Students have returned to the campus of St. Edward’s University, but Texenza and its coffee are gone, replaced by another coffee shop.

During the summer, St. Edward’s University demanded that Texenza, the operator of Meadows Coffee House and Doyle Café, pay commission on gift cards purchased by students as a condition of its contract, which requires that the coffee vendor pay the university a certain percentage of its sales.

Students purchased $70,000 worth of gift cards as meal plan dollars were set to expire. Texenza refused to pay commission because they believe a gift card is not a sale until it is redeemed.

The battle went to court, and St. Edward’s won. The court victory led to the termination of Texenza’s contract, which would not have expired until June 2012.

Instead, Texenza ceased on-campus operations July 23. Jo’s Coffee became the new campus coffee vendor, beating out Austin Java, Progress Coffee and Bon Appétit.

Jo’s will be the third operator of the coffee house since 2007.

Commission woes

The unused balances would have been split between Bon Appétit and the university after June 30.

St. Edward’s did not ask for the $70,000, but requested commission for the sales of gift cards. Neither Director of Auxiliary Services Mike Stone nor Robert Gleason, president of RTG Enterprises, disclosed the commission payment.

Texenza refused on the grounds that gift cards are comsidered liabilities, Gleason said. In other words, gift cards are a promise to deliver the monetary amount of goods and services to the card holder.

Once a gift card is used, the liability is removed and a sale is credited. Many gift cards have inactivity fees and expiration dates toreclaim these liabilities.

Gleason said that Texenza would pay the commission once the sales were redeemed.

Stone declined multiple offers for interviews, but said in an e-mail that Texenza’s refusal to cooperate and pay the commission left the relationship “unworkable.”

Vice President of Financial Affairs Rhonda Cartwright said in an e-mailed statement that she moved forward with the contract termination after discussing the matter with the university’s attorneys.

“Failure to fulfill a contractual obligation is a serious matter to the university,” Cartwright said in the statement. “Once [Texenza] refused to make the payment due under the contract, the university determined that a workable relationship no longer existed and we exercised our right under the contract to terminate the relationship.”

Texenza and the university had gone through several disputes since the two became partners. One of the more recent battles fought was over whether or not the coffee shop could sell pizza and other entrée items.

However, both sides said those disputes were resolved with little incident.

Boiling point

In April, Stone predicted that between $325,000 and $350,000 of unused meal plan dollars would be left over after June 30, the deadline for spending the money.

Then the numbers came in. After June 30, just over $200,000 was left over for the two parties to split. Sixty percent of the money went to on-campus dining services provider Bon Appétit, while the other 40 percent went to the university’s general fund.

Despite the prediction proving to be off the mark, Stone said the university expected students to use the money.

“It was always expected that students would spend down their meal plan accounts as June 30 approached,” Stone said. “Indeed, that was the purpose of giving them 18 months’ notice of the end of the rollover. Since we had never done this before, it was always difficult to know how much they would spend.”

But Gleason said he believes the university acted because it lost out on the funds.

“They believed that they lost out on $70,000 of expiring meal plans,” Gleason said. “It is just my belief that somebody in a position of authority in the university was unhappy about the fact that the students exercised their right – which is their right – to convert a meal plan to a gift card because there was nothing stating in our contract that we could not sell gift cards.”

Gleason’s father-in-law and RTG partner, Rick Timmins, said he even offered to pay the commission on the gift cards, but did not hear back from the university.

Stone said the offer wasn’t made until after the contract termination. But Timmins said he still hoped the two sides could come to terms.

“I’m very, very sad by this whole turn of events – extremely sad and disappointed,” Timmins said. “It is so sad that this dispute couldn’t be resolved by simply sitting down at a table and coming to an agreement and talking about it.”

The last drop

The university won’t just be losing Texenza. Timmins, a St. Edward’s graduate and a member of the university’s Business School Advisory Board, said he is severing his ties to the university.

“I don’t think the university wants me to be a part of campus anymore,” Timmins said. “It is very clear to me now. They just don’t want to talk and try to resolve the issues. I’ve even reached out to other very senior people on campus to try to talk to them and they never returned or acknowledged my calls or emails and refused to meet with me.”

Timmins said he has donated a large sum of money to the university over the years. Although he did not disclose the exact amount, Timmins said the number was over six figures. Advancement Vice President Michael F. Larkin said he could not disclose the exact amount of money, but said he had “no reason to challenge” that statement.

But Timmins said the loss stings from far more than just a monetary perspective.

“St. Edward’s University was our most enjoyable place to do business,” Timmins said. “We enjoyed the students, we enjoyed campus and being part of the university there, so that will be difficult for us and our team to swallow.”

Texenza’s departure left seven student employees out of work. Texenza offered the employees positions at Texenza’s other locations around Austin.

Students will still be able redeem their gift cards at the other locations.