MATCO TOOLS Franchise Report Alleges Distributor Churning

UnhappyFranchisee.com has received a report alleging that Matco Tools, a division of Danaher Corporation (NYSE: DHR), is actively engaged in what’s known as “franchise churning.”  “Churning” is a form of franchise fraud wherein a franchisor sells franchises it knows (or should know) are doomed to fail, collects payments, then resells the same franchise once the previous franchisee fails.

UnhappyFranchisee.com has recently received numerous complaints from failed and struggling Matco Tools franchised distributors (See MATCO TOOLS Franchise Complaints) who claim they were unfairly terminated or allowed to fail by the mobile tools company.

The report is based on data reported in the 2011 Matco Franchise Disclosure Document (FDD) (MATCO TOOLS 2011 Franchise Disclosure Document), and was compiled by an analyst at the law firm of Marks & Klein, LLC of Red Bank, NJ.

Marks & Klein has an active class action lawsuit filed against Matco Tools and TD Bank on behalf of Matco franchisees (See:  FRANCHISE LAWSUIT Alleges Matco Tools Scam, TD Bank Fraud, MATCO TOOLS Class Action Lawsuit, “Secret” Sales Projections), and has also sued Matco competitors Snap-on Tools and MAC Tools for franchise fraud.

The Marks & Klein report on Matco Tools comes to some disturbing conclusions, and alleges that a “fundamental failure of its franchise system is taking place,” yet “MATCO Tools has, nonetheless, continued to offer and sell Distributorships despite the pattern of early failure.”

“The information contained in the Disclosure Document paints a picture of failure on large scale, year after year, with MATCO seeking to replace Distributors whose tenure in its system is woefully short, and doing so within the calendar year in which a distributor fails,” the report alleges.  “The conduct evidenced by the FDD demonstrates a pattern of churning.”

The Marks & Klein report on Matco Tools is reproduced in its entirety below, or can be read as a Word document here.

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[Beginning of Report]

November 28, 2011

MATCO Tools 2011 FDD:

Analysis of Information contained in Item 20 Tables

We have reviewed the data contained in MATCO Tools franchise Disclosure Document issued March 11, 2011 (the “FDD”). The FDD provides information about the franchise system during calendar years 2008, 2009, and 2010.

In Item 20 of the Disclosure Document, MATCO discloses information which suggests a fundamental failure of its franchise system is taking place.

For the three year period beginning January 1, 2008, and ending December 31, 2010, MATCO presents the following results:

During the three year period from 1/1/08 to 12/31/10, seven hundred fifteen (715) Distributors, forty nine percent (49%) of the total number of MATCO Tools Distributorships open at any time during the period, left the MATCO system.

[Click chart to enlarge]

Of that 715, only fifty (50) transferred their MATCO Tools business to third party franchisees. Of the remaining six hundred and sixty five (665) Distributors who left the MATCO Tools system, five hundred thirty one (531) closed their Distributorships, and one hundred thirty four (134) had their distributorships terminated. If a MATCO Tools distributor desired to exit the system during this three year period, and hoped to sell its business through a MATCO approved transfer, that franchisee had less than a seven percent (7%) chance of success. Statistically speaking, such a low success rate indicates that the MATCO Tools businesses run by distributors who were leaving the MATCO system were so unprofitable as to be unmarketable.

MATCO Tools has, nonetheless, continued to offer and sell Distributorships despite the pattern of early failure. In fact, during the three year period from 1/1/08 to 12/31/10, six hundred sixty six (666) new Distributors came into the MATCO Tools system, six hundred sixteen (616) opening new MATCO Tools businesses, and fifty (50) new Distributors as Transferees.

In 2008, MATCO discloses that 213 Distributorships opened for business, 42 were terminated, and 200 ceased operations. Only seven Non-Renewals occurred, none of which is included in this analysis.

In 2009, MATCO discloses that 215 Distributorships opened for business, 41 were terminated, and 152 ceased operations. Only three Non-Renewals occurred, none of which is included in this analysis.

In 2010, MATCO discloses that 188 Distributorships opened, 51 were terminated, and 179 ceased operations. Only two Non-Renewals occurred, neither of which is included in this analysis.

The information contained in the Disclosure Document paints a picture of failure on large scale, year after year, with MATCO seeking to replace Distributors whose tenure in its system is woefully short, and doing so within the calendar year in which a distributor fails: not a single signed but not opened Franchise Agreement is disclosed in Table 5. In fact, the number of closed Distributorships disclosed in Table 3 closely tracks the number of projected Openings in Table 5, in several cases, matching exactly (by way of example only, in Arizona and Alaska, the number of projected openings equals the number of closures disclosed in Table 3 during the period). The conduct evidenced by the FDD demonstrates a pattern of churning.

The actual operating results of a MATCO Tools Distributor may be worse that the picture presented by the FDD because Item 20 Tables, prepared in accordance with the FTC Rule and NASAA Disclosure Guidelines, only include the last event in time for each Distributorship, be it a termination, a closure, or a transfer, which artificially lowers the number of terminations, closures, or transfers reflected in the FDD and as a result, analyzed.

[End of Report]

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ARE YOU FAMILIAR WITH THE MATCO TOOLS FRANCHISE DISTRIBUTOR OPPORTUNITY?  WHAT DO YOU THINK?  SHARE A COMMENT BELOW.

Contact post author or site admin at UnhappyFranchisee[at]gmail.com.  Corporate clarifications and/or rebuttals invited.

MATCO TOOLS 2011 Franchise Disclosure Document (FDD) & Other Resources

Matco Tools distributor program has become a hotly debated subject on UnhappyFranchisee.com.

This post is meant to provide significant reference material and important documents for the ongoing Matco Tools franchise distributorship debate.

A blog post on MATCO TOOLS Franchise Complaints set off a lively debate between Matco distributors.

One point of contention is the high default rate reported on SBA loans.  According to CNN, even among the franchises with the greatest number of loan defaults, Matco Tools is the riskiest:  Failure Rates of the 10 Most Popular Franchises.

Further heating up the debate is a class action lawsuit filed against Matco Tools & TD Bank alleging they conspired to defraud the SBA and new Matco distributors into entering high-risk loans that were likely to fail.  Read about the lawsuit here:

FRANCHISE LAWSUIT Alleges Matco Tools Scam, TD Bank Fraud

MATCO TOOLS Class Action Lawsuit, “Secret” Sales Projections

Why are some Matco Tools distributors adamant that the Matco distributor program is fair while others insist that the Matco System is rigged for them to fail?

One point of difference seems to be that the rules are different for distributors with older agreements.  For that reason, we are posting the Matco Tools Franchise Disclosure Documents (FDD) for 2010 and 2011.  These are the versions Matco Tools filed with the state of Minnesota to meet its franchise disclosure laws:

MATCO TOOLS 2011 FRANCHISE DISCLOSURE DOCUMENT

MATCO TOOLS 2010 FRANCHISE DISCLOSURE DOCUMENT

Matco Tools distributors who had joined prior to October, 1992 were eligible for a special Charter Agreement.  Some have contended that those with the oldest agreements have the most lenient terms and greater chance of success than those who sign today.  The Charter Agreement Q&A’s were posted on the Matco Distributor Association Facebook page:

MATCO TOOLS Charter Agreement Q&A Part 1 (click to enlarge)

 

 

 

 

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MATCO TOOLS Charter Agreement Q&A Part 2 (click to enlarge)

 

 

 

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Relevant Links:

Debbie Solko’s Lady Matco distributor site

Matco Tools Distributor Association Facebook Page

Matco Tools Corporate Website

Matco Tools Franchise Sales Site

Do you have any relevant resource documents that we can post?  If so, feel free to email them to UnhappyFranchisee[at]gmail.com.

ARE YOU FAMILIAR WITH THE MATCO TOOLS DISTRIBUTORSHIP? SHARE A COMMENT BELOW.

Contact the author or site admin at UnhappyFranchisee[at]gmail.com.

MATCO TOOLS Class Action Lawsuit, “Secret” Sales Projections

A class action lawsuit against Matco Tools and TD Bank alleges that the tool company franchisor and the bank engaged in a loan fraud scheme to encourage unsophisticated borrowers to enter into risky business loans to buy Matco Tools franchises.

Here is a copy of the complaint brought by Marks & Klein, LLP, of Red Bank, New Jersey:

MATCO TOOLS TD BANK CLASS ACTION LAWSUIT

The lawsuit alleges that Matco and TD Bank conspired to make loans using secret three-year income projections, in violation of FTC franchise disclosure regulations. Specifically, it claims Matco would deliver the secret three-year income projections to TD Bank with a letter, instructing bank officials not to disclose the projections to loan applicants.

The bank would then use the income projections to qualify the loans for SBA financing. But Matco kept the projections secret because it knew of the high rate of failure among its franchisees and feared the lackluster projections would be used by failed franchisees filing suit.

UnhappyFranchisee.com has received a copy of the alleged secret three-year income projections Matco is said to have provided to TD Bank but did not furnish to prospective Matco Distributors.  Click here for the alleged three year projections.

MATCO TOOLS ALLEGED SALES PROJECTIONS

The lawsuit further states that Matco, TD Bank and other unscrupulous SBA lenders preyed upon unsophisticated borrowers because of their perception that the lender would not make the loan unless it believed the Matco franchise was an acceptable business opportunity.

According to the lawsuit, TD Bank profited through its collection of loan origination fees as well as interest on the loan principal, which it collected from borrowers while these improper loans were current. When the loans would ultimately fail, TD bank and other lenders would pass along the loss to the American taxpayer, as SBA loans are 90 percent guaranteed by taxpayers, according to the FDIC.

Matco, as the franchisor, would likewise profit from the sale of a new franchise and having its franchised distributors sell tool products for two to three years in a designated route, before ultimately failing and being replaced by a new franchisee.

“Matco and TD had the ability to perpetuate this scheme because of a self-serving lending culture that was more than happy to originate and collect fees and pass along the risk of loss to its customers and taxpayers, even if the law was being violated,” said Louis Tambaro, Esq., another member of Marks & Klein. “By bringing this lawsuit as a national class action, we look forward to exposing the dark underbelly of a destructive lending culture.”

Representatives of Matco Tools, TD Bank or others are invited to submit clarification, opposing opinions or rebuttals for publication.  Contact the site ADMIN at UnhappyFranchisee[at]gmail.com.

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ARE YOU FAMILIAR WITH THE MATCO TOOLS DISTRIBUTORSHIP?  SHARE A COMMENT BELOW.

Contact the author or site admin at UnhappyFranchisee[at]gmail.com.

Also read: MATCO TOOLS Franchise Complaints.

FRANCHISE LAWSUIT Alleges Matco Tools Scam, TD Bank Fraud

FRANCHISE DUE DILIGENCE is More Critical Than Ever (Attorney Jon Fortman)

Franchise due diligence, thorough franchise research and consultation with qualified professionals before buying a franchise is more critical than ever, according to attorney Jon Fortman.

Fortman, of St. Louis-based Fortman Law, is an attorney who represents franchisees who believe they’ve been defrauded or treated unfairly by franchisors.

While the legal agreements governing the franchise relationship have always been undisputedly one-sided in favor of the franchisor, Fortman reports that the playing field is less level than ever before… and getting worse.

In a recent blog post, Fortman writes:

“…franchisers are tightening the reins on the franchisees while making sure the franchise agreement is written in such a way that they really have no obligation beyond letting the franchisee use the marks and providing some minimal training.

“For instance, five years ago a franchise agreement may have said the franchisor SHALL provide training on a quarterly basis. Now, the same agreement will say that the franchisor MAY, in its absolute discretion, provide training on a quarterly basis.

I am amazed at the number of franchisees who signed their agreements and never saw an attorney… The contract may be a ten-year term. That’s a long time if you rush into something without proper investigation.  – Attorney Jon Fortman

Writes Fortman: “There are more terminations and the ability of many franchisees to seek a remedy from the franchisor has been limited by arbitration provisions and the inability to pay for an attorney to fight the battle. I have only been doing these types of cases for about five years. I can see that during that time the relationship between franchisor and franchisee seems to be more strained and there is a lot of caution and suspicion when they interact. It has led to communication issues which is never good.

“Some [franchisors] blame the franchisees, and the attorneys representing them, because they believe franchisees don’t take responsibility for their success and are quick to blame the franchisor. There are some franchisees who do not get proper advice and do not fully understand the relationship between the parties.

“I am amazed at the number of franchisees who signed their agreements and never saw an attorney. They will pay significant amounts of money to buy a franchise that is based on a legal contract. The contract may be a ten-year term. That’s a long time if you rush into something without proper investigation.”

It is critical for prospective franchise owners to do their own thorough due diligence and research prior to committing to any franchise or business opportunity.

Just reading franchise publications supported by franchisor advertising or the franchisor’s list of testimonials and awards is not due diligence.  Prospective franchisees must dig in with a skeptical and thorough approach in order to find out the truth about a given franchise opportunity or company.  And they must spend a few bucks (that’s right, spend a few bucks) on getting advice from experienced franchise professionals paid to give honest, frank advice.

Writes Fortman:

“My advice to those of you considering the purchase of a franchise still remains the same. You must do your own investigation. It is even more important these days. Call every franchise owner listed in the disclosure document. That includes the open and closed locations.

The franchisor has a vested interest in seeing you buy into the system. Regardless of what the salesman says, their interest and your interest in the transaction are not the same.  – Attorney Jon Fortman

“If it is a newer system, you must consider that there may not have been enough time for any flaws in the system to appear.

“The Internet has several sites that discuss franchising. I review the site www.unhappyfranchisee.com every day. That type of site lets you see what can happen if you don’t protect yourself. It also gives you examples of the types of things to look out for when making your decision.

“You also must speak to an accountant and an attorney, preferably ones who are familiar with franchising. They can spot areas of concern and get clarification for you from the franchisor….

“The franchisor has a vested interest in seeing you buy into the system. Regardless of what the salesman says, their interest and your interest in the transaction are not the same. A healthy dose of skepticism in any of these transactions can help you stay alert and spot problems before you sink your money into the franchise.”

“An Ounce of Prevention…”
Benjamin Franklin said “An ounce of prevention is worth a pound of cure.”

In franchising, a few thousand dollars and thorough due diligence can be worth hundreds of thousands of dollars and years of either prosperity – or misery.

The pages of UnhappyFranchisee.com are filled with the stories of those who wish they had done their homework more diligently before they took the leap.

Take our advice and investigate thoroughly before investing.

WHAT DO YOU THINK?  SHARE A COMMENT BELOW.

To contact the author or site admin, email UnhappyFranchisee[at]Gmail.com

CORNWELL TOOLS Franchise Scam or No Scam?

“Eight former Cornwell tool dealers, including David Bachrach, sued Cornwell Quality Tools Company for compensatory and punitive damages, alleging common law deceptive trade practices, violation of Ohio’s Business Opportunity Law, fraud, fraud in the inducement, consumer fraud, negligent misrepresentation, and breach of fiduciary duty.

"The former franchisees brought class action claims in Summit County Common Pleas Court as representatives of a proposed class of nearly 500…

“The plaintiffs (eight former Cornwell tool dealers) have alleged that:

(1) Cornwell’s trade practice is to draw the plaintiffs and others into Cornwell’s sham enterprise;

(2) in the sale of a business opportunity to plaintiffs and others, Cornwell has not acted in conformity with the Business Opportunity Laws of Ohio;

(3) Cornwell committed fraud and fraud in the inducement in obtaining the franchise agreements from plaintiffs and others through material misrepresentations designed to greatly distort the risk involved in the franchise;

(4) Cornwell committed consumer fraud in connection with the sale of services; (5) Cornwell negligently misrepresented facts regarding the likelihood of success of the franchise to the damage of plaintiffs and others;

(6) Cornwell breached its fiduciary duty to its franchisees; and

(7) Cornwell acted with reckless disregard of its franchisees’ rights and well being. All of these claims stem from the formation of the contract and the contractual relationship whereby plaintiffs became franchisees of Cornwell. “

Source:  Bachrach v. Cornwell Quality Tool Co., (Ohio 2011)

The court determined that the matter was to be settled via private arbitration – so the proceedings and outcome may never be made public.

ARE YOU FAMILIAR WITH THE CORNWELL TOOLS DEALER FRANCHISE OPPORTUNITY?  IS IT A GREAT FRANCHISE OPPORTUNITY, A FRANCHISE SCAM OR NEITHER? PLEASE SHARE YOUR OPINION BELOW.

Contact the author or site admin at UnhappyFranchisee[at]gmail.com.

FRANCHISE LAWSUIT Alleges Matco Tools Scam, TD Bank Fraud

Matco Tools & TD Bank worked together to scam Matco franchise owners, the Small Business Administration (SBA) and American taxpayers, according to a class action franchise lawsuit filed by Marks & Klein, LLP of Red Bank, N.J. yesterday.

The press release issued by Marks & Klein, LLP is included below.

UnhappyFranchisee.com intends to follow this case and other allegations against Matco as they unfold.

If you are familiar with the Matco Tools franchise or distributorship programs, please share your insights or opinions with a comment below.

Representatives of Matco Tools, TD Bank or others are invited to submit clarification, opposing opinions or rebuttals for publication.  Contact the site ADMIN at UnhappyFranchisee[at]gmail.com.

Also read:  MATCO TOOLS Franchise Complaints.

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Marks & Klein franchise lawsuit press release:

Father & Son File Lawsuit Against Matco Tools and TD Bank

Class Action Lawsuit Claims the Tool Company and Bank Engaged in Widespread SBA Loan Fraud

TRENTON  – A father and son – David Villano, Jr. and David Villano III, through their attorneys, Marks & Klein, LLP of Red Bank, N.J., today filed a class action lawsuit against TD Bank and Matco Tools, Inc. alleging the tool company franchisor and the bank engaged in a loan fraud scheme to encourage unsophisticated borrowers to enter into risky business loans to buy Matco Tools franchises.

The scheme enabled Matco to sell more franchises and TD Bank to make risky loans without concern. The bank knew if the loans failed, the loans would ultimately be repaid by United States taxpayers through the SBA guaranteed loan program. Data from the SBA shows that from 2000 to 2010, Matco Tools’ SBA loans had a staggering 37.3 percent failure rate.

“It is most unfortunate that SBA loans, which are designed to assist aspiring entrepreneurs to finance a new business venture and benefit the economy could, as alleged in this case, be used for such deceitful purposes,” said Gerald A. (Jerry) Marks, Esq., lead plaintiff counsel.

“Many individuals like the Villanos have unknowingly been exploited,” Marks said. “We are seeking treble damages to discourage this sort of conduct from happening again in the future. United States taxpayers have unwittingly been `bailing out’ lenders like TD for years on defaulted loans that should never have been made in the first place.”

The lawsuit alleges that Matco and TD conspired to make loans using secret three-year income projections, in violation of FTC franchise disclosure regulations. Specifically, Matco would deliver the secret three-year income projections to TD Bank with a letter, instructing bank officials not to disclose the projections to loan applicants.

The bank would then use the income projections to qualify the loans for SBA financing. But Matco kept the projections secret because it knew of the high rate of failure among its franchisees and feared the lackluster projections would be used by failed franchisees filing suit.

The lawsuit further states that Matco, TD Bank and other unscrupulous SBA lenders preyed upon the Villanos and other unsophisticated borrowers because of their perception that the lender would not make the loan unless it believed the Matco franchise was an acceptable business opportunity.

According to the lawsuit, TD Bank profited through its collection of loan origination fees as well as interest on the loan principal, which it collected from borrowers while these improper loans were current. When the loans would ultimately fail, TD bank and other lenders would pass along the loss to the American taxpayer, as SBA loans are 90 percent guaranteed by taxpayers, according to the FDIC.

Matco, as the franchisor, would likewise profit from the sale of a new franchise and having its franchised distributors sell tool products for two to three years in a designated route, before ultimately failing and being replaced by a new franchisee.

“Matco and TD had the ability to perpetuate this scheme because of a self-serving lending culture that was more than happy to originate and collect fees and pass along the risk of loss to its customers and taxpayers, even if the law was being violated,” said Louis Tambaro, Esq., another member of Marks & Klein. “By bringing this lawsuit as a national class action, we look forward to exposing the dark underbelly of a destructive lending culture.”

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ARE YOU FAMILIAR WITH MATCO TOOLS FRANCHISE OR DISTRIBUTORSHIP?  SHARE A COMMENT BELOW.

Contact the author or site admin at UnhappyFranchisee[at]gmail.com.

THE JANITORIAL AGENCY Scam or No Scam?

The Janitorial Agency aka TJA aka (and formerly GMS Contracts) advertises what it calls a Master Franchise opportunity.

The Janitorial Agency website states:

“Own your own exclusive franchise.  We’re looking for a select group of entrepreneurs or business professionals who hold themselves to higher standards and desire to run their own janitorial agency master franchise with all the assistance and support that is needed to maintain the high levels of success. As an exclusive Master Franchise owner, you will have the freedom to run your own Janitorial Agency master franchise, with the proven model of success, and be rewarded for managing a high performance business. We help you do all of this without all of the hassles brought upon most business owners. You have your own business and you’re not growing it alone.”

The Janitorial Agency Complaints

Despite the friendly tone and assurances of The Janitorial Agency website,  a growing number of complaints and scam allegations are appearing on complaint sites throughout the Internet.

October 17, 2011, babalu wrote:

TJA Company [The Janitorial Agency] is a total scam. I have purchased they program for $7400.00 and they said it is  GUARANTEED business volume of $24000.00. If you get your contract, if you are lucky they will charge 20 % on your first contract. And willl say that $7400.00 was for setup package.

They send you to bogus appointments and then claim that it’s your fault for not obtaining the contracts. The client will tell them, they dont need a cleaning company…

Please save yourself from these company…

Mike d — STOCKTON California U.S.A. – posted this on July 28, 2011:

GMS Contracts/The Janitorial Agency Promised leads of quality janitorial accounts, never called once, Internet

A sales rep from GMS Contracts called me a few years back to sign up with them. She said for 840.00 she would be able to help us get contracts by setting up the appointments. After a year I never received one call. I called to ask for a refund, at this point they were changing their name to The Janitorial Agency. I spoke with Steve I think was his name and he said if they could locate the old records (whatever) that they would refund me…….imagine this, they didn’t locate them..

After trying many times to get a refund they said they would apply the money I was owed towards their new program that cost way more…….?! huh really? So now to get my refund they want even more of my hard earned cash…shut these crooks down….it has been many months since i last spoke with anyone

I looked up this board today after I got an automated call from them wanting me to sign up…the nerve…

April 23, 2011, Rose Gerard — Valley Stream New York, wrote:

The Janitorial Agency TJA Total Scam, Unable to deliver Lansing, Michigan

This company is a total scam. They do not have the contracts to give you and they don’t issue refunds if they fail to perform. They send you to bogus appointments and then claim that it’s your fault for not obtaining the contracts. A lot of the prospects are not looking for cleaning services and the so called “training and consulting” is something you can do yourself for less than $100 at the JanitorialStore. They can’t help you grow your business because they can’t run a business themselves. Look them up on the Michigan Better Business Bureau and the Michigan Attorney General. They have a lot of unresolved complaints. Look out for Sue Bowers and Denise Shattuck, they send them to talk to you when you file a complaint. They try to get you to retract your complaints so that they can screw you over. Google the name TJA scam and TJA complaints. There are over 30 complaints about them. Sue Bowers visit sites and try to write rebuttals when people try to complaint. It is not an issue of training and doing your part, they can’t deliver and want to keep your money as well

RickR wrote:

Terrible.  These guys are terrible. All I can do is beg people not to waste their money here. Imagine a sleezy car salesman, mixed with a con-artist, combine that with a serial liar, and you still wont come close to how low this company will stoop to get your money.

ARE YOU FAMILIAR WITH THE JANITORIAL AGENCY OR GMA CONTRACTS?  IS THE JANITORIAL AGENCY A GREAT OPPORTUNITY OR A SCAM?  SHARE A COMMENT BELOW.

Contact the author or site admin at UnhappyFranchisee[at]gmail.com.

PET CORNER INTERNATIONAL: Scam or No Scam?

Pet Corner International claims it offers a low-investment, home-based distributorship that will enable you to capitalize on the $54 billion pet care industry.  Is Pet Corner International a scam?

(UnhappyFranchisee.com) The Pet Corner International distributor program claims it offers “an affordable, easy to operate business in a thriving industry.”

According to the Pet Corner International website:

Enjoy a proven business model with numerous competitive advantages:

• Recession-resistant industry
• Flexible, home-based business model
• Ground Floor Opportunity
• Offer the most in-demand, all natural pet products
• Company Established Accounts
• Growth Opportunities
• National Television Advertising
• Strong Company Support and Local One-On-One Training

The company claims:  “PCI can be your vehicle to a reliable and growing income and a business that, with our help, can develop for you into long term financial security.”

PET CORNER INTERNATIONAL Complaints

Numerous complaints about the Pet Corner International business opportunity have been popping up on complaint sites lately.

Don’t Buy into Pet Corner* wrote:

Posted: Friday, September 16, 2011

Reported By: Don’t Buy into Pet Corner — Sneads Ferry North Carolina United States of America

Pet Corner International

Pet Corner International This Company misrepresented itself to me and hasn’t done the things it said it would do. Deerfield Beach, Florida

I bought a distributorship from Pet Corner International in December 2010. They claimed to be audited and inspected by the National Science Foundation. The National Science Foundation has denied that they have any relationship with Pet Corner International. That claim was one of the main reasons I bought into this Company. Also,the product hasn’t sold very much at all in 9 months. Pet Corner has abandoned me as a distributor, not contacting me anymore. They haven’t done a thing to help me in this business as promised. I just want the public to be aware of them so people won’t make the same mistake I did.

* UnhappyFranchisee.com received the following message 12/7/11 from the author of this complaint:  “There is an agreement in place to resolve all the issues between Pet Corner International and myself. These issues have been resolved to both Parties mutual satisfaction.”

October 14, 2011 EJ wrote:

I purchaed a distributorship in Sept 2010. Product doesn’t sell like they tell you.I’ve yet to see one advertisement on TV. The 2 distributors they gave me to contact (Norfolk Va. and Seattle Wa) told me the products sell immediately off the shelf. Vets and store owners tell me the product price is too high at $19.99. In one year 11 retail accounts I’ve sold less than 25 bottles. In this time frame not one representative from Pet Corner has called to ask how I was doing or if they can help. I’m fairly well off so I can handle the loss. I understood the risk going in. What I don’t get is if we as distributors can’t sell the product Pet Corner International will never survive. They should have a vested interest in making sure we succeed but that just doesn’t seem to be the case. I’m going to think about trying different approaches to sell the product. To those of you thinking about buying –BUYER BEWARE

October 25, 2011, Hamond B3 wrote:

…The product only has a 30% profit for the retailer. Even on consignment they turn it down because everything they sell outside of pet food they work on 50 to 60 % margin. They dont tell you that in the sales pitch.

The displays they have for the product are lame at best. The bottles do not stand up straight. One has to kneel down to read what the bottle says. They will tell you the average distributer sell 60 bottles a month or one a day. Not even close at 19.95 I was lucky to sell one a week. The product is overpriced for the market. My displays were located in high end car washes with plenty of traffic. My peeve with them they are very evasive to give you any information on there dealer network if they even have one. They are more interested in the short term of selling start up inventory at 15,000 a pop. I thought I did all my home work after months of research but obviously that was not enough. There is no company dealership or distributorship that will not allow you to use social media to advertise. I believe they do not want there failure rate to be known through this media. Be very aware of them. These guys are preditors on the phone.

ARE YOU FAMILIAR WITH THE PET CORNER INTERNATIONAL DISTRIBUTORSHIP? IS IT A GREAT OPPORTUNITY OR IS PET CORNER INTERNATIONAL A SCAM? SHARE A COMMENT BELOW.

Contact the author or site admin at UnhappyFranchisee[at]gmail.com.

MICHAEL EISENBERG: Atomic Vending & Energy Vend Scams End in Jail Time, Restitution

Michael Eisenberg, the serial vending con artist known for the Atomic Vending, Energy Vend & Lifestyle Vending scams, is going to prison.

Congratulations to the Justice Department, the U.S. Postal Inspection Service, prosecutor Richard Goldberg of the Civil Division of the Department of Justice, Tony West, Assistant Attorney General for the Civil Division of the Department of Justice, Assistant Attorney General West and Wifredo Ferrer, U.S. Attorney for the Southern District of Florida, and all others involved in holding Michael Eisenberg accountable for his fraudulent vending schemes.

While some have remarked that Mr. Eisenberg was only prosecuted on behalf of a relatively small number of his many victims, a victory is a victory and prison time is still prison time.

Congratulations to the USPIS and USDOJ.

Here’s the press release from the Department of Justice:

Office of Public Affairs

FOR IMMEDIATE RELEASE

Tuesday, November 8, 2011

New York Resident Sentenced in Miami in Connection with Fraudulent Business Opportunity Schemes

WASHINGTON – Michael Eisenberg, a resident of Long Island, N.Y., was sentenced Monday in connection with a series of fraudulent business opportunity ventures, the Justice Department and the U.S. Postal Inspection Service announced. Eisenberg was sentenced by U.S. District Judge Joan A. Lenard in Miami to 28 months in prison, a $7,500 fine, at least $15,000 in restitution and three years supervised release.

On July 19, 2011, Eisenberg pleaded guilty to conspiracy to commit wire fraud for his operation of two firms, Atomic Vending and Energy Vend, both located on Long Island. The criminal information charging Eisenberg alleged that he served as an owner and salesman for Atomic Vending and Energy Vend from March 2008 to March 2010. Each firm sold business opportunities to the public for a minimum price of approximately $6,000.

As the government alleged, potential investors were told they would receive a vending “route.” In pleading guilty, Eisenberg admitted that he and others made a number of false claims about the profits generated by the firms’ vending machines. In addition, he admitted salesmen led potential buyers to believe that they would recoup their investment in a year or less. Eisenberg admitted that he misrepresented that “locating companies” would find high traffic, high profit locations in which to place the vending machines. In reality, as the government alleged, buyers earned little to no money from their investments.

Prior to Atomic Vending, Eisenberg had operated another business opportunity firm called Lifestyle Vending. In December 2006, the Justice Department brought a civil case against Lifestyle Vending and Eisenberg, alleging that they made unsubstantiated claims to business opportunity buyers. The case resulted in entry of a federal court order barring Eisenberg and others from misrepresenting business opportunities. After entry of the federal court order in the Eastern District of New York in March 2008, the information stated, Eisenberg founded Atomic Vending and, later, Energy Vend, to continue the deceptive sales practices of Lifestyle Vending. In the sentence announced today, Judge Lenard increased Eisenberg’s period of incarceration based upon his violation of the 2008 federal court order.

“Fraud schemes like this one target consumers who are trying to start a small business and earn an honest living,” said Tony West, Assistant Attorney General for the Civil Division of the Department of Justice. “This defendant not only misled investors about business opportunities; he continued to defraud people after being ordered by a court to stop. We believe the judge appropriately took this behavior into account when issuing her sentence.”

Assistant Attorney General West and Wifredo Ferrer, U.S. Attorney for the Southern District of Florida, commended the investigative efforts of the Postal Inspection Service, which investigated the case. The case was prosecuted by trial attorney Richard Goldberg of the Civil Division of the Department of Justice.

ARE YOU FAMILIAR WITH THE MICHAEL EISENBERG, ATOMIC VENDING, ENERGY VEND OR LIFESTYLE VENDING? HAVE YOU BEEN A VICTIM OF A VENDING SCAM?   SHARE A COMMENT BELOW.

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DVDNOW DVD Vending Kiosks: Scam or No Scam?

DVDNow offers a DVD rental business vending opportunity.  While their website does not disclose the required investment (unless you fill out their form), franchise and business opportunity ads state that $20,000 cash is required.

Do you have any experience with the DVDNow kiosk vending or similar business opportunity?  Please share a comment below.

DVDNow DVD Rental Kiosks:  The Dream.

Here’s the dream scenario that DVDNow is conjuring:  That there is an $8 billion rental market for new release movies.  You can “skim the cream off that $8 billion market”

From the DVDNow website:

“Imagine owning a chain of fully automated DVD rental machines without the overhead or hassles of a big staff or a several thousand square foot storefront. Did you know that almost 90% of revenue in the $8 billion DVD rental industry is generated through the rental of new releases. Now imagine that you can skim the cream off that $8 billion dollars without investing hundreds of thousands in a brick and mortar store, franchise licenses, and all of the time, overhead and management hassles that come with starting and running such a business. DVDNow is proud to introduce the most innovative way to skim the cream off that $8 billion market – an automated DVD rental kiosk that is open 24 hours a day, has a footprint of only 5 square feet, requires no staff, and rents nothing but profitable new releases.”

DVDNow DVD Rental Vending: The Pitch.

Here’s the basic pitch:  There is a window of opportunity in an $8 billion market that will soon be gone if you don’t act now.  DVDNow will assist you in getting top locations for your machines (which are abundant).  You will get the training and support you need to run a profitable business that can be managed remotely via the Internet.

From the DVDNow website:

With the limited number of DVD rental kiosks in operation we are at a point in this industry that will never occur again. The massive demand from consumers, and the unprecedented availability of top locations, are just two of the reasons why experts are uniformly endorsing DVD rental kiosks.

• DVDNow offers a truly scalable business, allowing you to build from just a few locations to a large network of rental kiosks
• We can offer assistance in selecting and securing great locations
• Our training and support staff will teach you what you need to know to run a profitable business
• Our industry leading remote monitoring application allows your entire business to be managed remotely from any computer with Internet access

DVDNow Vending Complaints & Red Flags

On the BizBuySell Answers website, commenter Robert Wallace wrote:

I owned 2 of these kiosks… I truly believe that it is a bad business to get into.. the hidden costs that are not discussed at the sales orientation amount to about 25% of the operating costs of these kiosks, irregardless of their location.. plus technology has flat passed it up.. it was a good Buseness model in Europe 6-7 years ago but now Bit Torrents, Free Movies by Hulu and others, Netflix has become so cheap, not to mention the biggest competitor in the Industry is privately owned, REDBOX.. they are everywhere and they rent for $1.00.. the average cost of the dvd’s you buy will be about $17, possibly more.. and the buyback program for wholesale DVD’s is not good, get exact info on that beforehand.. just check out how many are desperate to sell their kiosks, it’s unbelievable.. I gave up last year and chalked it up as experience and a loss…

Wallace warns of hidden fees & costs, and mechanical problems:

You must use their software and their technical assistance.. they charge for that tech assist, they charge for all rfid’s, they charge for all parts .. The Kiosks are made in China … they are great when they work but they are a nightmare when they don’t and your phone will be ringing off the hook because there is noone there at your kiosk.. people will rip you off left and right… you will either be chasing money or trying to find the dvd’s they stole.. the credit card companies that process your transactions are outright THIEVES… all the costs will never be explained to you… the owner of the company LIED to me .. I was told I had to buy two kiosks… thats $35,000 US plus shipping…. come to find out from other owners that they didn’t have to buy 2… Do Not get involved in this Business…

Jason Miller cautions that DVD vending could soon be obsolete:

DVDs are going the way of the dinasaur. Right now you can order the most recent movie releases “on demand” from cable/satelite right from your couch. I’d expect the number of movies that one can access at home will continue to grow exponentially… In my opinion, the business model is not great, and the only people who make money are the ones who sell the machines.

UnhappyFranchisee.com does not have firsthand experience with the DVDNow vending business opportunity, but we always urge extra caution when dealing with a vending opportunity, especially one that promises vending machine placement services.  Vending machine locators are notorious for making big promises, demanding cash upfront, and then not delivering as promised.  As Always, Caveat Emptor.

ARE YOU FAMILIAR WITH THE STRATUS BUILDING SOLUTIONS FRANCHISE OPPORTUNITY?  WHAT DO YOU THINK?  SHARE A COMMENT BELOW.

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