From Handel's Encinitas website
On June 22, a federal judge ordered a newly-opened ice cream shop in the Gaslamp to close down, citing a "high likelihood" that a venerable ice cream parlor chain based in Youngstown, Ohio, would otherwise lose trade secrets and suffer "irreparable harm." The chain, Handel's Homemade Ice Cream and Yogurt, had complained that such a store would compete with a Handel's franchise in Encinitas, though the same two people own the Gaslamp store and the Encinitas franchise.
Last Monday (Aug. 27), the Gaslamp store, Cali Cream at Fourth and Market, remained closed, but a notice posted on Yelp later on in the week announced the specialty ice-cream store would reopen on September 17. That may signal that both sides, which have reportedly wanted to end the franchise agreement but could not agree how, have reached an accord and settled thorny issues.
Among those thorns is whether the same owner who turns out fresh tubs of exotically-flavored premium ice creams ( a la “lavender honeycomb”) in one location, Market Street, must inevitably be cribbing from what was learned opening a store two years earlier, in 2016, in Encinitas – a store that flew the Handel's banner. The Ohioans had schooled that same one-time Market Street dipper in the techniques, recipes and other trade secrets of the Handel's brand. The two stores, it was argued, would compete with each other; the franchisee in Encinitas pitting Handel's against his own Cali Cream.
As the Youngstown Vindicator newspaper put it, franchisor Handel's has aimed to prevent the California franchisee from “going rogue.” Cali Cream owners Kenneth Schulenburg's popular Handel's Homemade occupies a prime spot at 90 North Coast Highway (the 101) in Encinitas.
Schulenburg claims Handel's violated California franchise laws by failing to wait a requisite two weeks before before formally executing an agreement. His attorney argued that the Gaslamp and Encinitas stores are operated as separate entities. (Addressing the point that closing Cali Cream would bring about layoffs of employees and a financial catastrophe for the ownership, the Ohio federal judge, Benita Y. Pearson, said the owner knew this case was pending when he opened Cali Cream in May.)
Those who have been showing up screaming for ice cream at Cali Cream's place the last several weeks found a hand-lettered sign posted on a locked door that noted “unforeseen circumstances” had caused the shop to shut down temporarily. A notice projecting a re-opening in a couple of weeks was seen Thursday (Aug. 30) at a Yelp page of San Diego ice cream spots. This business of who owns what and why has migrated now from the U.S. District Court in Youngstown to the U.S. District Court in San Diego, where a judge on June 18 gave Schulenburg the go-ahead to amend a complaint so as to clarify their cause of action. Those papers were to have been filed in July.
Schulenburg and Handel's have been on what the Vindicator dubbed a rocky road since he bought the franchise in 2016. In the court complaint that led to the shutdown, Handel's alleged that Schulenburg concocted and sold unapproved products, notably a “Bourbon-barrel-aged stout ice cream.” An ale house that joined the effort used the Handel’s logo in its advertising, according to the complaint. The lawsuit claims Schulenburg said he'd keep charting his own course and the proof is the $2 million generated over two years in Encinitas, making it the best Handel's franchise of all.