The Frango Factor -- Legal Maneuvering Threatens A Seattle Tradition

Frederick & Nelson quietly churned out Frangos while World War I raged. The factory was making them when Pearl Harbor was bombed. The tiny pillows of chocolate solace were available when President Kennedy was shot, during the long Vietnam War and while Seattleites were glued to their televisions viewing the Persian Gulf War.

Now, mere legal maneuvering threatens to halt a 74-year-old Seattle tradition.

The Frango Factor has lent an element of mystery to the Frederick & Nelson bankruptcy proceedings and has been one of the biggest causes for furrowed brows among the local citizenry.

UNCERTAIN FUTURE

Are Frangos destined to become just a bit of Seattle nostalgia?

Nobody knows for sure.

What is known is that various parties have an interest in sinking their teeth into the Frango business. And Dayton Hudson is trying to kill the locally produced version of the candy.

How customers will be able to get Seattle-produced Frangos after the downtown F&N store closes later this month depends on the court system and any last-minute deals cut among the various interested parties.

"There is a strong tradition for Frangos in the Seattle marketplace . . . we would like to leave this legacy in place if we can . . . but we haven't gotten that done yet," said David Taylor, a spokesman for the Sabey Corp., which owns F&N and is liquidating its six remaining stores in Washington.

DAYTON HUDSON LAWSUIT

Dayton Hudson sees things differently. The Minneapolis-based parent company of Frango owner Marshall Field filed a lawsuit in federal bankruptcy court last week asking the judge to allow the Frango issue to be removed from the bankruptcy proceeding. If it succeeds, Dayton Hudson plans to try to halt F&N's production of Frangos.

F&N produces Frangos under a licensing agreement with Marshall Field, which once owned the chain. The lawsuit alleges that F&N has violated its agreement on several fronts. Chicago-based Marshall Field claims that it told F&N to stop making Frangos but that the tiny candy factory has refused to stop production.

The lawsuit also claims that F&N's Sixth Avenue Chocolates brand infringes on the Frango trademark.

Sixth Avenue Chocolates are candies that look and taste like Frangos, but are not called Frangos because of where they are sold. Frangos are sold exclusively by F&N. Sixth Avenue Chocolates are sold through drug stores, specialty shops and other retail outlets.

Ironically, the Sixth Avenue brand was established for F&N by Marshall Field, which is now claiming trademark infringement. Marshall Field established the brand for F&N in the late 1970s or early 1980s, Taylor said.

Marshall Field, which also makes Frangos and sells them by mail order, seeks to halt production of both candies in Seattle, said Molly Maloney, a spokeswoman for the department-store division of Dayton Hudson. Some speculate that Marshall Field may have plans to move its Chicago-made Frangos into the Seattle market.

F&N disputes Marshall Field's claims. F&N has an obligation to recover as much value as it can for creditors, and Frangos are part of that value, Taylor said. A lot of things, including the bankruptcy proceeding and the Dayton Hudson lawsuit, will determine the future of Frangos and Sixth Avenue Chocolates. "It's a substantial legal quagmire," he said.

F&N CANDY FACTORY

In addition to Frangos and Sixth Avenue Chocolates, the F&N candy factory, which is on the 10th floor in the downtown Seattle store, also makes candy for Starbucks Coffee Co.

Starbucks began offering a Frango-like candy (Starbucks Espresso Chocolates) last fall that is popular, said Chris Harris, vice president of merchandising.

The future of the Starbucks product, however, is not in jeopardy, Harris said. The candy recipe is a Starbucks original, which includes ground coffee, and the F&N candy factory simply acts as a contract manufacturer. If the candy factory closes, Starbucks will find a new vendor, she said.

Frangos got their start around 1918 in Seattle. Maloney said the chocolates were originally called Francos but were changed to Frangos when an uprising in Spain in the 1920s made Franco a politically charged name. Taylor said no one knows the actual story behind the Frango name, but the Franco story is probably just legend. Old menus from the mid-1920s call the candy Frangos, he said. The Fran part of Frangos does stand for Frederick & Nelson, Taylor said.

The now-troublesome licensing agreement began when Marshall Field acquired F&N, and the rights to Frangos, in 1929. In 1982, Batus Inc. acquired Marshall Field and its subsidiaries, which included F&N. In 1986, Batus sold F&N and the Sixth Avenue Chocolates brand name to a group of Seattle investors. Marshall Field, which was sold to Dayton Hudson in 1990, kept the Frangos trademark and licensed the right to produce the candy to F&N.

Now various suitors are rumored to be seeking to buy the Frango name.

Vancouver-based R.C. Purdy Chocolates Ltd. announced its interest in buying Frangos in March. Company President Charles Flavelle says Purdy is still interested and is working on a possible purchase. "There is nothing to report at the moment," Flavelle said.

The Sixth Avenue name, however, does not particularly interest Flavelle. "Our interest is primarily Frangos. It's the one that has the following."

For now, at least, there is no longer a shortage of Frangos, which are produced in eight flavors and sell for $6.95 a box. The nearly empty F&N stores, which will close later this month, all have

stacks of the candy.

Taylor acknowledged that demand for Frangos has slowed compared with the panic purchasing during the holiday season. However, he said, Frangos continue to draw customers into the stores, and demand is still strong.

Frangos are moving quickly and are replenished often, he said. Shelves are restocked daily with some flavors, he added.

He would not reveal how much candy the factory produces.

Mint, the original Frango flavor, is the most popular and accounts for two-thirds of total sales, Taylor said. Together the other seven flavors, including rum, latte, almond, espresso, ebony chocolate, mokas coffee and raspberry, make up the other 33 percent of sales, he said.