Leo Kats and Claire Kats founded the gourmet meal delivery franchise Dine In 2Nite. The California Department of Business Oversight claims that Leo Kats and Dine in 2Nite North America, Inc. have been unlawfully selling franchises in violation of California’s Franchise Investment Law. On June 25, 2015, Leo Kats and Dine in 2Nite franchise were issued a Desist and Refrain Order by the State of California (see below).
(UnhappyFranchisee.Com) Leo Kats is a franchise industry veteran and, one might assume, no stranger to state franchise registration & disclosure laws.
Leo Kats is co-founder (with his father, Lev Kats) and past president of the franchisor Instant Imprints. He is past Chairman of franchisor Concerto Networks, and is CEO of franchise development firm FranVest International, Inc.
Leo and his wife Claire Kats founded the gourmet meal delivery service Dine In 2Nite in 2010, and launched the Dine In 2Nite franchise program in 2012.
It appears that Leo & Claire Kats may have sold franchises in several states that require prior registration (including California, Washington, Wisconsin, Virginia) without registering Dine In 2Nite… in violation of state franchise laws.
Dan Olsen, Director of FGS Franchise Growth Systems, knows franchise registration laws
The Dine In 2Nite franchise program launched with a team of veteran franchise industry pros. The 2013 Dine In 2Nite lists franchise industry veteran Phil Mettra as Director of Marketing.
Phil Mettra became had been VP of Marketing for franchise and household brands such as Money Mailer, ADVO, Budget Blinds and 3 Day Blinds, and CMO for International Franchise Solutions. Phil Mettra certainly would be familiar with state franchise laws.
The 2013 Dine In 2Nite lists franchise industry veteran Dan Olsen as a management team member:
Dan Olsen – Director of Regional Development
Dan Olsen became Director of Regional Development September 2012 and oversees our regional expansion and support.
In 2009, Dan Olsen co-founded International Franchise Solutions, LLC and is also the founder and director of Franchise Growth Systems since 2002. He is credited with developing the largest independent master franchise sales organization in the world and has successfully implemented national franchise development and sales campaigns for dozens of companies since 1997.
Dan Olsen presumably knows that franchises must be registered in certain states before they can be advertised and sold in those states.
Eric M. Welch, Esq. knows franchise registration laws
The 2013 Dine In 2Nite lists attorney Eric M. Welch, Esq. as VP & General Counsel:
Eric M. Welch, Esq. – Vice President and General Council
Mr. Welch became Vice President and General Council in June 2010. From November 2005 to March 2011 Mr. Welch was Vice President and General Council for Instant Imprints Franchising, Inc.
Attorney Eric Welch certainly has a lot of franchise experience, too. He certainly is familiar with state franchise laws.
Why would a group of franchise industry veterans avoid state franchise disclosures?
Sometimes franchisors avoid complying with franchise disclosure laws because they don’t want state examiners to see they haven’t disclosed required information.
Other times, franchisors may avoid franchise registration due to certain states requiring undercapitalized franchisors to disclose their financial status, and possibly escrow franchise fees until a new franchisee is up and running.
We don’t know the specifics regarding Dine In 2Nite, Leo Kats, Claire Kats, Dan Olsen and Eric Welch, but we will try to reach out to them for clarification.
We are curious: why did Leo Kats and Claire Kats fail to register their San Diego, CA-based in their home state of California?
Did they sell franchises without being registered California, Washington, Wisconsin, Virginia and/or other registration states? If so, why?
Leo Kats, Dine In 2Nite Franchise Desist & Refrain Order from California
STATE OF CALIFORNIA
BUSINESS, CONSUMER SERVICES AND HOUSING AGENCY
DEPARTMENT OF BUSINESS OVERSIGHT
Dine In 2Nite North America, Inc.
Mr. Leo Kats
9808 Waples Street
San Diego, CA 92121
DESIST AND REFRAIN ORDER
(For violation of section 31110 of the California Corporations Code)
The Commissioner of the Department of Business Oversight finds that:
1. Dine In 2Nite North America, Inc. (“Dine in 2Nite”) is a California corporation with a business address at 6494 Weathers Place, San Diego CA 92121. Dine in 2Nite is in the business of
preparing and delivering ready-made meals to residential homes.
2. Leo Kats (“Kats”) is a California resident and control person of Dine in 2Nite. Kats’ principal place of business is in San Diego, California.
3. Dine in 2Nite and Kats are collectively referred to as “Respondents.”
4. Dine in 2Nite is not, and has never been, registered with the California Department of Business Oversight to offer or sell franchise investments in California. Nevertheless, in violation of the Franchise Investment Law as set forth in Corporations Code section 31110, Respondents have offered Dine in 2Nite franchise investments in California and sold at least one franchise in 2014 for approximately $100,000.00. According to the terms of the franchise purchase, in exchange for a franchise fee, the Dine In 2Nite franchisee was granted an exclusive geographic sales territory in San Diego County and required to follow protocols, processes and procedures in the operation of the franchise. To facilitate the franchise purchase, Kats submitted a signed “Letter from the Franchisor” to the United States Embassy in the purchaser’s home country setting forth the terms of the purchase.
5. Respondents continue to offer franchise investments through the company website accessible within California at “www.dinein2nite.com.” The franchise investments offered and sold by Respondents are franchises within the meaning of California Corporations Code section 31005.
Based upon the foregoing findings, the California Commissioner of Business Oversight is of the opinion that Leo Kats and Dine In 2Nite North America, Inc., offered and sold franchises in California that were subject to registration under the Franchise Investment Law without the offers first being registered, in violation of Corporations Code section 31110. Pursuant to section 31402 of the Corporations Code, Leo Kats and Dine In 2Nite North America, Inc., are hereby ordered to desist and refrain from the further offer or sale of franchise investments unless and until the offers have been duly registered under the Franchise Investment Law, or are exempt.
This Order is necessary, in the public interest, for the protection of investors and consistent with the purposes, policies, and provisions of the California Franchise Investment Law.
June 24, 2015
JAN LYNN OWEN
Commissioner of Business Oversight
MARY ANN SMITH
ARE YOU FAMILIAR WITH THE DINE IN 2NITE FRANCHISE OPPORTUNITY & ITS MANAGEMENT TEAM? DID THIS TEAM OF FRANCHISE VETERANS VIOLATE STATE FRANCHISE LAWS? IF SO, WHY?
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