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LEGACY ACADEMY Committed Franchise Fraud, Court Rules

August 19, 2014

Legacy Academy and franchisors Frank Turner and Melissa Turner committed fraud and criminal theft by deception against its franchisee, according to Superior Court of Gwinnett County. The Georgia Court of Appeals has affirmed the precedent-setting decision.

(UnhappyFranchisee.Com)  Legacy Academy franchisee Mamilove, LLC, et al. and law firm Ichter Thomas have scored a big victory, scoring both a significant financial award and setting new Georgia case law in the process.

The Georgia Court of Appeals affirmed the judgment of the Superior Court of Gwinnett County finding Legacy Academy, Inc. (“Legacy”) and its owners, Franklin Lee Turner and Melissa Veal Turner (the “Turners”), committed fraud and criminal theft by deception with respect to a former Legacy franchisee.

On July 16, 2014, in Legacy Academy, Inc., et al., v. Mamilove, LLC, et al. (Case No. A14A0718), the Georgia Court of Appeals affirmed the judgment of the Superior Court of Gwinnett County finding Legacy Academy, Inc. (“Legacy”) and its owners, Franklin Lee Turner and Melissa Veal Turner (the “Turners”), committed fraud and criminal theft by deception with respect to a former Legacy franchisee.

Legacy Academy Guilty of Fraud;  Franchisees Awarded $1.1M

Legacy Academy LogoFollowing a week-long trial last April, a jury concluded Legacy and the Turners fraudulently induced Michele and Lorraine Reymond (the “Reymonds”) to enter into a franchise relationship with Legacy by falsely representing a pro forma financial statement was based on the historic performance of then-existing franchisees.

Legacy and the Turners appealed the trial court’s judgment on the jury’s verdict for a host of reasons, including purported errors when the trial court denied Legacy and Turners’ motions for summary judgment, directed verdict and a new trial.

In a full-Court decision, however, the Court of Appeals rejected all these arguments.

As a result, the Reymonds’ franchise agreement with Legacy has been rescinded and the Legacy and the Turners are jointly and severally obligated to pay the Reymonds monetary damages in the principal amount of $1,155,000.

Legacy Academy has had contentious and turbulent relationships with its franchisees, some of which have been documented on UnhappyFranchisee.Com:

LEGACY ACADEMY Franchise Complaints

LEGACY ACADEMY Ichter Thomas Wins Suit for Legacy Academy Franchise Owners

ICHTER THOMAS Another Win Against Legacy Academy Franchise

LEGACY ACADEMY Franchise Marketing Representations

We have also had our own issues with Legacy Academy and its attorneys:

LEGACY ACADEMY Issues Cease & Desist Letter to UnhappyFranchisee.Com

LEGACY ACADEMY Are Frank & Melissa Turner “Disreputable”?

LEGACY ACADEMY UnhappyFranchisee.Com Complies With Legal Request/Threat

LEGACY ACADEMY Invited to Respond to Franchise Complaints

Ichter Thomas Makes Franchise Law in Georgia

Now, for the first time, the Georgia Court of Appeals has held that franchisees can state a claim against franchisors that breach their disclosure obligations under the Franchise Rule pursuant to O.C.G.A. § 51-1-6.  Furthermore, the appeal was decided by a seven-judge Court, with a four-judge majority concurring in the judgment.  As a result, the Court’s decision is binding precedent.  See Ga. Ct. App. R. 33(a).

Read more at ICHTER THOMAS: Franchisees Can Now Use FTC Franchise Rule to Sue in Georgia.

According to a release by Ichter Thomas:

Of particular note, however, the Georgia Court of Appeals ruled, for the first time, that franchisees can assert claims for relief under O.C.G.A. § 51-1-6 for violations of duties arising under the Federal Trade Commission’s (“FTC”) franchise rule, 16 C.F.R. Parts 436 and 437 (the “Franchise Rule”).  The FTC promulgated the Franchise Rule pursuant to its authority under the FTC Act, 15 U.S.C. §§ 41-58, for the stated purpose of “prevent[ing] deceptive and unfair practices in the sale of franchises and business opportunities….”  FTC, Disclosure Requirements and Prohibitions Concerning Franchising and Business Opportunities, 72 Fed. Reg. 15,445 (Mar. 30, 2007).  As a result, the Franchise Rule imposes substantial, pre-sale disclosure requirements on franchisors concerning a variety of issues, including their business experience; litigation history; fees; supply chain restrictions; assistance and support to franchisees; renewal, termination, transfer and dispute resolution procedures; and financial performance representations.

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Attorney Cary Ichter[Left, attorney Cary Ichter of Ichter Thomas]

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Franchisees, however, cannot sue to enforce the Franchise Rule.  See Holloway v. Bristol-Myers Corp., 485 F.2d 986, 987 (D.C. Cir. 1973) (“[P]rivate actions to vindicate rights asserted under the Federal Trade Commission Act may not be maintained”).  In addition, several courts have concluded that, even if a franchisor violated the Franchise Rule, the franchisee is still stuck with the franchise agreement.  See, e.g., Vino 100, LLC v. Smoke on the Water, LLC, 864 F. Supp. 2d 269, 281 (E.D. Pa. 2012) (“[A] franchisee may not use a franchisor’s alleged noncompliance with Rule 436 to invalidate a franchise contract”); Holiday Hospitality Franchising v. 174 W. Street Corp., 2006 WL 2466819, at *6 (N.D. Ga. Aug. 22, 2006) (“[T]he Defendants have not cited—and the Court cannot find—any case in which a court has voided an otherwise valid and enforceable franchise agreement because of regulatory violations”).

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Furthermore, while the FTC can enforce violations of the Franchise Rule, it often does not.  See GAO-01-776, FTC’s Enforcement of the Franchise Rule 3 (July 2001) (“FTC staff told us that limited resources and other law enforcement priorities prevent[] FTC from pursuing every meritorious complaint and investigation involving franchises and business opportunities”).  All of this is a particular problem for franchisees in states that, like Georgia, do not have any statutes, i.e., disclosure, registration or relationship laws, of general application.  Cf. Georgia Motor Vehicle Franchise Practices Act, O.C.G.A. § 10-1-620 et seq.

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O.C.G.A. § 51-1-6, however, provides that “[w]hen the law requires a person to perform an act for the benefit of another or to refrain from doing an act which may injure another, although no cause of action is given in express terms, the injured party may recover for the breach of such legal duty if he suffers damage thereby.”  Courts applying Georgia law have previously held this statute allows private litigants to sue for a breach of legal duties arising under federal statutes (and the regulations promulgated pursuant thereto) that themselves do not confer the right to sue.  See, e.g.,  Pulte Home Corp. v. Simerly, 322 Ga. App. 699, 746 S.E.2d 173, 179-80 (2013) (Clean Water Act); Cardin v. Telfair Acres of Lowndes County, 195 Ga. App. 449, 450, 393 S.E.2d 731 (1990) (OSHA).

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Now, for the first time, the Georgia Court of Appeals has held that franchisees can state a claim against franchisors that breach their disclosure obligations under the Franchise Rule pursuant to O.C.G.A. § 51-1-6.  Furthermore, the appeal was decided by a seven-judge Court, with a four-judge majority concurring in the judgment.  As a result, the Court’s decision is binding precedent.  See Ga. Ct. App. R. 33(a).

For more information on Georgia-based Ichter Thomas, see the profiles for attorneys Cary Ichter and Dan Davis in our Franchise Attorneys Directory.

ALSO READ:

FRANCHISE DISCUSSIONS by Company

 

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TAGS: franchise, franchise opportunity, franchise complaints, franchise Lawsuits, franchise law, Georgia franchise law, Georgia franchise attorneys, attorney Cary Ichter, Ichter Thomas, Legacy Academy, Frank Turner, Melissa Turner, unhappy franchisee

ICHTER THOMAS: Franchisees Can Now Use FTC Franchise Rule to Sue in Georgia

August 19, 2014

A Georgia court has ruled that franchisees can sue franchisors who breached the disclosure obligations required of them by the FTC’s Franchise Rule.

(UnhappyFranchisee.Com) The precedent-setting ruling by the Georgia Court of Appeals came down July 16, 2014, in Legacy Academy, Inc., et al., v. Mamilove, LLC, et al.  The Georgia Court of Appeals affirmed the judgment of the Superior Court of Gwinnett County finding Legacy Academy, Inc. (“Legacy”) and its owners, Franklin Lee Turner and Melissa Veal Turner (the “Turners”), committed fraud and criminal theft by deception with respect to a former Legacy franchisee.

Attorney Cary IchterWhy is this a big deal?  According to Ichter Thomas principal Cary Ichter,  franchisees cannot sue to enforce the FTC Franchise Rule.  Several courts have concluded that, even if a franchisor violated the Franchise Rule, the franchisee is still stuck with the franchise agreement.  However, the ruling means that in Georgia courts, breaches of the FTC Franchise Rule are actionable under the Georgia Civil Code O.C.G.A. § 51-1-6 which addresses “Recovery of damages upon breach of legal duty.”

[Pictured, left, Attorney Cary Ichter]

So, while franchisees cannot sue directly for breaches of the FTC Franchise Rule per se, in Georgia they can sue because violation of the Franchise Rule contitutes a breach of legal duty.

It’s also a big deal because the appeal ruling was decided by a seven-judge Court, with a four-judge majority concurring in the judgment.  As a result, the Court’s decision is binding precedent.

It’s an especially significant victory for Ichter Thomas on behalf of wronged franchise owners.

And it must be a sweet personal victory for attorney Cary Ichter, who has outspokenly asserted that franchisees should be able to sue for violations of the FTC Franchise Rule

(See Ichter’s article:  Attorney Cary Ichter: There is No Federal Franchise Regulation)

Congratulations Mamilove, LLC, et al., Cary Ichter and the team at Ichter Thomas, LLC.

Keep up the good work on behalf of unhappy franchisees and fraud victims!

ALSO READ:

FRANCHISE DISCUSSIONS by Company

 

WHAT DO YOU THINK? SHARE A COMMENT BELOW.

Contact UnhappyFranchisee.com

TAGS: franchise, franchise opportunity, franchise complaints, franchise Lawsuits, franchise law, Georgia franchise law, Georgia franchise attorneys, attorney Cary Ichter, Ichter Thomas, Legacy Academy, Frank Turner, Melissa Turner, unhappy franchisee

7-ELEVEN Franchisees Allowed to Proceed With FLSA Suit

August 7, 2014

7-Eleven franchisees can proceed with their lawsuit against 7-Eleven, Inc. for allegations that the Japanese-owned convenience store giant violated the Fair Labor Standards Act.

(UnhappyFranchisee.Com)  According to a report in the New Jersey Law Journal, a Camden, N.J., federal judge ruled that franchisees can proceed with their claim that, because of 7-Eleven, Inc.’s  “pervasive control of its franchisees’ operations,” 7-Eleven franchisees are technically employees who have been denied compensation and overtime pay.

See Judge Renee Marie Bumb’s decision here:  Judge Bumb’s Opinion August 5, 2014

The article, written by Charles Toutant and published August 6, 2014 , states:

In a suit against 7-Eleven by four franchisees, U.S. District Judge Renee Bumb of the District of New Jersey found the plaintiffs made a sufficient showing that they are employees to survive the company’s motion to dismiss claims under the FLSA and the New Jersey Wage and Hour Act. The franchisees’ assertion that they are employees was also supported by their allegations concerning the permanency of their relationship with the company, their integral role in the company’s business and their economic dependence on the company, Bumb said.

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According to Bumb, the franchisees’ wage-and-hour claims were supported by allegations that 7-Eleven controls settings on the heat and air conditioning and the volume on the television in individual stores from corporate headquarters; that the company controls pricing, ordering and advertising of products; monitors franchisees’ conduct on video cameras; conducts all accounting itself; and forbids the plaintiffs from making cash withdrawals without company approval, the judge said.

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In declining to dismiss the FLSA claim in Nair v. 7-Eleven, Bumb noted that the U.S. Court of Appeals for the Third Circuit has defined “expansively” the question of who is an employee. Applying a six-part test from Martin v. Selker Bros., a Third Circuit case from 1991, Bumb found four of the factors weighed in favor of a finding that the franchisees are employees.

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Those four factors were the degree of the alleged employer’s right to control the manner in which the work is performed; the employee’s investment in equipment or materials, or his employment of helpers; the degree of permanence of the working relationship; and whether the service rendered is an integral part of the alleged employer’s business. A fifth factor—whether the service rendered required special skills—weighed against a finding that the plaintiffs are employees. Finally, on the question of whether the plaintiffs’ opportunity to make a profit depends on their own skill, rather than factors outside their control, the court found the answer was “a close call” that would not weigh either positively or negatively in the analysis.

7-Eleven franchisees have alleged that the franchisor engages in the “fraudulent misrepresentation” of its relationship with franchisees in order to deny them them minimum and overtime wages, medical, pension and other employment-related benefits.

It’s been widely reported on UnhappyFranchisee.Com that franchisees claim they have been harrassed and forced to turn over their stores to 7-Eleven without compensation for their years of hard work and the substantial goodwill they built up for their stores.

Judge Bumb’s decision is seen as an important win both for Red Bank, New Jersey-based Marks & Klein and the 7-Eleven franchise owners the firm represents.

According to the law journal:

Gerald Marks of Marks & Klein in Red Bank, N.J., who represents the plaintiffs, has raised similar claims that 7-Eleven’s level of control of individual stores supports a finding that its franchisees are employees in another New Jersey case and in one filed in federal court in the Central District of California. No dispositive rulings have been issued in those cases.

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“This franchisor is without doubt the worst example of franchising, because it totally strips away any sort of decisional power on the part of the franchisee. Other franchisors needn’t fear this type of attack because of the way 7-Eleven has imposed these rigid controls. You can see this is not a normal franchise situation,” he said.

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Marks claimed 7-Eleven is attempting to “churn” its franchisees, by wresting control of its most profitable stores and reselling the franchises, as a prelude to a public stock offering in the company. He said a finding that the plaintiffs are employees would not prevent them from claiming the equity in their businesses.

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The lawyer representing 7-Eleven, Stephen Sussman of Duane Morris in Cherry Hill, N.J., declined to comment on the ruling.

ALSO READ:

Has 7-ELEVEN Declared War on its Franchisees? (Index)

7-ELEVEN Franchise Lawsuit Alleges Exploitation of 7-11 Franchise Owners

7-ELEVEN Franchise Blues – A Protest Song

FRANCHISE DISCUSSIONS by Company

 

ARE YOU FAMILIAR WITH THE 7-ELEVEN FRANCHISE, 7-ELEVEN ASSET PROTECTION & JOE DePINTO?  SHARE A COMMENT BELOW.

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TAGS: 7-Eleven, 7-Eleven lawsuit, 7-Eleven franchise lawsuit, 7-Eleven franchisee lawsuit, 7-Eleven FLSA, 7-Eleven franchisees employees, 7-Eleven franchise opportunity, 7-Eleven franchise complaints, 7-Eleven Fair Labor Standards Act, 7-Eleven unhappy franchisee, Judge Bumb, 7-11 NJ lawsuit, Mark Stinde, Stephen Sussman, Marks & Klein, Duane Morris

DICKEY’S BARBECUE PIT Franchise Warning

August 6, 2014

Dickey’s Barbecue Pit franchise complaints include dishonest and illegal franchise sales tactics, illegal and inflated earnings claims, understated investment costs, improper franchise disclosure, and more.  While these complaints are allegations and franchisee opinions, we suggest that prospective franchisees should pay particular attention to these areas while investigating the Dickey’s franchise opportunity.

(UnhappyFranchisee.Com)  Matt & Carla Chorley are no strangers to research.  Prior to investing in a Dickey’s Barbecue Pit franchise, Matt was the Senior Director of Operations at a biotechnology company and Carla had been Director of Operations at a life sciences firm.

Unfortunately, the Chorley’s learned the expensive lesson to not base their research on representations allegedly made by a Dickey’s Barbecue Pit franchise salesman.

In a lawsuit filed May 21, 2014 in the United States District Court of Maryland (CHORLEY ENTERPRISES, INC., MATTHEW and CARLA CHORLEY v. DICKEY’S BARBECUE RESTAURANTS, INC., ROLAND DICKEY, JR., & JERREL DENTON), the Chorleys claim that Dickey’s Director of Development Jerrel Denton induced them with illegal and inflated earnings claims, with grossly understated start-up costs, and with the false promise that they could keep costs low by sourcing used equipment… which they were later prohibited from doing.

By trusting the representations made by Dickey’s and Jerrel Denton, the Chorleys claim to have lost more than $300,000.

To add insult to injury, Dickey’s is seeking more than $600,000 in liquidated damages from the Chorleys.

Are you familiar with the Dickey’s franchise opportunity?  Please share your opinion – positive or negative – below.

The allegations in the Chorley lawsuit are strikingly similar to those in the Trouard franchisee lawsuit, discussed here: DICKEY’S BARBECUE Franchise, Jerrel Denton, Roland Dickey Jr. Sued for Fraud

Dickey’s Franchise Warning:  Alleged Illegal Earnings Claims

Franchisors are forbidden from making financial performance representations for new outlets unless those representations are documented in Item 19 of their Franchise Disclosure Document (FDD).

According to Dickey’s FDD:  “We do not make any representations about a franchisee’s future financial performance or the past financial performance of company-owned or franchised outlets.  We also do not authorize our employees or representatives to make any such representations either orally or in writing.”

Dickey's FDD

However, the Chorley lawsuit alleges:

[Director of Development Jerrel] Denton made express financial performance representations regarding Chorley’s potential earnings from the operation of the franchise. Specifically, Denton represented that:

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a. depending on size, Dickey’s restaurants averaged between $800,000 and $1,200,000 per store in annual revenues;

b. “the worst operators are making 10% net profit in each store”; and

c. based on the particular market in which Chorley was looking to operate, he should be able to do over $1,000,000 in annual revenues with one store.

…Dickey’s, by and through its authorized agent Jerrel Denton, made numerous representations of, or from which could be ascertained, specific levels or ranges of actual or potential sales, income, or profit from Dickey’s franchised units, which earnings claims were not included in the 2011 FDD. This conduct was in violation of MD. CODE REGS. (COMAR) 02.02.08.16(D)(3) and, by operation of law, Section 14-229(a)(3) of the Act.

Dickey’s Franchise Warning:  Alleged Misrepresentation of Start-Up Costs

According to the Chorley lawsuit, the cost to open a Dickey’s outlet was almost double the amount the franchisee was told:

…the statements made by Denton on October 4 and the information contained in Item 7 of the 2011 FDD materially misrepresented the initial investment amount required to open a Dickey’s franchise. Denton represented to Chorley that a prior food service facility could be converted to a Dickey’s restaurant for $30,000 or less, and that $89,000 was sufficient funds to open 3 such restaurants. The 2011 FDD stated that the total initial investment required to open a Dickey’s restaurant from a prior food service facility was between $63,556 and $162,438. Chorley’s actual initial investment was more than $300,000.

Dickey’s Franchise Warning:  Alleged Misrepresentation Regarding Used Equipment

The Trouard lawsuit, the Chorley lawsuit, and franchisee James Neighbors all contend that they were made certain promises by the sales staff that were contradicted by the operations staff AFTER the franchise agreement was signed.

The Chorleys were allegedly told upfront that they could save costs by purchasing used equipment, but were forbidden to do so once they signed the agreement:

The projected equipment costs were 5 to 10 times greater than the $10,000 and $20,000 figure Denton represented to Chorley in October 2012, several multiples greater than the $13,701 figure listed in Item 7 for a “Non-Traditional Conversion”, and well more than double the $37,633 listed in Item 7 for a “Restaurant Conversion”.

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44. On information and belief, Chorley alleges that Dickey’s intentionally withheld the equipment cost information from Chorley until after he had executed the lease because the lease obligation would make it less likely that Chorley would seek to terminate the Franchise Agreement once the huge discrepancy between the actual equipment costs and the costs stated in the 2011 FDD was revealed.

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45. Confronted with projected equipment costs that more than doubled the highest estimate provided in the 2011 FDD, Chorley told Dickey’s that he wanted to acquire used equipment, which was one of the key features and selling points of the Dickey’s system as represented by Denton and on which Chorley had relied on in making his decision to purchase the franchise. Chorley explained that he was expressly told by Denton that Dickey’s had a “team” whose sole purpose was helping a franchisee source used equipment… Dickey’s responded that Chorley would not be allowed to equip his restaurant with used equipment…

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…When Chorley again told Dickey’s he wanted to source used equipment, Lauren Parker, Dickey’s Associate Director of Development, flatly told Chorley that he was “not allowed to source used equipment.”

Dickey’s Franchise Warning:  Alleged Misrepresentation of Construction Costs

According to the Chorley complaint:

The final cost of construction to convert the Frederick Property into a Dickey’s Barbecue Pit was more than triple the cost Chorley had been told by Denton, and several multiples higher than the amounts listed for “leasehold improvements” in Item 7 of the 2011 FDD for either the “Non-Traditional Conversion” or “Restaurant Conversion”.

Dickey’s Franchise Warning:  Alleged Misrepresentation of Leasing Rates

According to the Chorley complaint, Dickey’s forced them into accepting unrealistically high rent:

The monthly rental amount Dickey’s proposed in the LOI was approximately $7,800 per month, which was significantly higher than what had been listed in Item 7 of the 2011 FDD… Chorley felt pressured by Dickey’s real estate team to sign the LOI and move forward. On or about November 8, 2012, Ellis told Chorley that if he did not sign the LOI, the timeline for opening his restaurant would be delayed, resulting in a default under the Franchise Agreement.

Dickey’s Franchise Warning:  Alleged Hard-Selling a Development Agreement

Dickeys franchiseThe Chorley complaint alleges the common franchise add-on sales tactic of scaring a franchisee into paying a fee to fend off development of adjacent territories:

In or about April 8, 2013, prior to the opening of Chorley’s first restaurant, Denton contacted Chorley by phone and advised him that there was “tons of activity in [his] area” and that Dickey’s was about to sell a franchise to another operator near Chorley’s restaurant in Frederick, Maryland.

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… Denton told Chorley that the only way he could protect his store from direct competition from another local franchisee was to purchase the territory through a development agreement.

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…[Denton told Chorley] he could expect his second store to generate $1,000,000 in revenue with 10% profit.

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…Having already spent or committed to spend more than double his original investment budget, Chorley was particularly sensitive to the threat competition posed to that investment… As a result, Chorley executed a developer agreement [and]… paid Dickey’s a development fee of $15,000.

Chorley, of course, never had the chance to open the second store and Dickey’s kept the $15,000.

Dickey’s Franchise Warning:  You’ll Get Sued for Failing

Franchisors are fond of saying that “we’re all in this together,” and that they only succeed when their franchisees succeed.

However, some franchisors not only are unsympathetic when franchisees fail, they sue them for the royalties and marketing fees they would have paid had they been successful, liquidated damages, and/or other forms of failure fees.

According to the Chorley lawsuit, even after the couple lost $300,000 and paid an additional $15,000 development fee, Dickey’s is seeking damages for more than $600,000.

Dickey’s is seeking the same from franchisee Justin Trouard, and is demanding $675,122.55 from James Neighbors, who was forced to close after only 3 months.

We’ve heard the same from many, many franchisees:  When franchisees fail, they fail alone.

Also read:

The Chorly lawsuit:  CHORLEY ENTERPRISES, INC., MATTHEW and CARLA CHORLEY v. DICKEY’S BARBECUE RESTAURANTS, INC., ROLAND DICKEY, JR., & JERREL DENTON

DICKEY’S BARBECUE Franchise, Jerrel Denton, Roland Dickey Jr. Sued for Fraud

DICKEY’S Franchise: Open Letter to Roland Dickey, Jr.

DICKEY’S BBQ Is Dickey’s Overselling its Franchise Opportunity?

DICKEY’S BARBECUE PIT Franchise Complaints

DICKEY’S BARBECUE PIT Franchise: Roland Dickey Sells to, Then Sues, Registered Sex Offender

DICKEY’S BARBECUE PIT Makes an Unhappy Franchisee Happy… Then Sues Him

 

ARE YOU FAMILIAR WITH THE DICKEY’S BARBECUE PIT FRANCHISE OPPORTUNITY?  SHARE A COMMENT BELOW.

 

Contact UnhappyFranchisee.com

Tags:  Dickey’s Barbecue Pit, Dickey’s Barbecue Pit franchise, Dickey’s franchise lawsuit, Dickey’s Barbecue Pit franchise complaints, Dickey’s Barbecue Pit franchisee lawsuit, Roland Dickey Jr., Roland Dickey, Dickey’s Barbecue Pit closed, Dickey’s complaints, Jerrel Denton, Dickey’s Jerrel Denton, Matt & Carla Chorley, Chorley lawsuit, Matt Chorley, Carla Chorley

DICKEY’S BARBECUE PIT Makes an Unhappy Franchisee Happy – Then Sues Him

August 5, 2014

UnhappyFranchisee.Com gave Dickey’s Barbecue Pit credit for stepping up to the “plate” and helping James Neighbors get his Johnson City, TN franchise open.

We’re sad to report that Dickey’s Barbecue Pit decided to terminate franchise owner James Neighbors just three months after his Grand Opening for falling $1200 behind in his payments.

Dickey’s forced him to close his store, and is suing the 54-year-old franchisee for more than $600,000 in liquidated damages that they say he owes them because his store failed.

Here’s the back story:

After UnhappyFranchisee.Com posted James Neighbors’ complaints about lack of corporate assistance in getting his Johnson City, TN Dickey’s Barbecue Pit franchise open (read  DICKEY’S BBQ Is Dickey’s Overselling its Franchise Opportunity?), we emailed top management at Dickey’s about his frustrations.

We’ve learned that Dickey’s management contacted James Neighbors, listened to his concerns and frustrations, and vowed to work with him to get his Dickey’s Barbecue Pit restaurant open.

As financing the new venture was a major concern, Dickey’s helped Neighbors negotiate more favorable payment terms with his contractor, Venator .

UnhappyFranchisee.Com Helps Franchisee Get Franchise Assistance

According to the Johnson City, TN Dickey’s Facebook page, James Neighbors’ store opened Thursday April 10, 2014 at 11:00 am.

Although there were some customer complaints regarding long lines, long wait times and some mistakes by the rookie staff, Neighbors characterizes the launch of his Dickey’s Barbecue Pit as a success.

The previously unhappy franchisee says that Dickeys is working with him to provide the support he needs.

Dickey’s Barbecue Pit franchise owner James Neighbors wrote:

Dear Sean,

I want to update you on my issues with Dickey’s and the Franchise itself.

I have had a few conversations with representatives from Dickey’s and they are working with me to resolve all of my issues that I have previously complained about.

When I made the post I reacted out of anger, fear and lack of professionalism on my part.  We have came to a mutual agreement and understanding and are working out the issues we have between us.

Our restaurant is open and we are doing Great!  Dickey’s has shown interest in us and has made genuine attempts to help us through our troubled times and make up for any misunderstanding or communication issues.

I would like to remove my post or have this letter added to the post and show that it is resolved.

Our restaurant is serving “The Best” barbecue in Johnson City, TN and our numbers prove it.  Our customers are happy and we are on our way to becoming very successful.

Dickey’s has shown support for us and is encouraging us in every way with training, advice and recommendations to help us reach our full potential.

I appreciate their response and hope we have a long lasting and successful relationship.

Sincerely,

James L. Neighbors

April 18, 2014

UnhappyFranchisee.Com does not remove comments, complaints or posts, but we have updated the prior post to reflect that the issue had been resolved with Dickey’s.

Unfortunately, Mr. Neighbors’ contentment with Dickey’s Pit Barbecue was short-lived, as you can read in this update:

DICKEY’S BARBECUE PIT Franchise: Roland Dickey Sells to, Then Sues, Registered Sex Offender

DICKEY’S Franchise: Open Letter to Roland Dickey, Jr.

This post was originally published April 22, 2014, and updated August 5, 2014

Also read:

DICKEY’S BBQ Is Dickey’s Overselling its Franchise Opportunity?

DICKEY’S BARBECUE PIT Franchise Complaints

DICKEY’S BARBECUE Franchise, Jerrel Denton, Roland Dickey Jr. Sued for Fraud

ARE YOU FAMILIAR WITH THE DICKEY’S BARBECUE PIT FRANCHISE OPPORTUNITY?  SHARE A COMMENT BELOW.

Contact UnhappyFranchisee.com


TAGS: Dickey’s Barbecue Pit, Dickey’s Barbecue Pit franchise, Dickey’s franchise, Dickey’s Barbecue Pit franchise complaints, Dickey’s Barbecue Pit failures, Dickey’s Barbecue Pit closed, Dickey’s complaints, Jerrel Denton, Dickey’s Johnson City TN, James Neighbors

DICKEY’S BARBECUE Franchise, Jerrel Denton, Roland Dickey Jr. Sued for Fraud

August 5, 2014

Dickey’s Barbecue Restaurants, Inc., franchise salesman Jerrel Denton, & President Roland Dickey Jr. are being sued by franchisee Justin Trouard for alleged violations of Maryland franchise registration and disclosure law including disclosure violations, illegal earnings claims, and fraud.

(UnhappyFranchisee.Com)  According to a lawsuit filed in the United States District Court of Maryland on May 28, 2014, Justin Trouard “was induced to purchase a Dickey’s Barbecue Pit franchise and suffered financial loss in excess of $1,000,000.”

The lawsuit JUSTIN D. TROUARD, JESSICA CHELTON v. DICKEY’S BARBECUE RESTAURANTS, INC., ROLAND DICKEY, JR. & JERREL DENTON was filed by attorneys Andrew K. Wible, Russell J. Gaspar, & C. Patteson Cardwell, IV of Cohn Mohr, LLP of Washington, D.C.

It includes familiar allegations that we’ve heard before about Director of Franchise Sales Jerrel Denton’s  pre-sale representations.

Dickey’s Alleged Illegal Earnings Claims

Jerrell DentonAccording to the complaint:

On or about August 7, 2012, Trouard had a telephone conversation with Denton regarding Dickey’s franchise opportunities, and Trouard’s interest in opening a franchise in Alexandria, Virginia. During the phone conversation, Denton made express financial performance representations regarding Trouard’s potential earnings from the operation of the franchise. Specifically, Denton represented that:

a. the typical Dickey’s franchisee earns $80,000 – $100,000 per month in gross profit;

b. the typical Dickey’s franchisee would earn a monthly net profit of between 17-20% of the gross; and

c. during the time Denton had been working for Dickey’s, not a single restaurant had failed due to poor financial performance.

Franchisor’s are prohibited from making earnings claims that are not disclosed in Item 19 of their Franchise Disclosure Document.  According to the lawsuit:

In connection with the sale of a Dickey’s Barbecue Pit franchise to Trouard in August 2012 and February 2013, Dickey’s, by and through its authorized agent Jerrel Denton, made numerous representations of, or from which could be ascertained, specific levels or ranges of actual or potential sales, income, or profit from Dickey’s franchised units, which earnings claims were not included in any FDD provided to Trouard. This conduct was in violation of MD. CODE REGS. (COMAR) 02.02.08.16(D)(3) and, by operation of law, Section 14-229(a)(3) of the Act.

Dickey’s Allegedly Understated Start-up Costs

According to the complaint:

11. During the same phone conversation, Denton made express representations regarding the low initial investment required to open a Dickey’s franchise. Specifically, Denton represented that:

a. the average cost to open a restaurant using a second generation restaurant space was $60,000 – $70,000;

b. some franchisees had successfully opened second generation restaurants for as little as $30,000;

c. a major feature of Dickey’s system, which allowed them to keep their opening costs so low, was that they recommended franchisees obtain second hand restaurant spaces, and allowed and encouraged franchisees to use second hand equipment and furniture to outfit the restaurant;

d. Dickey’s had a “team of ladies” that search the internet on behalf of franchisees and locate second hand restaurant equipment and furniture;

e. that Dickey’s “team of ladies” could obtain chairs, which cost $60 new, for $5.

Trouard’s actual start-up costs were significantly higher than represented by Denton and by the Dickey’s FDD:

Specifically, the statements made by Denton on august 7 and the information contained in Item 7 of the FDDs materially misrepresented the initial investment amount required to open a Dickey’s franchise. Denton represented to Trouard that a second generation restaurant could be converted to a Dickey’s restaurant for $70,000 or less, and that many franchisees had converted second generation restaurants for as little as $30,000. The FDDs stated that the total initial investment required to open a Dickey’s restaurant from a second generation restaurant was between approximately $109,000 and $163,000. Trouard’s actual initial investment was more than $370,000.

More Dickey’s Barbecue Pit franchise allegations

The complaint includes many other allegations, including advertising promises not kept, and the fact that the franchisee was provided with an invalid disclosure document:

12. During the same phone conversation, Denton made express representations regarding the advertising support that Dickey’s provided its franchisees. Specifically, Denton represented that “a portion of the monthly royalty fee went to ‘ad fund’ that was used exclusively for promotion in the franchisee’s local area.” Denton made this representation without disclosing the manner by which the funds are to be raised and spent, or that Trouard would be able to obtain an accounting of those expenditures.

13. After the phone call, Denton sent Trouard by email a copy of Dickey’s Virginia Franchise Disclosure Document for 2011 (“2011 VA FDD”). A copy of the 2011 VA FDD is attached as Exhibit A.

14.  Trouard, a resident of Maryland, was unaware that the 2011 VA FDD was not registered under the Act.

Of course, the validity of these allegations haven’t been proven in a court of law, but the number of similar complaints we are receiving here at Unhappy Franchisee World Headquarters is setting off alarm bells and launching red flags aplenty.

When it comes to Dickey’s Barbecue franchise sales practices, where there’s smoke there may indeed be fire… and not that lovely BBQ kind.

Caveat Emptor.

Also read:

Read the lawsuit:  JUSTIN D. TROUARD, JESSICA CHELTON v. DICKEY’S BARBECUE RESTAURANTS, INC., ROLAND DICKEY, JR. & JERREL DENTON

Read more posts:

DICKEY’S BBQ Is Dickey’s Overselling its Franchise Opportunity?

DICKEY’S BARBECUE PIT Franchise Complaints

DICKEY’S BARBECUE PIT Makes an Unhappy Franchisee Happy

DICKEY’S BARBECUE PIT Franchise: Roland Dickey Sells to, Then Sues, Registered Sex Offender

DICKEY’S Franchise: Open Letter to Roland Dickey, Jr.

 

ARE YOU FAMILIAR WITH THE DICKEY’S BARBECUE PIT FRANCHISE OPPORTUNITY?  SHARE A COMMENT BELOW.

 

Contact UnhappyFranchisee.com

Tags:  Dickey’s Barbecue Pit, Dickey’s Barbecue Pit franchise, Dickey’s franchise lawsuit, Dickey’s Barbecue Pit franchise complaints, Dickey’s Barbecue Pit franchisee lawsuit, Roland Dickey Jr., Roland Dickey, Dickey’s Barbecue Pit closed, Dickey’s complaints, Jerrel Denton, Dickey’s Jerrel Denton, Justin Trouard, Justin Trouard lawsuit, Cohn Mohr, C. Patteson Caldwell

DICKEY’S Franchise: Open Letter to Roland Dickey, Jr.

August 5, 2014

Dickey’s Barbecue Pit President Roland Dickey, Jr. appears to have approved and signed a franchise agreement with a 54-year-old man with a troubled financial and criminal past who lacked experience and adequate funding. 

Dickey’s terminated the man’s store after 3 months, sued him and is seeking $675,122.55.

 UnhappyFranchisee.Com gives Roland Dickey, Jr. an opportunity to justify (what appears to us to be) Dickey’s questionable franchise practices.

(UnhappyFranchisee.Com) Last night we published a post about Dickey’s lawsuit against Johnson City, TN franchisee James Neighbors.

This morning we sent an email to Roland Dickey, Jr. and copied Dickey’s franchise sales guy Jerrel Denton and Assistant General Counsel Christine S. Johnson on it.

[Are you familiar with Dickey’s Barbecue Pit franchise?  Please share a comment – positive or negative – below.]

Previous emails to Mr. Dickey, Jr. have not been answered, so we posted the email here in case he and others Dickey’s personnel are reading our humble blog.

August 5, 2014

Mr. Dickey:

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UnhappyFranchisee.Com invites your input, response, rebuttal or clarification on our latest post (or any of the others).  While we are not shy with our opinions on franchise matters, we value open and honest discussion and debate above all.  We are diligent in representing opposing views and don’t hesitate to admit when we’re wrong.

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We invite your response to the questions we raise in our post on Dickey’s lawsuit against James Neighbors:

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DICKEY’S BARBECUE PIT Franchise: Roland Dickey Sells to, Then Sues, Registered Sex Offender

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This lawsuit seems to be a PR nightmare in the making for Dickey’s, does it not?

.

Roland DickeyIt appears that you personally signed a franchise agreement with an undercapitalized, 54 year old registered violent sex offender with a recent history of bankruptcy, then terminated him 3 months after his Grand Opening for falling $1200 behind in payments.  You are now suing for liquidated damages over $600,000.

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If your lawsuit complaint is to believed, you didn’t know about his criminal or credit history, which makes you and Dickey’s seem irresponsible, if not clueless.

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If Dickey’s DID run background and credit checks (like, I assume, every responsible franchisor in America), then Dickey’s is being misleading in its court filings and reckless in its franchisee recruitment process.

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Is there another side to the story?  Are we missing something?

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We invite your side of the story.  While often attorneys automatically advise not to discuss current litigation, we think you may want to challenge them a bit in this case.  We can’t tell your side of the story unless you share it with us.  At this point it seems to us that you took a franchise fee from a man who never should have been approved for a franchise, and now your attorneys are bent on crushing what little is left of his and his wife’s lives.  It seems a bit cold and predatory to us, and something that prospective franchisees should definitely consider if considering a Dickey’s franchise, but of course this is opinion and we could be wrong…

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Please let me know if our perception is incorrect.

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ADMIN

UnhappyFranchisee.Com

Also read:

DICKEY’S BARBECUE PIT Franchise: Roland Dickey Sells to, Then Sues, Registered Sex Offender

DICKEY’S BBQ Is Dickey’s Overselling its Franchise Opportunity?

DICKEY’S BARBECUE PIT Franchise Complaints

DICKEY’S BARBECUE PIT Makes an Unhappy Franchisee Happy

 

ARE YOU FAMILIAR WITH THE DICKEY’S BARBECUE PIT FRANCHISE OPPORTUNITY?  SHARE A COMMENT BELOW.

 

Contact UnhappyFranchisee.com

Tags:  Dickey’s Barbecue Pit, Dickey’s Barbecue Pit franchise, Dickey’s franchise lawsuit, Dickey’s Barbecue Pit franchise complaints, Dickey’s Barbecue Pit franchisee lawsuit, Roland Dickey Jr., Roland Dickey, Dickey’s Barbecue Pit closed, Dickey’s complaints, Jerrel Denton, Dickey’s Jerrel Denton, James Neighbors, James Neighbors lawsuit, James Neighbors sex offender

DICKEY’S BARBECUE PIT Franchise: Roland Dickey Sells to, Then Sues, Registered Sex Offender

August 4, 2014

President Roland Dickey, Jr. assigned the Dickey’s franchise for Johnson City, TN to an undercapitalized franchisee who had no foodservice experience and is a registered sex offender.  Three months after opening, when the franchisee fell $1205.58 behind in his royalty and marketing fees, Dickey’s terminated the franchise and demanded $675,122.55 in liquidated damages.

(UnhappyFranchisee.Com)  What was it that convinced Dickey’s Barbecue Pit President Roland Dickey, Jr. that James Neighbors was the right franchisee to operate his Johnson City, Tennessee restaurant?

Was it Neighbors’ complete lack of foodservice experience?

Was it Neighbor’s 2007 Chapter 7 bankruptcy filing, or his inability to finance the huge investment necessary to open a Dickey’s?

Was it the fact that Neighbors is a registered sex offender whose publicly available profile includes a classification of “violent”?

Did ace franchise salesman Jerrel Denton assure Roley that Neighbors passed their high level of scrutiny, since both the mirror fogged and the check cleared?

Roland DickeyOr was it a combination of factors (inexperience, undercapitalization, violent criminal past, Jerrel Denton) that made Roland Dickey, Jr. say:  Mr. Neighbors is the right franchisee to represent us in Johnson City!?

And how could anything go wrong with a screening process like that?

Roland in the Dough…

According to the lawsuit DICKEY’S BARBECUE PIT, INC. AND DICKEY’S BARBECUE RESTAURANTS, INC. v. JAMES L. NEIGHBORS filed July 28, 2014 in the United States District Court for the Eastern District of Texas, Sherman Division,  Roland Dickey, Jr. and James Neighbors entered into a franchise agreement August 17, 2013.

We assume James Neighbors handed over a check for at least the $15,000 franchise fee at that point.

According to Dickey’s suit:

In his application for a franchise and during the franchise development talks, Neighbors failed to disclose to Dickey’s Restaurants that he had previously filed for bankruptcy and was a registered sex offender convicted of aggravated sexual assault. Neighbors’ failure to disclose his registered sex offender status coupled with his credit history, made it difficult to obtain financing for the franchise finish out. Neighbors complained about the inability to obtain financing and tried to ascribe the duty and inability to find financing upon Dickey’s Restaurants. In a letter dated May 22, 2014, Dickey’s Restaurants indicated that it had found a lender – although Dickey’s Restaurants had no obligation to find financing – but that Neighbors would have to have 90 days of franchise sales history before the lender would consider an application for financing.

The lawsuit exhibits include a checklist signed by Mr. Neighbors, but none of the questions asked about prior bankruptcies or felony convictions.

Apparently, Dickey’s franchise approval department has never heard of credit checks or even Google.  Both Neighbors bankruptcy information and his Sex Offender Registration status are available with basic Internet searches.  They DO have the InterWebs in Texas, right?

And while the suit states Dickey’s “had no obligation to find financing” for Neighbors, the franchisee has claimed that he never would have proceeded without Jerrel Denton’s representations that they could find him financing.  (See  DICKEY’S BBQ Is Dickey’s Overselling its Franchise Opportunity?)

Dickey’s Throws Franchisee into the Pit for $1205.58

Neighbor’s Dickey’s restaurant opened in Johnson City, TN on April 10, 2014.

According to a story in the Johnston City Press, James Neighbors went $200,000 in debt to open his Dickey’s Barbecue Dickey's BarbecuePit restaurant.

A little more than 3 months after his Grand Opening, on July 17, 2014, Dickey’s Barbecue Pit, Inc. terminated Neighbor’s franchise agreement and ordered him to cease doing business.

The lawsuit alleges that the Dickey’s franchisor terminated Neighbors franchise for falling just $1205.58 behind in his royalty payments, and that he now owed $675,122.55 in liquidated damages.

The termination meant that he is ordered to immediately close the restaurant and not reopen it.

In fact, he’s forbidden from opening a barbecue restaurant within 5 miles.

So, James Neighbors’ decision to open a Dickey’s Barbecue Pit restaurant has left him nearly $1,000,000 in debt and under the crushing weight of a lawsuit he can’t afford to fight.

Dickey’s Barbecue:  How to Lose $1M in 4 Months or Less!

Seriously, what does Roland Dickey, Jr. and Dickey’s Barbeque Pit hope to gain by suing James Neighbors?

Do they really think they do not look remarkably stupid and grossly incompetent when they claim that they didn’t check to see if their prospective franchisee had a recent bankruptcy or a criminal past?

Do they really think that they are going to obscure their parade of mistakes by further crushing a 54-year-old franchisee and his wife, both emotionally and financially?

In our opinion:  They sold a franchise that shouldn’t have been sold to someone they shouldn’t have sold to… and instead of acknowledging their mistakes and trying to clean up their mess they go into attack mode and demand hundreds of thousands of dollars that Mr. Neighbors can never pay in his lifetime.

In our opinion, the moral of this story is… unless you need to to show a million dollar loss for tax purposes and don’t have years to do it, you should approach the Dickie’s Barbecue Pit franchise and the people selling it with extreme caution.

Also read:

DICKEY’S BBQ Is Dickey’s Overselling its Franchise Opportunity?

DICKEY’S BARBECUE PIT Franchise Complaints

DICKEY’S BARBECUE PIT Makes an Unhappy Franchisee Happy

Read the lawsuit:  DICKEY’S BARBECUE PIT, INC. AND DICKEY’S BARBECUE RESTAURANTS, INC. v. JAMES L. NEIGHBORS

ARE YOU FAMILIAR WITH THE DICKEY’S BARBECUE PIT FRANCHISE OPPORTUNITY?  SHARE A COMMENT BELOW.

 

Contact UnhappyFranchisee.com

Tags:  Dickey’s Barbecue Pit, Dickey’s Barbecue Pit franchise, Dickey’s franchise lawsuit, Dickey’s Barbecue Pit franchise complaints, Dickey’s Barbecue Pit franchisee lawsuit, Roland Dickey Jr., Roland Dickey, Dickey’s Barbecue Pit closed, Dickey’s complaints, Jerrel Denton, Dickey’s Jerrel Denton, James Neighbors, James Neighbors lawsuit, James Neighbors sex offender

PRIMOHOAGIES & Nick Papanier Tax Evasion: A Clarification

July 31, 2014

We received an email from Nixon Peabody attorney Craig Tractenberg regarding our recent posts on the PrimoHoagies founder Nick Papanier, and his conviction last year on charges of tax evasion.

Attorney Craig Tractenberg stated:

“Nellies is a company which sells products to Primo, to franchisees and to unaffiliated third parties like restaurants, grocery stores and the like. No franchisee ever paid Nellies in cash. No franchisee money was taken from Nellies. No money intended to be paid by a franchisee to Nellies was ever diverted or taken.  The collection of cash by people who paid Nellies has nothing to do with Primo Hoagie, which is only one of many customers of Nellie’s.

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“The US Attorney made reckless statements. Nothing in the case supports those statements. You continue to make them.  For this reason, you continue to defame Primo, and the many franchisees who work honestly to build a brand. You hurt franchisees by tying a tax fraud having nothing to do with Primo to the Primo brand.”

However, when asked about Mr. Tractenberg’s allegations, Matthew Reilly, Deputy Public Affairs Officer, U.S. Attorney’s Office/District of New Jersey, said they stand by the accuracy of their press release.

Mr. Reilly wrote:

The press release is still accurate. The press release says Nellies sold products to Primo and other customers, which is accurate. It says he diverted money paid by his customers from his company to his personal use and avoided taxes on that money, which is accurate.

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They’re saying that of the money that customers paid to Nellies, none came from Primo franchisees. There is nothing in the public record that confirms or refutes that claim.

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No one from Primo’s franchisees has ever contacted us and asked us change that press release, which has been up on our public website for more than a year.

In fairness to PrimoHoagies, it should be clarified that Papanier’s tax fraud case did not appear to contain evidence that PrimoHoagies franchisees were adversely affected by PrimoHoagie’s relationship with Nellie’s Provisions.  We did not see any allegations of overcharging or unreasonable purchase requirements.

In his email, Mr. Tractenberg  took issue with our posts, and made four statements challenging the U.S. Attorney’s version of events:

1)  Mr. Tractenberg wrote:  “The only connection between the crime and PrimoHoagie is that Nick Papanier founded Primohoagies.”

The U.S. Attorney apparently disagrees.

The Papanier Information document filed by U.S. Attorney Paul J. Fishman, Newark New Jersey stated:

1. At all times relevant to this Information:

a. Defendant NICHOLAS PAPANIER, Sr. was a resident of Sewell, New Jersey, and owned Primos Hoagies Franchising, a company that sold the franchising rights of Primos Hoagies. Defendant PAPANIER also owned Nellie’ s Provisions, a meat distribution company that provided all of the meat for Primos Hoagies franchises and other independent restaurants.

b. Defendant NICHOLAS PAPANIER, Sr. and his wife maintained numerous personal bank accounts at Commerce Bank, N.A. (currently TD Bank, N.A.), PNC Bank and St. Edmonds Federal Savings Bank.

2. In 2006, 2007 and 2008, defendant NICHOLAS PAPANIER, Sr .:

a. caused Primos Hoagies franchise owners to buy Thumanns meats and cheeses from Nellie’s Provisions, which the owners did, often paying in cash;

b. took significant amounts of the cash Primo Hoagies franchise owners paid to Nellie’s Provisions and deposited it into his personal bank account;

c. used the money from his personal account to pay personal expenditures; and

d. in total, diverted approximately $556,666 in cash as follows: 2006 – $56,395; 2007 – $349,264; and 2008 – $151,005.

3. For tax years 2006, 2007 and 2008, defendant NICHOLAS PAPANIER, Sr. reported to the Internal Revenue Service Form W-2 wages, interest and dividend income, and property tax information, but omitted all of the diverted cash which the defendant used for his personal benefit. Thus, he failed to disclose and report a significant portion of this income on his tax returns, thereby causing those tax returns to substantially understate the amount of income he received…

It seems to us that there was a greater connection than Mr. Tractenberg states, since Mr. Papanier allegedly owned both companies, “caused” Primo Hoagies franchise owners to purchase from Nellie’s Provisions, then (at least according to the U.S. Attorney) used the money to pay personal expenditures.

There does not appear to be anything in the public record to either prove or disprove Mr. Tractenberg’s contention.

2)  Mr. Tractenberg wrote:   “No franchisee funds were paid in cash.”

Again, the U.S. Attorney apparently disagrees.

The court document stated “In 2006, 2007 and 2008, defendant NICHOLAS PAPANIER, Sr .:  a. caused Primos Hoagies franchise owners to buy Thumanns meats and cheeses from Nellie’s Provisions, which the owners did, often paying in cash;  b. took significant amounts of the cash Primo Hoagies franchise owners paid to Nellie’s Provisions and deposited it into his personal bank account.”

Other media outlets have also published the U.S. Attorney’s version of events.  A Philadelphia Inquirer story from July, 2013 reported “Papanier, who also owned Nellie’s Provisions in Gloucester City, often received cash payments from Primo Hoagie’s franchisees when they bought salami, provolone, and other deli items from him.”

3)    Mr. Tractenberg wrote:   “No franchisee funds were taken and not reported.”

While Mr. Papanier’s allocution in open court neither confirms nor denies that franchisee funds were the direct source of his unreported income, the U.S. Attorney’s office stands by their published allegations.

In court documents, the U.S. attorney stated that Mr. Papanier, Sr. took “significant amounts of cash Promo Hoagies franchise owners paid” and failed to report it.

4)    Mr. Tractenberg wrote:  “No price issues affected franchisees.”

We did not write that any price issues affected franchisees, and did not read anything that would lead us to believe that they did.

ALSO READ:

FRANCHISE DISCUSSIONS by Company

PRIMOHOAGIES Owner of Nellie’s Provisions Pleads Guilty to Tax Fraud [Updated]

PRIMOHOAGIES Franchise Complaints [REVISED]

ARE YOU FAMILIAR WITH THE PRIMOHOAGIES FRANCHISE, NICK PAPANIER OR NELLIE’S PROVISIONS?  SHARE A COMMENT BELOW.

Contact UnhappyFranchisee.com

TAGS: PrimoHoagies, Primo Hoagies, Primos Hoagies, Nick Papanier, Nicholas Papanier, Craig Tractenberg, Nixon Peabody, Nellie’s Provisions, PrimoHoagies franchise, PrimoHoagies franchise opportunity, PrimoHoagies franchise complaints, Primo Hoagies franchise, Primo Hoagies franchise opportunity, Primo Hoagies franchise complaints, Primo Hoagies franchise

PRIMOHOAGIES Franchise Complaints [REVISED]

July 31, 2014

PRIMOHOAGIES Franchise Complaints:  Nicholas Papanier, PrimoHoagies franchisor and owner of PrimoHoagies’ food supplier Nellie’s Provisions, served prison time and house arrest for tax fraud last year.

(UnhappyFranchisee.Com) Nicholas Papanier, PrimoHoagies franchisor and owner of PrimoHoagies’ food supplier Nellie’s Provisions, served prison time and house arrest for tax fraud last year.  Hopefully, Papanier’s federal conviction for fraud and his current probation is being disclosed to prospective franchisees in the PrimoHoagies Franchise Disclosure Document (FDD).

We also hope that the financial arrangement between PrimoHoagies and Nellie’s Provisions are fully disclosed, as the relationship between the franchisor and required source of supplies is important to consider while performing due diligence.

(Note that PrimoHoagie’s attorney Craig Tractenberg disputes the U.S. Attorney’s characterization of the role PrimoHoagies played in Nick Papanier’s tax fraud conviction.  See PRIMOHOAGIES Owner of Nellie’s Provisions Pleads Guilty to Tax Fraud [Updated])

Are you familiar with PrimoHoagies, Nick Papanier and Nellie’s Provisions?  Please share your experience with them – positive or negative – below.

PrimoHoagies and Nick Papanier are also invited to share their views… and a copy of their FDD for our review.

We first learned of the PrimoHoagies and Nick Papanier’s malfeasance on the BlueMauMau.org published the story  Primo Hoagies Franchisor Goes to Prison last March.

We read the Press release on the US Department of Justice website:  PRIMOHOAGIES Owner of Nellie’s Provisions Pleads Guilty to Tax Fraud.

PrimoHoagiesWhen we read about franchisor Nick Papanier being convicted of tax fraud, we weren’t so much concerned about Uncle Sam not getting his cut of the booty.

No, our alarm bells were ringing because of

1) the fact that the franchisor and the required supplier had the same owner,

2) Mr. Papanier allegedly “caused” franchisees to buy from his own supply company, and

3) Mr. Papanier’s admission to tax fraud raises some, shall we say, ethical concerns.

These three factors can be a deadly combination for franchisees, as evidenced by the many franchise failures and ultimate collapse of Quiznos, mostly due to a franchisor who double-dipped by selling required supplies and food items to franchisees, and charged royalties on sales.

We are not saying that Papanier’s tax fraud case contained evidence that PrimoHoagies franchisees were adversely affected by PrimoHoagie’s relationship with Nellie’s Provisions.  We did not see any allegations of overcharging or unreasonable purchase requirements.  We are just saying that, in general,  franchisor ownership of a required source of supply has been the source of much tension and litigation with franchisees in the past, and is a factor prospective franchisees should consider when performing their due diligence.

This June 30, 2013 story from the Philadelphia Inquirer states Nick Papanier made more than a million dollars in just three years, and tried to avoid paying taxes on half of it:

Prison for tax evasion for Primo Hoagie franchiser

The owner of Primo Hoagie’s franchising business will spend four months in prison for tax evasion, a Camden federal judge ruled Friday.

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In a plea bargain designed in part to avoid prosecution of his wife and save his son’s house, Nicholas Papanier Sr., 57, of Sewell, admitted that he avoided paying taxes totaling $189,656 in 2006, 2007, and 2008.

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Papanier, who also owned Nellie’s Provisions in Gloucester City, often received cash payments from Primo Hoagie’s franchisees when they bought salami, provolone, and other deli items from him.

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Over three years, he made more than a million dollars, but paid taxes on only about half of it, according to court documents.

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After Papanier gets out of prison, he must serve four months of house arrest, followed by 20 months of probation, the judge said.

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U.S. District Judge Noel L. Hillman also ordered Papanier to forfeit $484,010 the federal government seized from his bank accounts as part of its investigation.

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In banking that money in his personal accounts, Papanier made small deposits designed to avoid reporting requirements, the government said.

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Papanier pleaded guilty to one count of tax evasion March 22. His lawyer was Ronald Warren of Haddonfield. Assistant U.S. Attorneys Jason M. Richardson and Jordan Anger prosecuted the case.

 

ALSO READ:

FRANCHISE DISCUSSIONS by Company

 PRIMOHOAGIES Owner of Nellie’s Provisions Pleads Guilty to Tax Fraud [Updated]

PRIMOHOAGIES & Nick Papanier Tax Evasion: A Clarification

ARE YOU FAMILIAR WITH THE PRIMOHOAGIES FRANCHISE, NICK PAPANIER OR NELLIE’S PROVISIONS?  SHARE A COMMENT BELOW.

Contact UnhappyFranchisee.com

TAGS: PrimoHoagies, Primo Hoagies, Primos Hoagies, Nick Papanier, Nicholas Papanier, Nellie’s Provisions, PrimoHoagies franchise, PrimoHoagies franchise opportunity, PrimoHoagies franchise complaints, Primo Hoagies franchise, Primo Hoagies franchise opportunity, Primo Hoagies franchise complaints, Primos Hoagies franchise, unhappy franchisee

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