FIESTA INSURANCE Accused of Franchise Fraud
August 3, 2012
Fiesta Insurance franchise owners Jehad Modalala and Lillian Alvayed (JTS Group, LLC) have filed suit against Fiesta Insurance Franchise Corp. alleging franchise fraud.
JTS Group own and operate the Fiesta Auto Insurance Center franchise at 3759 W. 26th Street, Chicago, Illinois (Store # IL001).
Are you familiar with the Fiesta Insurance franchise opportunity? Please share a comment below.
Court: UNITED STATES DISTRICT COURT, NORTHERN DISTRICT OF ILLINOIS, EASTERN DIVISION
Plaintiff: JTS Group, LLC (Jehad Modalala, Lillian Alvayed)
Defendant: Fiesta Insurance Franchise Corp.
Plaintiff Attorney: Carmen D. Caruso, CARMEN D. CARUSO LAW FIRM
Case: 1:12-cv-05480
Full Complaint: Fiesta Insurance Franchise Complaint
Defendant: Fiesta Insurance Franchise Corp.
Excerpts From JTS Group, LLC v. Fiesta Insurance Franchise Corp.
Count I: Claim for Rescission Based On Defendant’s Violation of Section 5 of the Illinois Franchise Disclosure Act
Section 5 of the Illinois Franchise Disclosure Act (“IFDA”), entitled “prohibited practices,” provides that it is unlawful to sell franchises in the State of Illinois without providing a disclosure statement as provided in the Act. ((815 ILCS
705/5(1) and (2)).
The FDD must inform prospective franchisees of numerous categories of information that as a matter of law are deemed to be material to the prospective franchisee’s investment decision. Without limitation, the FDD must include an accurate disclosure of all fees that the franchisor intends to charge the franchisee over the course of the franchise relationship.
Defendant provided Plaintiff with an FDD, but the FDD was incomplete and misleading in that it failed to disclose all of the fees that the Defendant intended to charge the Plaintiff. As a consequence, Defendant violated
Section 5 of the Illinois Franchise Disclosure Act.
Pursuant to Section 26 of the Illinois Franchise Disclosure Act, (815 ILCS 705/26), the Plaintiff is entitled to rescission of the parties’ franchise agreement (Exhibit A) hereto. Rescission shall include:
a. The return to Plaintiff of all monies paid by Plaintiff to Defendant.
b. A judicial declaration that the franchise relationship created by the franchise agreement is rescinded and that, therefore, the Defendant is not entitled to enforce any provisions of the franchise agreement
against the Plaintiff.
c. Payment of all of the Plaintiff’s reasonable costs and attorneys’ fees as provided in Section 26 of the Illinois Franchise Disclosure Act.
Count II: Fraud in Violation of the IFDA
…Section 6 of the IFDA prohibits fraud in the franchise sales process (815 ILCS 705/6).
…Defendant’s failure to disclose all of its fees was part of a scheme to defraud the Plaintiff, in violation of Section 6 of the IFDA.
After the Plaintiff began operating its franchise the Defendant began to charge various fees that had not been disclosed.
Defendant’s violation of Section VI of the IFDA entitles the Plaintiff to rescission as alleged in paragraph 11.
In addition, Defendant’s fraudulent conduct warrants the imposition of punitive damages in an amount sufficient to punish the Defendant and to deter other franchisors from like misconduct.
Count III: Common Law Fraud
”Defendant’s failure to disclose all of its fees was part of a scheme to defraud the Plaintiff.
”After the Plaintiff began operating its franchise the Defendant began to charge various fees that had not been disclosed.
”Defendant’s fraud entitles the Plaintiff to rescission as alleged in paragraph 11.
”In addition, Defendant’s fraudulent conduct warrants the imposition of punitive damages in an amount sufficient to punish the Defendant and to deter other franchisors from like misconduct.
Count IV: Alternative Claim For Breach of Contract
”After the Plaintiff began operating its franchise the Defendant began to charge various fees that had not been agreed to.
”In the event the franchise agreement is not rescinded for any one or more of the reasons that have been alleged above, the Defendant is in breach of the franchise agreement, and the Plaintiff is entitled to such damages that will be
proven at trial.
“In addition, the Plaintiff is entitled to a judicial declaration that the Defendant’s breaches were sufficiently material to excuse the Plaintiff from any further performance under the franchise agreement.
ARE YOU A FIESTA INSURANCE FRANCHISE OWNER OR FRANCHISEE? ARE YOU FAMILIAR WITH THE FIESTA INSURANCE OPPORTUNITY? SHARE A COMMENT BELOW.
Is FIESTA AUTO INSURANCE & TAX SERVICE a Great Franchise?
November 22, 2010
The “Tax Only” franchise is dead!
Yes, the Tax Prep franchise was given last rites and declared dead a few days ago right here on Unhappy Franchisee by John Rost, President & CEO of Fiesta Auto Insurance & Tax Service.
Mr. Rost was commenting on a post about JACKSON HEWITT Franchise Complaints when he broke the sad news.
(Technically, he said that the “Tax Only” franchise concept is a “dinosaur,” and since dinosaurs are dead we deduced that he was declaring “Tax Only” franchises dead as well.)
Luckily, there just happens to be a replacement concept for those of you facing extinction. It’s a franchise two-fer, a veritable service business combo meal called Fiesta Auto Insurance & Tax Service.
Mr. Rost was gracious enough to provide his unbiased insights in the comment section of the Jackson Hewitt post.
Writes Mr. Rost:
The business environment is constantly changing. Those that believe they have the best system and do not adapt will be swallowed by those that constantly innovate. Consumers get tired of boring brands and poor management along with politicians including the IRS who can damage a system or put it out of business. It is my belief that the “Tax Only” franchise model is a dinosaur. This was a great idea in the past as many franchisees were able to create wealth working only in the tax season. Unfortunately as more tax companies were created along with software available for the independent tax shop the population has more choices. The increased choices ultimately diluted the market and locations originally preparing hundreds or thousands of returns continued to see their market share decrease.
Fiesta Auto Insurance and Tax Service is the only national franchise system that incorporates both a full service insurance agency and tax service. Our franchise owners have a year business opportunity that provides more options for success. Most Fiesta Auto Insurance customers visit the office to make their monthly insurance payments. Having a customer visit monthly improves our customer loyalty and builds customer rapport. This loyalty translates into creating tax customers and places our franchisees in a position of building a business instead of searching for clients every December.
Consider the tax only model where they have a customer visit once or twice to complete the tax process. Then they do not see their client for another year. If the client does appear again they will most likely have the tax return prepared by a new face as most hire seasonal help. How much loyalty will that customer have to the brand based on one or two visits and then twelve months of nothing? Having RAL’s is not the issue. The tax only models cannot brand year round to the consumer and therefore are forgotten. The tax only franchise system is a dinosaur and will continue to see declining results until they ultimately fail or innovate.
If you are interested in a solution to the current tax only opportunity please visit http://www.FiestaFranchise.com and contact our offices for more information.
John Rost
President
Fiesta Insurance Franchise Corporation”
While we do not always welcome blatant self-promotion, Unhappy Franchisee is a great admirer of chutzpah. It’s a pretty ballsy move to self-promote a franchise in the comment section of a site called Unhappy Franchisee… so we’ll open the floor to comments.
Is the “Tax Only” franchise concept really dead in the water (or tar pit)?
Is the idea of bundling auto insurance and tax services as brilliant as Mr. Rost contends?
Why do “most Fiesta Auto Insurance customers visit the office to make their monthly insurance payments.”?
Are they actually hosting monthly fiestas? Are there pinatas involved?
Because why else would customers pay their insurance in person unless there were pinatas involved?
ARE YOU FAMILIAR WITH FIESTA AUTO INSURANCE & TAX SERVICE? WHAT DO YOU THINK? SHARE A COMMENT BELOW.
