ROGUE YOGURT

WHEN YOU BUY THAT DOUBLE-SWIRL CONE, YOU MAY NOT BE LICKING WHAT YOU THINK.

The weekend was warm, the type of weather that puts a jingle in the cash register of anyone with something sweet and cold to peddle. Customers lined up out the door of Doug Gunn's I Can't Believe It's Yogurt shop in Boulder.

The frozen-yogurt racket had proved a tough go for Gunn, harder than he figured when he quit his oil company job and opened an ICBIY franchise.

But things were going fine that weekend in July 1994. Until one of the big guys from Dallas-based ICBIY ambled into Gunn's store.

A visit from the head man should not have been a problem, except that Doug was purveying rogue yogurt. The chocolate and vanilla in his machines were counterfeit, fake, not made from the genuine ICBIY yogurt mixes that Gunn had agreed to sell when he inked the franchise deal with ICBIY.

Bill Brice Jr., co-founder and head honcho of the ICBIY chain, is no rube. Frozen yogurt buys his groceries, and his office is a cone's throw from the small yogurt mill that grinds out all of ICBIY's trademark product. If there is phony yogurt in an ICBIY store, Brice's tastebuds will tell the tale.

Brice and his wife were in Boulder on vacation, visiting friends. As fate would have it, they stopped by Gunn's store for a little after-dinner treat. Doug was so busy, he didn't even notice Brice come through the line. And damned if Brice and his wife didn't order one chocolate and one chocolate-vanilla swirl. Both nonfat.

Gunn was busted.
"When Mr. Brice tasted the product, he sensed it might be counterfeit," says a July 15, 1994, letter from ICBIY summarizing the fateful day. "He glanced up in time to see an employee exiting the store's walk-in freezer, and observed a yogurt mix carton that clearly did not bear the I Can't Believe It's Yogurt label."

It was showdown time. Brice confronted Gunn, who not only 'fessed up, but turned in his brother Mark, as well. Mark Gunn was also selling bogus yogurt at his ICBIY franchise in Aurora, Doug told the high sheriff.

And the Gunn brothers were making no apologies for the contraband stacked in their freezers. "We were definitely in violation, and we knew it," says Mark. But ICBIY had jerked the brothers around so many times on deliveries, he adds, they figured they had to make truck with another supplier to keep their stores from going under.

Brice returned to Dallas, and ICBIY quickly moved to run the Gunns out of their corporate territory. The two men's franchises were canceled, and ICBIY sued them in U.S. District Court in Denver for breach of contract.

But the Gunn brothers are going down fighting, and earlier this year they fired back, suing ICBIY and Brice in Dallas County District Court for, among other things, defamation, fraud and deceptive trade practices.

The Gunns discovered that they were by no means the only ICBIY purveyors who have hawked counterfeit frozen yogurt. Customers who shelled out money for ICBIY's genuine yogurt in at least 55 locations across the country in 1994 actually were buying cheaper substitutes.

The problem was serious enough that in September 1994, the company felt compelled to declare a general amnesty. Store owners were told they could confess to their wrongdoing, pay the company some money and escape further punishment.

"During the past few months, we have accumulated evidence that an alarming number of [ICBIY] franchisees and licensees have offered counterfeit frozen yogurt products under the I Can't Believe It's Yogurt banner," states a September 30, 1994, memo written by company general counsel Charles Cannon that was sent to all ICBIY franchise holders.

"Bootleg brands we detected include Gise, Je Mari's, Colombo, Dannon, Honey Hill, Frostline, Dole Whip, Sugarcreek, Ridgfield--even TCBY," the memo continues.

In the future, the company sternly informed its franchise holders, counterfeiting problems would not be so easily forgotten.

The amnesty program worked, company officials say, and the counterfeiting of product is now under control.

But another stain on the good name of ICBIY is growing in its place.
During the course of investigating ICBIY's operations for their lawsuit, the Gunn brothers say, they have discovered evidence that the company has been misleading store owners--and the public--about the ingredients in its frozen yogurt.

For years ICBIY literature touted the high quality of the company's pricey yogurts, boasting that they were made with fresh milk straight from the cow. Nutritional brochures available at ICBIY stores told customers that the company "built a dairy to satisfy the increasing demand for our great-tasting product."

But it turns out that sometime around 1990 ICBIY jiggled its recipes and started using primarily powdered milk to make its yogurt, says attorney Steve Khoury, who is representing the Gunns in their lawsuit against ICBIY.

During a deposition taken in the case, Khoury says, the head of the company's factory acknowledged that ICBIY decided to save some money by replacing much of the fresh milk it used with powdered milk mixed with water.

"They claimed basically to all the franchisees and the world generally that they were making their product with the highest-quality ingredients, specifically including farm-fresh milk. Milk straight from East Texas farms," Khoury says. "We have found out that approximately since 1990 they have been manufacturing the product with milk powder and water."

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