Judge blocks franchisor’s effort to close Bruegger’s Bagels near DU

A Denver judge has temporarily barred Bruegger’s Bagels from closing its last franchise location in the state, a cafe near the University of Denver that the company said is rundown.

In a 20-page order that he issued on Dec. 20, District Court Judge Jon Olafson required the company to let the dozen-year-old store at 2000 S. University Blvd. remain open until a jury can decide whether its owner or Bruegger’s breached their franchise agreement.

“While Bruegger’s asserts that its goodwill is harmed by (the) continuing operation of the premises, no corroborating evidence was provided,” Olafson wrote. “Instead, the evidence shows that the premises is cleaner and has newer equipment, the customer ratings on public sites have improved, and the bakery is more profitable than the previous year.”

Olafson’s decision followed a day-long hearing Dec. 19 during which he admitted struggling to see who was to blame for the store’s imminent closure. The judge repeatedly referred to the dispute between franchisee and franchisor as a chicken-or-the-egg dilemma: Should the store have made renovations to receive a renewal of its franchise agreement, or should Bruegger’s have renewed the agreement before requiring renovations be made?

Shawn Carter, an Arizona man, has been a Bruegger’s franchisee since 1995 and has, alongside his wife and son, owned the Bruegger’s location near DU since 2012. That store’s franchise agreement expired in 2023, setting the stage for the dispute with Bruegger’s.

The two sides met in January of 2024, when it was decided that the Carters would make renovations to the store and its time as a franchisee would be extended. Bruegger’s took issue with the way the location looked and worried about what it meant for Bruegger’s.

“Anytime a store falls into disrepair, there is brand and reputational risk associated with that,” Matthew Copenhaver, the chief development officer for Bruegger’s, testified Dec. 19. He later referred to the cafe as being “dirty and run down,” without going into detail.

“It’s the only Bruegger’s in this market, so in a lot of cases it’s the first introduction for consumers to the brand. And if you think about its adjacency to a college campus, you have a transient population who is here for a period of time, and then leaves and goes somewhere else. So, if they have a negative interaction with the brand up front, that carries through.”

Copenhaver said that Bruegger’s, which has its corporate offices in Denver, is so embarrassed by the look of the Carters’ location along University Boulevard that when the company hosts visitors, such as investors and other franchisees, “we don’t take them to this bakery.”

Shawn Carter and his son Ben, who moved to Golden to manage the restaurant last year, pushed back on the corporate office’s criticisms of their store. The elder Carter testified that a recent ranking of Bruegger’s 48 locations by revenue put the DU store 17th. It has paid about $67,000 in royalties to Bruegger’s in 2024 and $530,000 since 2013, he said.

“We agreed that we would do a remodel. It was never our intent not to do the remodel project,” Shawn Carter testified, listing recent equipment upgrades to the cafe. But Carter wanted a franchise agreement in place before spending $150,000 to $200,000 on aesthetic improvements. “I never invest money without having an agreement in place,” he said.

After the January meeting, communication between Bruegger’s and Carter’s company, Colorado Bagel Co., faltered. Both sides accuse the other of not following up. Bruegger’s never sent a franchise agreement to the Carters, who continued running the store. They made improvements to the kitchen but did not remodel the front of the cafe, as Bruegger’s wanted.

“While the evidence is clear that (Colorado Bagel Co.) did a frustratingly poor job of communicating about the remodeling of the premises, the evidence demonstrates that it did take some steps towards remodeling,” Olafson wrote in his Dec. 20 order.

Then, in October, a termination notice arrived. Copenhaver, the Bruegger’s exec, had been hired to “clean up,” in his words, franchise arrangements that were no longer successful. That included a bakery he passed by every day on his way to work, along University.

“Can you explain to the court why you would make that decision?” Bruegger’s attorney Hal Bruno asked him Dec. 19. “Why you would cut off a royalty stream to yourself?”

“I don’t think that we can sacrifice on brand standards for the sake of monetary gain,” he answered. “… It’s not just a financial decision. For us, it’s much bigger.”

In November, Colorado Bagel Co. sued Bruegger’s for breach of contract, among other claims, and asked Judge Olafson to prevent the closure of its restaurant.

“We’re talking about a bakery that’s going to get shut down with little-to-no-warning,” Krista Tushar, a lawyer for Colorado Bagel Co., told the judge in closing arguments. “Jobs are going to be lost and the sweat and equity that (the Carters) put into it, to bring it to what it is today, is gone. It’s just wiped out. And they won’t have the opportunity to continue to grow it.”