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

One of several franchisee lawsuits charging Wireless Toyz, and executives Richard Simtob, Joe Barbat, and Jack Barbat with fraud has ended with mixed results.

According to Crain’s Detroit:  “An Oakland County jury awarded $180,600 damages last week against Wireless Toyz and another $20,000 against Richard Simtob, its finance director and vice president of franchise development, in favor of Colorado franchisee David Abbo of Colorado Toyz Inc.

“Jurors awarded no damages against founder and President Joe Barbat, his company JSB Enterprizes Inc. or against co-founder and Vice President Jack Barbat.”

The single count awarded is for silent fraud. The other allegations of pure fraud, negligent misrepresentation and the franchise law violations were dismissed or resulted in no damage awards from the jury.

The plaintiffs in the case were represented by Birmingham-based Norman Yatooma & Associates P.C.  They were seeking $7.2 million in damages.

According to ClickOn Detroit:

Attorney Norman Yatooma also represents Abbo and other investors, who claim they were defrauded out of their investments by Barbat and the company.

"They didn’t much care what the franchisees were ultimately going to earn. What they cared about was getting their $100,000, their $150,000, their $200,000 down payment to open up that store or to reserve that territory. After that, what happened to the franchisee was their problem," Yatooma said.

He said the investors were lied to when they were told they would make huge profits with their franchises.

"[Joe Barbat’s] made obscene millions off this Wireless Toyz scandal. He’s made millions upon millions upon millions," Yatooma said.

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RENT-A-CENTER to Pay $340K for Customer Harrassment

Rent-A-Center, the parent of rental franchise chain ColorTyme, has reached a settlement with the Washington Attorney General’s Office over claims that it harrassed and directed profanity against customers.

The the Plano, Texas based company (NASDAQ: RCII) has vehemently denied the charges but agreed to pay Washington more than $340,000 in legal fees and costs to monitor the decision, according to Attorney General Rob McKenna.

According to an article in the Puget Sound Business Journal:

“In July, the state alleged that company employees tried to kick in the door of one customer who said he’d be late with his payments because of his wife’s hospitalization. In another case, the state alleged that a woman said Rent-A-Center employees refused to leave her home after she stopped making payments, telling her that she’d be jailed for theft, scaring her daughter, and passing information to her neighbors that she wrote bad checks.

“As part of the settlement, Rent-A-Center agreed not to: speak to customers more than six times a week to discuss an overdue account; engage in violence; trespass; call or visit bankrupt customers unless authorized; impersonate other people; discuss customer accounts with other people; threaten legal action unless permitted under law; visit a customer’s workplace after being told not to visit; use profanity; attempt harassment; or ask someone other than a customer to make a customer’s payment. There were also other restrictions.”

According to the article, Rent-A-Center officials are “delighted to have the case” behind them because, in the words of their spokesman, “It’s less costly to settle than to litigate.”

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

Joe Barbat claims that Wireless Toyz franchise investors have themselves to blame for their failures.

According to a  Local 4 Defenders video report posted on Click On Detroit, the Wireless Toyz founder accused of fraud said that if the franchisees suing him had worked as hard as he had, they’d be rich, too.  Barbat’s allegedly banked $13 Million on the Wireless toyz franchise chain he founded.

Check out the Local 4 Defenders video:  Wireless Toyz Founder Goes On Trial.

Read and discuss the Joe Barbat, Wireless Toyz lawsuits here:  WIRELESS TOYZ: Joe Barbat Fraud Trials

Here’s an earlier video from the Local 4 Defenders that gives an overview of the charges and allegations against Joe Barbat & Wireless Toyz:

Are Wireless Toyz franchisees victims of deception or lazy entrepreneurs looking for someone to blame for their lack of initiative?

That’s what the courts are trying to decide.  Share your opinion… and stay tuned.

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WIRELESS TOYZ: Joe Barbat Fraud Trials

Known for his mini-mansion, fast cars, and millionaire lifestyle, Joe Barbat, founder of the 200 unit Wireless Toyz franchise chain, was named to the Crain’s 40 under 40 list in 2005.  In 2007, Barbat was named as Entrepreneur of the Year by Detroit-based firm Ernst & Young.

More recently, however, he’s named as a defendant in multiple lawsuits by Wireless Toyz franchise owners.  Joe Barbat, and his associates, are being accused of violating Michigan franchise laws and falsifying information about profitability to franchisees.

From Millionaire’s Fraud Trial Begins:

…a number of investors said they were defrauded out of massive amounts of money and a number have sued Barbat for violating Michigan’s franchise investment laws.

“Outright lies, deceit and illegal methods to dupe my clients into investing hundreds of thousands of dollars,” [attorney Norman]Yatooma said.

Rod Kello is one of the investors claiming to be a victim. He talked with Local 4 Defenders about his plight.

“I’ve lost just about my life savings that I had, pretty much put all my money into this company. I’m pretty close to foreclosure on my home, kids’ tuitions, I mean you name it,” Kello said…

“They feed you all these numbers and all these lies and you find out a year later that they are all lies,” Kello said.

Sumil Rupani of Texas was another investor. He testified in court on Friday and later said his experience has cost him personally.

“Financially it’s been the worst thing I’ve ever gone through. I’ve lost friends, made enemies along the way. Family members don’t speak to me like they used to,” Rupani said.

Wireless Toyz and Joe Barbat claim there was no fraud.

Attorneys for Wireless Toyz and Joe Barbat deny the allegations.  Steven Cohen, Joe Barbat’s attorney in the Kello lawsuit, stated  “My clients are neither cheats nor liars nor did they defraud anyone.”

According to a Crain’s Detroit story, Wireless Toyz attorney Bradley Schram also believes the fraud charges are unfounded:

“There was no fraud involved in any of the franchises,” Schram said. “The market has just changed, just like many industries are dealing with a market that changes.”

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

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RICKY’S: Summit, NJ Store Equipment Auction

Another sad milestone for the dying Ricky’s Candy, Cones & Chaos franchise dream.  

Equipment for the defunct Ricky’s Candy, Cones & Chaos franchise in Summit, NJ will be auctioned by A.J. Willner’s Auctions on Monday, December 14, 2009 at 11:00 AM. 

 

Here is the information from A.J. Willner’s auction page:

ABSOLUTE AUCTION
Like New Gelato, Ice Cream & Candy Equipment 
re: Ricky’s Candy, Cones & Chaos of Summit
By Retention of Landlord. Everything Must Be Sold Regardless of Price!

Auction Date(s):     Monday, December 14, 2009  Time: 11:00 AM

Address:
333 Springfield Ave.    
Rt. 24 to Exit 9A    
Summit, NJ  07901

Inspection Date(s):
Monday, December 14, 2009
Time: 9:30 AM to 11:00 AM
Pickup Date(s): 
Monday, December 14, 2009  Time: 1:00 PM to 4:00 PM
Tuesday, December 15, 2009  Time: 9:00 AM to 1:00 PM

LIKE NEW ICE CREAM, GELATO, CANDY & RESTAURANT EQUIPMENT:
# "New" Prima 18 PLUSA 5 Ft. Glass Front Gelato Showcase (s/n L40002; Recently purchased for $25,000!)
# Master-Bilt Glass Ice Cream Showcase
# Scotsman Undercounter Ice Machine
# True Undercounter Rolling Refrigerator
# 47 Compartment Candy Dispening Unit
# 3 well S.S. Sink w/ Sprayer
# Single Head SaniServe Ice Cream Dispenser & (3) 5 Ft. S.S. Tables
# Bunn CWTF35 Coffeemaker & 6 Head Coke Soda Dispenser
# Beautiful Free Standing & Custom Built Store Fixtures Including Wonka Mobile, Cabinets, Menu Board w/ TV, Outside Lighted Sign, Wall Signage, Decorations, etc.
# 8 Sections of Metro Racks, Small Sentry Safe & Samsung SF 560 Fax
# Large Qty. of Paper Goods, Supplies, Accessories, Tables, Chairs, Hot Fudge Disp., Hand Sinks, etc.

Featured Items:

Prima 18 Self Contained Gelato Showcase
Master Bilt Self Contained Display Freezer Case
Scotsman Under Counter Ice Machine
SaniServ Frozen Beverage Machine
True Under Counter Single Door Refrigerator
Stainless Steel Prep Tables
Stainless Steel Triple Well Sink
Hot Topping Dispensers
6 Flavor Soda Fountain
Dial Face Safe & Fax Machine
Interior Signage
Exterior Signage
Bulk Candy Merchandising Unit
"Wonka" Store Fixture
Animated Store Fixtures
Tables & Chairs

For Complete Catalog please click on "download catalog" at the A.J. Willner’s auction page.

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photos:  A.J. Willner

RICKY’S CANDY, CONES & CHAOS FRANCHISE

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RICKY’S CANDY: Why’d the Princeton Store Close?

Thanks to Krystal Knapp, writer for the Times of Trenton, for citing UnhappyFranchisee.com as a source for her recent article on the closing of the corporate-owned flagship Ricky’s Candy, Cones & Chaos store in Princeton, NJ (Princeton Borough sweetshop closes on a sour economic note).

Knapp’s article quotes comments left here and on the retired Franchise Pick  website in which Ricky’s new president Donald Cheng blamed the economy for the struggles of the Princeton store and the chain as a whole.  “The current economy has impacted the retail sector much more heavily than others. The Ricky’s model was heavily dependent on a robust economy where parents splurge on their children and friends,” wrote Cheng.  “However, as the economy worsened, more people became budget conscious and retailers have to react by providing better value and Ricky’s did not adjust fast enough."

Cheng had promised a repositioning of the Ricky’s concept to adapt to current economic climate, starting with the Princeton store.  After his short burst of comments here were questioned by current and former franchisees, Cheng was never seen nor heard here again.

The Times article includes some telling details of the financial woes of the failing chain, and its unsuccessful attempt at gaining bankruptcy protection:

In December 2008, the company filed for Chapter 11 bankruptcy. Among other creditors, court records show Ricky’s owed thousands of dollars in back rent to Nassau Tower Realty and $100,000 to the state in sales tax.

Ricky’s struggled to pay rent of $14,590 a month that increased to $15,673 a month in April, court records show. Ricky’s made a partial payment of $2,000 for September 2008, and the realtor tapped into a $75,000 deposit to pay for rent in the coming months. That money was exhausted and Ricky’s owed Nassau Tower $42,301 for March, April and most of February.

The bankruptcy was rejected by a judge and dismissed in May.

According to Knapp, “The Willy Wonka-esque franchise that sold candy, ice cream and other sweets went sour along with the economy, records show.”

Ricky’s demise may have occured “along with” the decline of the economy, but some argue not because of the tough economic times.  According to Guest, commenting on a related Ricky’s Candy post:

…The one flaw of the article is the idea that the economic conditions were a factor in the fall of Ricky’s. NO, IT WAS NOT…… Court documents from the Ch 11 attempt clearly showed that even when the economy was roaring and Toll Brothers couldn’t build a McMansion fast enough Ricky’s was not making any money and the only income supporting the shell was the franchise fees and royalties paid by people who thought they were buying into a successful business model. The house of cards began to crumble once the store owners began to communicate directly and the fact checking began.

Was the Princeton store simply a franchise sales tool from the start?

Ricky’s Candy, Cones & Chaos franchisees have alleged that the Ricky’s concept was not viable from the start and the company’s – and founder’s – main goal was to sell franchises.  Nearly all franchise stores have failed and closed, and angry franchisees are suing. 

The shockingly high rent of the Princeton store suggests that it perhaps was designed to be a brand showcase and franchise sales vehicle rather than a profitable candy store.  Could a candy store in Princeton, NJ, even in good economic times, realistically sell enough candy and cones to justify rent of more than $175,000 per year? 

Or did Ricky’s corporate assume the high rent and high overhead would be recouped not by selling candy, but by selling the dream of owning a successful Ricky’s franchise?

Related Posts on Ricky’s Candy, Cones, & Chaos:

RICKY’S CANDY: Message from Donald William Cheng

RICKY’S CANDY, CONES & CHAOS: Summit, NJ Store to Close

RICKY’S: Princeton, NJ Store Eviction Notice

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RICKY’S CANDY, CONES & CHAOS: Summit, NJ Store to Close

We received the following sad message via email from Liliana Carvalho, the owner of the Ricky’s Candy, Cones & Chaos franchise location in Summit, NJ:

Ricky’s Candy,Cones and Chaos of Summit will be closing its doors forever after Nov 15th.

I am the current owner Liliana Carvalho and within the last 20 months have lost over $400k in this Franchise.

It is sadly coming to an end, since I cannot any longer afford to continue to pour money into a failed business concept, which was sold to me as a Sweet profitable Candy and Ice Cream Franchise, early 2008 by Rick Barber ( Franchise owner) and by Mike Kapp (former owner of the Ricky’s Summit location).

I would like to thank all my clients for their patronage during the last 20 months. Wishing them and their families the best and hopefully our  paths will cross again in the near future.

Thank you,

Liliana Carvalho

According to a May, 2004 press release posted on the Ricky’s website,

As a retail chain, Ricky’s Candy, Cones & Chaos is a new version of the “Old Time Candy and Ice Cream Store” with scheduled openings starting in May 2004. With three concurrent store openings starting with Summit NJ ; Princeton NJ ; and Rockefeller Center , NYC, Ricky’s Candy, Cones & Chaos is focusing its future growth on upscale suburban downtowns where retail activity is on the rise.

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RICKY’S CANDY: Message from Donald William Cheng

Donald William Cheng has taken over the role of President of the once-promising & now-troubled Ricky’s Candy Cones and Chaos franchise chain.  Cheng, a real estate broker, left a series of messages (see below) on UnhappyFranchisee.com for his few remaining franchisees and former franchisees (some of whom are suing the franchisor).  In his messages, Cheng announced that founder Rick Barber is no longer involved with day-to-day operations, that he’s temporarily halted franchise sales and has hired a General Counsel to help resolve disputes.

The announcement is a sharp contrast to what was stated in a grammatically challenged press release posted just last month.  In the release, posted on Bison.com, stated Cheng was embarking on a new franchising initiative for the franchised retail candy chain.

Ricky’s Candy, Cones & Chaos press release June 7, 2009:

Rickys Candy Cones and Chaos, the premiere Franchise for bulk candy and Ice Cream has brung on a new president.  Donald William Cheng will be taking the helm of this new and fast growing franchise and moving operations headquarters to New York City.

A new Franchise growth plan as well as a new focus on helping current franchisees will be implemented by Mr. Cheng.  Mr. Cheng is an experienced real estate developer and well known in the retail real estate world and has advised numerous Franchises including Nathan’s Famous, Shiseido, Chock Full of Nuts and was owner of the Shake-a-Paw puppy franchise in New Jersey.

The company is looking to start Franchising in New York City and has selected several locations including Times Square, Port Auhthority Bus Terminal, and other high traffic locations.

Donald William Cheng messages Sunday, July 19th, 2009 on UnhappyFranchisee.com:

Submitted on 2009/07/19 at 6:59am

Rickys Candy Cones and Chaos, including the Princeton Store is now run by Mr. Cheng. Mr. Cheng is an experienced corporate turnaround strategist and experienced in finance, marketing, real estate, and food service. Mr. Cheng came on board in May of 2009 and was appointed by the Board of the holding company to turn the Princeton Store around financially and the Franchise firm. Mr. Cheng’s former and current clients include Nathan’s Famous and large multinationals.

As current operating President, Mr. Cheng regrets to say that there are best of times and there are the worst of times. The current economy has impacted the fortunes of million of lives and the the Rickys chain has not fared well.

However, going going forward, the Ice cream, candy and food service business is still a stable business and I hope to make changes to the firm which will enable the future success of existing stores.

My background in construction and coupled with my mass media and food service skills will enable a faster and less expensive building out while providing a better investment for future franchisees.

In Regards to any questions about Rick Barber, he is out of the picture on day to day operating procedures.

In Regards to current litigation, a chief counsel is being brought on board to handle the complaints in a fair and equitable manner.

*  *  *  *  *

In Regards to the existing stores, we would like to reach out to the existing stores to come forward and talk about issues which may be of mutual benefit. However, I have been unable to get through to the franchisees and the owners are red bank, summit, and Oceanside.

We are planning some regional advertising on TV and would like to get the cooperation of the other existing stores.

*  *  *  *  *

Rickys Candy Cones and Chaos will not be selling any more franchises until current issues , problems and litigation with the holding company and Princeton stores and existing stores are resolved. We will continue to honor current franchise agreements in place. Many apologies to those that have suffered losses .

Regards

Donald William Cheng

This message from Donald William Cheng left the same day on Franchise Pick:

Rickys Candy Cones and Chaos is now run by Mr. Donald William Cheng as of May, 2009. The Princeton store is undergoing a restructuring and is out of bankruptcy. New changes are being effected to combat the changes in the business environment. The current economy has impacted the retail sector much more heavily than others.

The Ricky’s candy, cones and chaos model was heavily dependent on a robust economy where parents splurge on their children and friends. However, as the economy worsened, more people became budget conscious and retailers have to react by providing better value and Rickys did not adjust fast enough.

New management and marketing have been brought in to ensure that future partners and franchisees will be able to sustain a dip in the economy by providing long term financing and stronger financial management and brand management

Relevant Links:

Donald William Cheng – LinkedIn profile

Donald William Cheng bio

Shake-A-Paw trademark dispute

Shake-A-Paw franchise puppymill controversy prior to closing

RICKY’S CANDY, Cones & Chaos Franchise Update

Ricky’s Candy, Cones & Chaos Franchise

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