A Bethesda advertising agency's bid to expand to the West Coast by acquiring a San Diego-based agency has fallen apart over conflicts involving two of their clients -- fast-food competitors McDonald's and Roy Rogers.
Earle Palmer Brown, the Bethesda-based agency, and California-based Great American Bank, which owns Franklin & Associates Advertising and Public Relations of San Diego, canceled the deal because neither agency wanted to give up the accounts, which have provided major portions of their revenues.
"We reached an impasse," said John Jensen, senior executive vice president and chief operating officer for Franklin. "We mutually decided to end the deal."
Earle Palmer Brown represents Roy Rogers and Bob's Big Boy restaurants on the East Coast. Franklin & Associates represents McDonald's Corp. in the San Diego area.
Normally, that potential conflict would have kept them from discussing a merger in the first place. But Earle Palmer Brown had been slowly winding down its work on the Roy Rogers account since Marriott Corp. sold the chain to Hardee's Food Systems Inc. last April.
That, coupled with the possible loss of the Bob's Big Boy account as a result of Marriott putting that chain on the market in December, eased the two ad agencies' fears of client conflict and led to the signing of a tentative merger accord in July.
But Hardee's then offered Earle Palmer Brown a contract to handle advertising for the conversion of Roy Rogers restaurants to Hardee's outlets in the Washington area, Philadelphia and New York -- which will keep the Roy Rogers account active into next summer, according to an EPB spokeswoman.
"We thought we had all the conflict issues resolved," said Jensen. "Then about two weeks before we were to close, EPB was offered a creative assignment from Hardee's, which they wanted to take, and did take. We felt duty-bound to talk to McDonald's, and they felt it was a problem."
The McDonald's account provides about one-fifth of Franklin's $35 million annual billings. Although the value of Earle Palmer Brown's new Hardee's contract is unclear, the Roy Rogers account at its peak brought $15 million in annual billings to EPB. Neither company could sacrifice such major clients, Jensen said.
The deal's collapse left Franklin seeking an investor. It has been a subsidiary of Great American Bank since 1974, but financial troubles have forced the bank to put some of its assets, including the ad agency, up for sale.
Jeb Brown, chief executive of Earle Palmer Brown, said the eleventh-hour cancellation of a deal everyone had expected to go through prompted him to help Franklin find a new investor and reach a deal that would allow Franklin's management to have a minority stake in the company. Brown declined to identify the new investor.
The Bethesda agency still is looking to gain a West Coast presence through an acquisition, although nothing is imminent, Brown said. "We have other discussions going on, but I wouldn't classify them as hot," he said.