’s business practices.

    “We are being bullied,” said Caboodle Cartridge founder Daniel Wencel. The
    company this month sued for the right to hire a top engineer from Cartridge

    Cartridge World, meanwhile, says Caboodle has withheld crucial information
    from potential franchisees, including a past lawsuit.

    “They’re going to end up in a lot of trouble,” said Cartridge World Chief
    Executive Burt Yarkin.

    The claims highlight the mounting stakes in off-brand printer ink sales. The
    industry is the scourge of printer makers, which rely on their brand-name
    supplies for much of their profit. But refills have become popular among frugal

    Cartridge refill services pour off-brand ink into empty ink cartridges. Thus,
    they bypass the most expensive part of the ink making process: the high-tech
    delivery mechanism.

    The warring companies hope physical stores help overcome their reputation,
    some of it fueled by printer makers, of shady ventures and shoddy products.

    Cartridge World is the biggest chain, with more than 150 U.S. stores and
    another 160 under construction. Caboodle, which recently began franchising
    stores, has 19.

    In its suit, Caboodle asked a Silicon Valley court to formally OK its recent
    hiring of Tien Nguyen. Well-known in the ink world, Nguyen quit Cartridge World
    in January and soon joined the smaller rival.

    Before Caboodle filed suit, Cartridge World had threatened, in letters sent
    by its attorneys, to sue Caboodle, saying Nguyen is subject to a noncompete
    agreement he’s now breaking. In the letters, Cartridge World says Nguyen will
    almost certainly give away trade secrets.

    But Cartridge World says it’s now dropped the matter. “If they think he’s so
    great, go to town and good luck,” Yarkin said.

    Cartridge World didn’t “have a leg to stand on,” said Caboodle’s Wencel. He
    wants Cartridge World to refund Caboodle’s legal costs.

    In the meantime, Cartridge World is publicizing complaints filed in
    California and Michigan that claim Wencel broke franchise laws by failing to
    disclose a prior lawsuit to potential franchisees.

    A complaint filed in Michigan by California attorney David Holmes also
    objected to other information Caboodle gave in franchise offer materials. The
    complaint to the Michigan attorney general’s office said Caboodle understated
    franchisees’ costs and made claims about their profit potential that aren’t
    allowed. Holmes didn’t return phone calls seeking comment.

    Cartridge World’s Yarkin says the Federal Trade Commission is probing
    Caboodle over the matter. An FTC spokeswoman says the agency comments on
    official actions only.

    Caboodle’s Wencel says he has corrected any errors. He says he’s new to
    franchising and didn’t know the prior lawsuit was relevant.


    In that prior matter, Wencel sued former business partners for fraud. They
    countersued him. They later settled, and Wencel says he was paid an undisclosed

    The complaints to regulators are more attempts to intimidate the smaller
    firm, Wencel says. They reflect a pattern of strong-arming rivals and its own

    Wencel says several would-be Cartridge World franchises have come to Caboodle
    because they didn’t like the bigger firm’s methods and franchise terms.

    In addition to refilled ink cartridges, both chains sell new ink cartridges.
    Wencel says his bigger rival forbids franchisees to buy those cartridges from
    anyone but Cartridge World, so it can squeeze more money from the stores.

    Cartridge World’s Yarkin says such deals are typical of franchise chains,
    meant to ensure quality.

    “Do you think McDonald’s allows franchisees to purchase their fries anywhere
    they want?” Yarkin said.

    He added that Cartridge World has a purchasing committee that includes
    franchisees. The firm has lowered prices twice in recent months, thanks to its
    growing size and buying power. Caboodle doesn’t understand ink technology or how
    to franchise, Yarkin says.

    Several Silicon Valley-area franchisees, contacted without Cartridge World’s
    knowledge, say they’re happy with the company.

    Frank Salamanca, who owns a Cartridge World store in San Jose, Calif., said
    he has “no complaints whatsoever.” He plans to open a second store. “So far, so
    good,” he said.

    Paul Mehta, who opened a Cartridge World franchise this month in nearby
    Milpitas, said his franchise contract “has been very fair.”

    Cartridge World and Caboodle see a quick resolution to their current legal

    But with ink fetching higher prices per ounce than fine wine, many perfumes
    and crude oil, their rivalry shapes up to be a long one.