A Sweet Idea Leads to a Bitter Dispute

One night shortly after Christmas of 1980 Jim Head had a dream that he says gave him the recipe for a cake to be baked out of chocolate chips, cherries, and pecans. ’’We baked it in the shape of Texas, and called our company The Original Texas Ya-Hoo! Cake Company,” he says.

The new firm was an instant success. During its first year 5.400 cakes were sold, grossing $92,000. By 1985 sales were up to $750,000.

The Ya-Hoo! people were jumping for joy, but success brought problems. A partner who owned 50 percent of the business refused to cosign any more notes to the bank, so Head bought the partner out. giving him a large promissory note for his share of the business. In April 1986, a new investor group purchased 55 percent of Head’s stock, acquired all the assets of Ya-Hoo!, and assumed all the liabilities, including Head’s promissory note to his original investor. Head was made president and chief executive officer of the new firm and given a ten-year contract with a yearly salary of $60,000 plus bonuses. At a board of directors meeting in August 1986, Curtis Vernon of Lone Star Candy Company was elected president of Ya-Hoo!, and Head was elevated to chairman of the board. Then Head’s dream collapsed.

Shortly after that meeting, Head says, he became a “non-person” and was forbidden to enter the premises. He stayed on the payroll from April 1986 until February 27. 1987, when, according to Head, his pay was suspended and his contract was breached. Soon after that, he says, the company ceased operations. Head is suing Ya-Hoo!; he is asking for $675,000 or his company back.

When asked to comment, Les Hansen, one of the major investors and CEO of Ya-Hoo! Inc., replied: “The company was badly mismanaged. Due to Head’s advice, we invested from $200,000 to $300,000 in thirteen new products that brought in less than $50,000 in revenues. There were many other factors. Really, both Ya-Hoo! and the candy company were totally insolvent when we took them over. We finally had to stop paying Head because we simply ran out of money.”

According to Hansen, Ya-Hoo! Inc. is not out of business, “We are mailing approximately 200,000 catalogues for the Christmas season. We are producing Texas Ya-Hoo! cakes, and our retail facilities will be open six days per week between October 1 and Christmas,” Hansen says.

While he wails for a court date, Head is bouncing back in the Cake business. He and wife Judy have formed the Celebration Cake Company and are now baking what they have named Allelujah Candy Cake, with a chocolate fudge base full of chunky pecans, white chocolate chips, semisweet chocolate. cherries, and pineapple. “Guaranteed to make you sing al-le-lu-jah,” says Head.