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NY BAGEL CAFÉ & DELI Franchise Complaints

December 3, 2013

NY BAGEL CAFÉ & DELI Franchise Complaints include unlawful and fraudulent franchise sales representations, a misleading, fraudulent, and incomplete Franchise Disclosure Document, and false and deceptive oral and written communications designed to trick prospective franchisees to buy a doomed, non-viable franchise.

(UnhappyFranchisee.Com) In researching the NY Bagel Café & Deli franchise opportunity for our recent post (NY BAGEL CAFÉ Franchise: How Many Have Closed?) we discovered that the NJ-based franchisor, founded by Joe Smith, could have a franchise failure rate higher than 75%.

That could mean that fewer than 1 in 4 franchise owners who invest $112,500 to $194,500 or more end up owning a viable NY Bagel Café & Deli through the term of the franchise agreement.

Why do such a high percentage of NY Bagel Café & Deli franchises close or otherwise leave the system?

The lawsuit brought by West Chester, PA franchisees Gordon Cunningham and Christine Mason against N.Y. Bagel Enterprises, Inc., Joseph Smith, and franchise salesman Dennis Mason (aka Keith Samuels) alleges that the franchise was sold to them using unlawful and deceptive earnings representations, understated cost estimates, and unlawful disclosure documents that created distorted and unrealistic expectations.

The franchisee lawsuit alleges that promised services were not provided to the franchisees, and that food costs are more than double what was represented to them.

The allegations made in the lawsuit (which was settled out of court) are summarized below.

Are you familiar with the NY Bagel Café & Deli franchise opportunity, founder Joe Smith, or franchise salesman Dennis Mason (aka “Ken Mason,” “Keith Samuels”)?  Please share your opinion or experience with a comment below.

NY Bagel Café & Deli Allegedly Misrepresented Sales

The FTC  Franchise  Rule  requires  that  if financial  performance  representations  are  to be made at all, they must be included in Item 19 of the Franchise Disclosure Document (FDD), along with required information about the representations.

NY Bagel Cafe logo

The PA franchisees allege that salesman Dennis Mason violated the FTC Franchise Rule by telling them multiple times that  “NY Bagel franchised stores were earning $10 ,000 to $15,000 per week in revenue,” and referred to sales projections of $1300 to $1500 per day as “low.”

According to the lawsuit, the franchisees’ stores only generated $4200 – $4900 per week in revenue – less than 1/3 of what Mason allegedly tole them they could expect.

NY Bagel Café & Deli Allegedly Misrepresented Costs

The lawsuit alleges that “NY Bagel also provided documents to Cunningham indicating that food costs would be roughly 30 percent of the suggested retail price.”

In fact, “Instead of being 30 percent of the suggested retail price, food costs were roughly 65 to 70 percent of the suggested retail price. This cut into Plaintiffs’ margin significantly and Plaintiffs would not have purchased the franchise knowing food costs would be so high.”

The lawsuit also alleges that NY Bagel understated the cost of building out the store and purchasing equipment by around 50%.  Franchisees spent $108,000 on buildout and $55,000 on equipment.

NY Bagel Café & Deli Allegedly Withheld Required Information

The Federal Trade Commission requires franchisors to disclose 23 categories of information to prospective franchisees to help them make more informed decisions regarding the franchise purchase.

According to the franchisees’ lawsuit, NY Bagel Café & Deli provided a Franchise Disclosure Document (FDD) that contained false and misleading information, and that left out key disclosures to keep franchisees from making a fully informed decision.

For example, the suit alleges that the NY Bagel FDD didn’t disclose that franchise salesman Dennis Mason was sued for fraud and deceptive franchise sales tactics, nor that the same company (Java’s Brewin) was fined for selling unregistered franchises in Connecticut.

The suit alleges that NY Bagel Café gave the franchisees an FDD that did not have the required charts that indicate the number of franchises that have closed or been transferred in the past.

The suit alleges that the franchisees’ did not receive the required contact information that would enable them to contact current and former franchisees to learn of their experiences.

The suit also alleges that the document obligated the franchisor to provide support and assistance that the NY Bagel Café franchisees never received.

NY Bagel Café & Deli Franchisees Allegedly Lost Nearly $400,000

At the time of the lawsuit, the NY Bagel Café & Deli franchise owners were on the line for $380,000:

Plaintiffs made substantial investments in building out the location and properly equipping it. In total , Plaintiffs have invested and lost roughly $230,000 in the business and Cunningham has taken on personal lease obligations of which roughly $150,000 remain.

Also read:

Lawsuit Complaint Document:  GORDON CUNNINGHAM; CHRISTINE MASON; and NYB (KENNETT} LLC v. N.Y. BAGEL ENTERPRISES, INC.; JOSEPH SMITH; and DENNIS MASON

NY BAGEL CAFÉ Franchise: How Many Have Closed?

DENNIS MASON Franchise Complaints

ARE YOU FAMILIAR WITH THE NY BAGEL FRANCHISE OPPORTUNITY, JOE SMITH OR DENNIS MASON?  PLEASE SHARE YOUR OPINION BELOW.

Contact UnhappyFranchisee.com

TAGS: NY Bagel, NY Bagel Cafe, NY Bagel Cafe & Deli, NY Bagel franchise, NY Bagel Cafe franchise, NY Bagel Cafe and Deli franchise, New York Bagel franchise, New York Bagel Cafe, NY Bagel complaints, NY Bagel lawsuits, Joe Smith, Joseph Smith, Dennis Mason, Keith Samuels, Ken Mason, franchise scam, franchise failure rates, bagel franchise

Comments

3 Responses to “NY BAGEL CAFÉ & DELI Franchise Complaints”

  1. Joe says:

    If you would like to report on my company that is fine. But when you report false or misleading information or slant it to look like something else that is Tortious Interference of the company and illegal. If you would like to report the correct information please feel free to contact me so I can give you the correct information and you can report it properly if that is the nature of this website and not just a bashing forum.

  2. ADMIN says:

    Joe:

    We have traded emails before, so you have my email address. You are always welcome to provide corrections, clarifications or rebuttals and we will address them right away. Much of what we are piecing together comes from public sources. Please send us your current FDD so that we can make sure we report your official numbers.

    Please check this post for accuracy also:
    http://www.unhappyfranchisee.com/ny-bagel-cafe-franchise-many-closed/

    We’ll be happy to address any issues you have with what we’ve printed right away.

    ADMIN

  3. ADMIN says:

    Joe Smith:

    You have not returned my emails, so I will communicate with you here.

    Can you please let me know when I can expect your corrections, clarifications & rebuttal?

    You claim some of the info we’ve posted is incorrect, but we need you to be more specific. How else can we fix it?

    Also, before I publish it, can you please confirm or refute the rumor that you are selling unregistered franchises in California, and that your new Tracy franchise was sold and opened despite the fact that you are not registered in California? We contacted California and they said you are not registered there. Can you comment on that? If you are in the process of registering we will be happy to include that fact in the upcoming story.

    At least let us know when to expect your corrections so we can plan accordingly.

    Thanks,

    ADMIN
    UnhappyFranchisee.Com

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