*NEWS*INK CTG REFILLERS AT WAR
*NEWS*INK CTG REFILLERS AT WAR
2005-04-26 at 10:07:00 am #9127Ink 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
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.