DAIRY QUEEN Sues Franchisee for $13M Extortion Scheme

Dairy Queen claims it’s the victim of a $13 million extortion scheme perpetrated by one of its own franchisees.

International Dairy Queen Inc. is soft-serving up a lawsuit against multi-unit franchise owner Guy Blume of Ankeny, Iowa. 

IDQ, Inc. claims Blume is threatening to go public with information he says would cause $100 million in damage to the company. 

Dairy Queen wants a federal judge to sever its ties with Blume, who operates four Iowa stores, and to issue a court order to keep the franchisee from defaming the company.

Blume hasn’t filed a response to the suit yet, but his attorney denied the allegations.

Source:  Minneapolis St. Paul Business Journal

WIRELESS TOYZ: Joe Barbat Boasts Victory in Franchise Lawsuit

(Unhappy Franchisee) Franchise company Wireless Toyz Inc. will not have to pay a Colorado franchisee the $200,000+ award he won in a 2010 lawsuit, according to a story in Crain’s Detroit business.

[Related reading:  WIRELESS TOYZ Fraud Case: Franchise Company, Simtob Must Pay; Barbat Cleared, 

WIRELESS TOYZ: Joe Barbat Claims Lazy Franchisees Have Selves to Blame, 

WIRELESS TOYZ: Joe Barbat Fraud Trials]

In February, 2010, a jury verdict against Wireless Toyz and its finance director and VP of franchise development Richard Simtob, awarded franchisee David Abbo and Colorado Toyz Inc. $180,600 in damages against Wireless Toyz and $20,000 against Simtob on a single count of silent fraud.  “Silent fraud” occurs when one person defrauds another by “failure to disclose material facts or creating a false impression, rather than through overtly false statements.”

Earlier this month, Oakland County Circuit Judge Shalina Kumar threw out the prior verdict and ruled in favor of Wireless Toyz.  Kumar found that jurors in the trial weren’t instructed that Abbo must have relied on a false impression from Wireless Toyz to prove silent fraud. She also found that a disclaimer in the franchise agreement appears to contradict any alleged ‘extracontractual statements’ that may have been misleading.”

Other lawsuit claims, which included fraud, negligent misrepresentation and violations of franchise law either, were dismissed or resulted in no damages.

Wireless Toyz issued a celebratory press release that called the lawsuit “frivolous,” and seemingly attempted to position the judge’s ruling as an endorsement of the high ethical and moral fortitude of the embattled Wireless Toyz franchise organization.  However, it seems that the dismissal was more a result of inadequate jury instruction in the original trial as well as disclaimers in the franchise agreement known as merger or integration clauses,  rather than the integrity of the Wireless Toyz sales process.

Here is the Wireless Toyz franchise lawsuit press release in its entirety:

___________________________________________________________________

Wireless Toyz and CEO Joe Barbat Prevail in Franchise Law Suit

SOUTHFIELD, Mich.–(BUSINESS WIRE)–Wireless Toyz, Joe Barbat its founder and CEO, Richard Simtob and Jack Barbat have prevailed in a frivolous lawsuit filed by a disgruntled franchisee. After a four week trial last year before the Oakland County Circuit Court, the jury found no cause of action on eight of the nine counts alleged. Earlier this week, the honorable Judge Shalina D. Kumar granted judgment in favor of Wireless Toyz and its aforementioned executives, vindicating them from all charges. Judge Kumar held that plaintiffs’ claims were barred as a matter of law, and further ruled that:

“This ruling speaks to the true ethics and moral principles of how Wireless Toyz operates and was founded”

Defendants correctly argue that the evidence adduced at trial established that Plaintiffs were not defrauded or mislead regarding the extent of their franchise.

The Court finds that the evidence shows that Defendants did not conceal the existence, nature, uncertainties or financial effects of the franchise opportunity.

The Court finds that under Michigan law, the merger/integration clauses and signed acknowledgements are valid, binding and enforceable, and bar Plaintiffs’ claim, which is based upon alleged extra-contractual and oral misrepresentations and omissions, as a matter of law.

“This ruling speaks to the true ethics and moral principles of how Wireless Toyz operates and was founded,” states, Barbat. “My objective was to see justice prevail, although it was a long and costly road, I was confidant that in the end justice would indeed prevail,”

Brian Witus of the law firm, Cohen, Lerner, Rabinovitz & Witus, P.C., states, “The jury verdict and Judge Kumar’s ruling constitute a complete vindication of Wireless Toyz. Wireless Toyz, Joe Barbat, Richard Simtob and Jack Barbat have vigorously defended this lawsuit in order to protect the name, integrity and reputation of Wireless Toyz, its exceptional franchisees and its valued customers.”

In October of 2009, Barbat re-acquired the company he founded. Since then, the company has experienced positive momentum with increased same store sales in 2010. Barbat is focusing his time and effort on enhancing Wireless Toyz’s business model. “We have hired a new operations manager, an accountant and will be opening new stores in 2011 and 2012. I am glad to put this chapter behind us and am committed to focusing on building the business by creating jobs and strengthening our already proven concept in the wireless industry.” said Barbat. This only goes to show that with Barbat back at the helm, Wireless Toyz is looking forward to continued success in the future.

About Wireless Toyz

Wireless Toyz is the largest independently owned chain of cellular superstores. Each Wireless Toyz outlet brings together cellular phones, accessories and service plans from multiple carriers, including Sprint, T-Mobile, Verizon, AT&T, Metro PCS, Cricket, Boost, as well as satellite TV offerings from industry-leading DirecTV. This broad selection simplifies shopping for consumers by eliminating visits to multiple stores. The company is headquartered in Southfield, Michigan, opened in 1996, and began franchising in 2001. The company had only nine locations that year, and today, 11 years later, it operates 95 stores in 12 states.

Founder Joe Barbat took a hiatus from the business in December 2007, selling off some of his shares and retaining his position as chairman of the board. In October 2009, Barbat returned as major shareholder and put together a new team to enhance the success of Wireless Toyz.

10 Considerations Before Investing in a Franchise

10 Considerations Before Investing in a Franchise

Read more

Washington Issues Franchise Opportunity Advisory

Washington Department Of Financial Institutions Helps Prospective Entrepreneurs Evaluate Franchise Opportunities

Getting information is key to making sound investment decisions, including franchise agreements

OLYMPIA – The Washington State Department of Financial Institutions (DFI) is encouraging Washington residents contemplating participation in a franchise agreement to make sure they have fully researched the proposal — and clearly understand the risks involved — before finalizing any agreements.

The uncertainty of today’s job market may encourage would-be entrepreneurs to take their futures in their own hands by opening a small business. Investing in an established franchise can be an attractive path to becoming your own boss, but DFI cautions investors to be mindful of the risks and the realities of franchising.

“If you’re thinking of investing in a franchise, you should educate yourself before you buy in,” DFI Director of Securities Bill Beatty warns.

DFI has issued an advisory for potential franchisees to alert them to important considerations before investing in a franchise.

“The first step before investing your money in any security or business venture is to do your homework,” Beatty advises. “For franchise investors, this means, at a minimum, reviewing the franchise disclosure document and getting in touch with current and former franchisees. You should be very skeptical if earnings for existing franchises are not disclosed and if experienced franchisees are unhappy or unreachable.”

Washington DFI also encourages franchise investors to retain legal counsel to help them understand the terms and conditions of their franchise agreement, which is drafted by the franchisor’s attorney and almost always gives the franchisor the advantage. Potential pitfalls for franchisees include no automatic right to renew the franchise after an initial term, liability for “future royalties” should the franchisee terminate the agreement early, and requirements that disputes with the franchisor be resolved in the state where the franchisor is located, which may be inconvenient and expensive.

“If the franchisor makes any verbal promises or guarantees, make sure you get those in writing, too,” Beatty adds. “Even if you have researched the franchisor and spoken with a number of successful franchisees, you need to protect yourself should your venture not take off as planned.”

Several states, including Washington, regulate the sale of franchises to provide greater protections to prospective franchisees and prevent fraud in the sale of franchise offerings. Beatty recommends that prospective investors contact the DFI to make sure the franchisor is registered and has not been the subject of franchisee complaints.

About DFI

www.dfi.wa.gov ▪ 360.902-8700 ▪ 877.746-4334

The Washington State Department of Financial Institutions regulates a variety of financial service providers such as banks, credit unions, mortgage brokers, consumer loan companies, payday lenders and securities brokers and dealers. The department also works to improve financial education throughout Washington through its outreach programs and online clearinghouse

About Division of Securities

www.dfi.wa.gov/sd ▪ 360.902.8760 ▪ 877.RINGDFI (746.4334)

The Division of Securities regulates securities investments, franchises, business opportunities, and off-exchange commodities sold in Washington and the firms and individuals that sell these products or provide investment advice. The Division handles complaints, conducts investigations, and takes appropriate enforcement actions to protect investors and combat fraud.

WHAT DO YOU THINK? SHARE A COMMENT BELOW.

LIBERTY TAX Mascot Arrested, Jailed

Liberty Tax mascot Lady Liberty was arrested and jailed in Lancaster, PA last Friday.

According to Larry Alexander’s story in the Lancaster Intelligencer Journal, Joseph A. Shevock, 43, has worked as the local Liberty Tax mascot since the last week in December.

Friday, Lancaster police received a tip that the man dressed up as the Statue of Liberty at the corner of Prince & King streets resembled a wanted forgery suspect named Joshua Dennison.

Police detained Shevock on suspicion of being Dennison.   In the process of determining that Shevock was neither the suspected forger nor the one true Lady Liberty, Lancaster police discovered that the Liberty Tax mascot was wanted in Cambria County on burglary charges.

Joseph “Give me Liberty or Give me the Cambria County Slammer!” Shevock was remanded to the Lancaster County Jail and awaits extradition.

Joshua Dennison, a man with the dual misfortune of being wanted on forgery charges and resembling a man dressed as Lady Liberty, is still at large. 

“WANTED: your poor, your wretched, your huddled masses… Immediate openings!  No background check!”

A bronze plaque on the Statue of Liberty includes the words “Give me your tired, your poor, Your huddled masses yearning to breathe free, The wretched refuse of your teeming shore… Send these, the homeless…”

These words seems to have been quite inspiring to the Liberty Tax human resources department, especially when it comes to hiring Liberty Tax mascots. 

Unhappy Franchisee has long questioned the marketing strategy of placing the integrity of a national brand, upon which franchisee livelihoods depend, into the hands of nearly anyone willing to wear a silly clothes and crazy foam headgear.  Just because it works for Green Bay Packers fans doesn’t mean it’s a wise move for a financial services company.

Jacqueline Gonzalez, the supervisor of the office that hired wanted fugitive Shevock, acknowledged that Liberty Tax does not require background checks for the mascot job. According to the LIJ, “Applicants supply references, go through an interview and orientation, and then are given a trial run. If they do well the first day, they are given more hours.”

One wonder what would constitute not doing well the first day?  Holding the Liberty Tax sign askew?  Failing to keep the torch of liberty burning bright?

Is the age of mascot profiling upon us?

The Lancaster police are delighted that they apprehended a wanted man by randomly detaining a Liberty Tax mascot.  And they are actively on the lookout for another wanted man who reportedly resembles a Liberty Tax mascot.

It would be natural for law enforcement to now conclude that they should detain and do a warrant check on every 40-something man dressed like a Statue of Liberty.

Liberty Tax franchisees would be wise to do a little extra investigation on their mascot personnel, at least to be sure they have no outstanding warrants and aren’t listed on the sex offender registry.

They would also be wise to pack, not wear, their Lady Liberty costumes when travelling by air.

The age of mascot profiling may be upon us.

WHAT DO YOU THINK?  SHARE A COMMENT BELOW.

CHOICE HOTELS: Franchisees Sue for “Unfair & Deceptive Acts”

UnhappyFranchisee.com -  Franchisees of Choice Hotels International are suing their franchisor, and alleging that the Silver Springs, MD company cost them millions as a result of its “unfair and deceptive acts.”

The class action complaint that Choice Hotels International is charging its franchisees a fee, of up to 5 percent, on room stays by guests who are members of the Choice Privileges rewards program.  Choice Hotels franchisees allege that the fee was neither disclosed nor agreed to in their original franchise contracts.

The Choice Privileges rewards program provides member benefits to guests of multiple Choice Hotels brands, including Comfort Inn, Comfort Suites, Quality, Sleep Inn, Econo Lodge, MainStay Suites, Clarion, Cambria Suites,  Suburban,  and Rodeway Inn

The plaintiff group, which includes Choice Hotel franchise owners in Florida, Louisiana, Missouri and Texas, are seeking $225 million in damages, plus attorneys’ fees and costs.

The lawsuit alleges that:

In essence, Choice has created a group of reward members, the majority of whom are not even aware of that status, and siphoned 5 percent of the gross room sales revenue from the Plaintiff franchisees in relation to the stays by these reward members and without any contractual or other basis to do so…  Plaintiffs’ action against Choice also arises from violation of law based on unfair and deceptive conduct by Choice

Choice Hotels International has more than 6,000 hotel franchises  worldwide.

Source:  Gazette.net

ARE YOU FAMILIAR WITH CHOICE HOTELS INTERNATIONAL?  WHAT DO YOU THINK?  SHARE A COMMENT BELOW.

DIRECTBUY: Attorney General Sues DirectBuy, DirectBuy Franchise Owner

The West Virginia Attorney General has filed a lawsuit against DirectBuy, Inc., DirectBuy’s president and the Charleston-Huntington DirectBuy franchise owner for “unlawful, coercive, deceptive, and high-pressure sales practices.”

The lawsuit alleges that DirectBuy engages in an aggressive bait-and-switch scam in which it tricks consumers into buying expensive memberships costing thousands of dollars by offering them attractive incentives, discounts and free gifts that they’ll never deliver.

According to AG Darrell McGraw, DirectBuy sells “expensive club memberships that have little actual value.”

Here is the press release issued January 26, 2011 from the West Virginia Attorney General’s office:

 

“Attorney General McGraw Sues DirectBuy, Inc. and Local Franchise Over Pressuring and Unfair Sales Techniques

“CHARLESTON – Attorney General Darrell McGraw filed suit today in the Circuit Court of Kanawha County against DirectBuy, Inc., headquartered in Merrillville, Indiana, and its local franchise, DirectBuy of Charleston-Huntington, and its President Timothy Parker for unlawful, coercive, deceptive, and high-pressure sales practices.

“Beginning in 2009, consumers complained that DirectBuy, a discount buying club, pressured them into purchasing memberships costing thousands of dollars. DirectBuy coerced consumers by offering free trial offers, guaranteeing free gifts, and offering a variety of other promotions. When consumers attempted to redeem these offers, they discovered the offers were not available as promised. Instead, DirectBuy focused on selling expensive club memberships through a sophisticated and oppressive sales presentation.

“DirectBuy targets prospective members by direct mail, internet, and television advertisements. The solicitations encourage consumers to contact the company to get their “free visitor’s pass” to its exclusive showroom. If consumers sign up for a free pass, they are invited to a sales presentation at the local store. After acquiring the consumers’ personal information, each consumer is paired with an individual salesperson for a high-pressure one-on-one discussion designed to close the sale.

“During the one-on-one portion of the sales presentation, DirectBuy pressures consumers with its ‘now or never’ tactic. DirectBuy warns consumers that anyone who leaves the premises without joining the club will be banned from joining forever. This threat is false, misleading, and unconscionable. When consumers become members, they discover that many of the promises DirectBuy makes during the sales presentation directly contradict the actual terms of the membership agreement. To induce consumers to purchase the membership, DirectBuy sales representatives offer money back guarantees, promise no hidden fees, and guarantee the lowest prices. These representations are false because the written contract specifically prohibits refunds, discloses various hidden fees, and plainly states that ‘DirectBuy does not guarantee that members will get the best price.’ DirectBuy discloses these material terms only after the consumer has purchased and signed the membership agreement.

“After receiving several complaints from consumers, Attorney General McGraw’s office opened an investigation into DirectBuy’s practices and determined that the company was engaged in unlawful sales practices. ‘West Virginians should not be pressured with coercive, deceptive, and unlawful tactics into buying expensive club memberships that have little actual value,’ said McGraw.

“Attorney General McGraw’s office seeks a preliminary injunction barring DirectBuy from engaging in this unlawful activity in West Virginia until further order of the court. The complaint further requests that the court eventually order restitution, refunds, debt cancellation, and civil penalties.

“Consumers who would like to file a complaint should call Attorney General McGraw’s Consumer Protection Division at 1-800-368-8808 or 304-558-8986. Consumers can also print a complaint off the Attorney General’s website at www.wvago.gov.”

ARE YOU FAMILIAR WITH DIRECTBUY OR THE DIRECTBUY FRANCHISE PROGRAM?  SHARE A COMMENT BELOW.