Local contractors say a Dunkin’ Donuts franchise group owes more than $1 million for construction work at four area locations and has cash available, but will not pay up.
Kainos Partners entered the Las Vegas market in 2007 and has 18 Dunkin’ Donuts stores operating in the area, but late last year the company stopped making payments on four stores under construction, contractors say.
Larry Monkarsh, owner of LM Construction, says Kainos Partners representatives have told him they are holding their cash reserves for operating capital and future expansion, while trying to negotiate a loan to pay the money owed to the contractors. Monkarsh said he sympathizes with the group and recognizes that a lot of companies are struggling to obtain financing, but he thinks Kainos has an obligation to satisfy its current debts before focusing on future projects.
“Right now we feel like we’ve been left holding the bag here.”
Bart Thorne, chief operating officer at Kainos Partners, admits the company owes money to some local contractors and said it is trying to obtain financing, but would not discuss the amounts owed or its business strategy.
“We are working diligently like other people are in Las Vegas and across the country,” Thorne said. “We found ourselves in a little bit of a pickle from a lending standpoint and in having access to capital.”
Thorne added that he hopes to have a resolution in the near future.
“It doesn’t benefit us to have four stores sitting there in Las Vegas, either,” he said.
Kainos Partners has 56 Dunkin’ Donuts franchises in three markets. The company has 21 shops in South Carolina and 17 in Buffalo, N.Y., in addition to the 18 in Las Vegas.
Monkarsh says he understands the problems Kainos is having, but feels the company should use cash reserves or proceeds from its other stores to help satisfy its obligations here. He said his fears have escalated recently because Kainos has failed to maintain consistent contact with his company.
“If you have dialogue between the companies there is usually a way to work things out,” Monkarsh said.
Thorne said Kainos has maintained some contact with the contractors, but until the company obtains financing, there is really not much to talk about.
Monkarsh said LM has not been paid since October and is owed about $750,000 for work on two stores. Another local contractor, Strata Building Group, also has two Dunkin’ Donuts stores under construction in the valley.
Charlie Mitchener, president of Strata Group, said his company is owed about $400,000.
“The problem is that it trickles down,” Mitchener said. “We can’t pay our subcontractors, then they can’t pay their suppliers.”
The Strata projects are on West Sahara Avenue, one near Palace Station and the other near Fort Apache Road. LM Construction’s work was done on stores at South Jones Boulevard and Moberly Avenue and on Lake Mead Boulevard at Simmons Street.
The store on Sahara Avenue near Fort Apache Road is close to completion, with signage already installed, a large “coming soon” banner on the building and a local phone number already listed.
The “See you tomorrow” sign at the drive-through window, however, serves only to tantalize passers-by.
Greg Layton of Western States Framing is a subcontractor who worked with LM Construction on the Dunkin’ Donuts shop on Jones Boulevard. He said he is still owed $30,000.
“A $30,000 hit is not looked on lightly by the vendors we have to pay,” Layton said. “We’ve worked with LM since the beginning on this project, and it’s just unfortunate that their customer isn’t performing.”
Dunkin’ Donuts did not want to talk about the issue, but released a statement.
“As all Dunkin’ Donuts stores are independently owned and operated by our franchisees, we are unable to comment on a specific franchisee’s business,” Margery Myers, senior vice president of global communications, said in the statement. “However, Dunkin’ Donuts is committed to the Las Vegas market and excited about building and strengthening our presence there.”
Because the company refused to respond to specific questions, it is unclear exactly what that means. Kainos officials said in 2007 it wanted to open at least 40 Dunkin’ Donuts stores in the area and Thorne said that is still a realistic number based on the company’s strategy of one store per 25,000 people.
Another Dunkin’ Donuts franchisee, LVDD, has four stores in the area and is current on all of its obligations.
Monkarsh said Kainos representatives told him it would be able to obtain financing for the outstanding debt in March, but it is now April and there is still no indication payment is forthcoming. Both LM and Strata have halted construction until Kainos works out a satisfactory payment schedule.
All parties admit that a main culprit is the sagging economy and the strapped cash markets.
Thorne said Kainos was confident in its ability to obtain financing when the projects were planned and Monkarsh acknowledges that in better times, he might be able to pay his subcontractors and wait for cash.
Of course, in better times, he probably wouldn’t have to.