USA MOBILE DRUG TESTING Franchisees Rebel, Cry Fraud
December 31, 2012
USA Mobile Drug Testing franchise owners claim they have been defrauded by CEO Joe Strom and USA Mobile Drug Testing, LLC.
Through their attorney, Mario Herman, a group of 7 USA Mobile Drug Testing (USAMDT) franchisees have demanded immediate termination of their franchise agreements and $635,000 in combined damages.
Mr. Herman states that his clients will be fully debranded from USAMDT by January 1, 2013.
UnhappyFranchisee.Com has reported many of the claims enumerated in attorney Herman’s letter (see below) in these prior posts:
When given a chance to respond to the serious allegations raised in these posts (namely the misleading earnings claim in the FDD, and the inconsistent and suspicious reporting of franchise locations), CEO Strom evaded all but one of the questions posed to him.
Franchisee Attorney Mario Herman’s Letter to CEO Joe Strom
UnhappyFranchisee.Com obtained (from an anonymous source) a copy of this letter sent by franchisee attorney Mario Herman to USAMDT CEO Joe Strom on December 28, 2012.
LAW OFFICE OF MARIO L. HERMAN
5335 Wisconsin Avenue N.W.
Washington, D.C. 20015
December 28, 2012
VIA EMAIL TO email@example.com
Joe Strom, CEO
USA Mobile Drug Testing, LLC
15310 Amberly Drive, Suite 220
Tampa, FL 33647
Re: Notice of Termination
Dear Mr. Strom:
I have been retained by the below-referenced franchisees of USA Mobile Drug Testing, LLC (“USA Mobile”) regarding numerous transgressions committed by USA Mobile in violation of Florida law, including Florida’s “Baby FTC” Act.
The franchisees are Breillat, Barga, Hamil/Montelibano, Kesler, Parker, Saracovan, and Greenberg. The total amount of the combined damages exceed $635,000.00. Demand is hereby made for that amount.
The transgressions include, but are not limited to:
- Illegal earnings claims offered via the Internet stating: “Net Annual Earnings of $145,745.”
- Entrepreneur.com states 77 franchises at the end of 2011, the USA Mobile Franchise Disclosure Document (“FDD”) states 40.
- Entrepreneur.com states 93 franchises at the end of 2012, USA Mobile website indicates 51 franchises. 8 of those redirect to the corporate 855 phone number because they have been shut down; 43 are operational franchises.
- Misrepresentations contained in Item 19 of the FDD in terms of the revenue generated by the putative Connecticut “franchisee.” The Financial Performance Representation in the FDD is not based on a USA Mobile Drug Testing franchise, but is actually A&B Employer Solutions, Inc. (“A&B”), which operates its drug testing business as an add-on to a previously existing business.
- The FDD at item 19 states: “We do not know the extent to which this operator provides products or services outside of his territory, or the portion of its revenues that are derived from outside of the territory.” The $329,225.40 revenue number most likely includes sales to existing A&B Employer Solutions clients and/or drug testing clients throughout the nation. New USA Mobile Drug Testing franchise owners would have neither an existing client base nor the ability to market outside their local area. Therefore, the $329,225.40 is highly misleading. The FDD further states: “We have not audited or verified the reports, nor has the operator confirmed that its report is prepared according to generally accepted accounting principles.”
- Furthermore, A&B has paid no royalties, ad fund contributions, or other required expenses that a new franchisee would have to incur. A&B did not have to pay the Roll-Out Advertising of $10,500.00 for its first three months (now mandatory at $19,500.00). This fact should have been properly disclosed, and its purposeful omission is deceptive and unfair.
- A&B did not have to pay a $49,900.00 franchise fee that a new franchisee would have to pay.
- A&B did not have to pay 9% royalties on its gross sales, which would amount to $29,630.00.
- USA Mobile knowingly allowed its external sales staff, Rhino 7, to falsely represent itself as being internal to USA Mobile, and knowingly allowed said external staff members to represent themselves as franchisees or soon-to-be franchisees.
- USA Mobile deliberately failed to disclose any information about its corporate-owned location in Tampa, Florida. This includes information about earnings.
- USA Mobile made representations to franchisees and potential franchisees as having national and regional accounts that would benefit franchisees. No such accounts existed at the time.
- USA Mobile failed and continues to fail to disclose information about failed or closed franchisees.
The Financial Performance Representation (“FPR”) provided by USA Mobile substantially overstates revenue and understates expenses a new franchisee realistically would expect. The FPR provided in the FDD should be based on what a majority of the USA Mobile franchisees are achieving within the network. Based on the fraud and the deceptive and unfair trade practices detailed above, my Clients hereby terminate their respective Franchise Agreements effective immediately. All proprietary information is in the process of being returned to you, and all my clients will be fully de-identified by January 1, 2013.
Please ensure that the clients listed above are accurately listed as terminated franchises in the forthcoming 2013 FDD, and have your attorney contact me at the number or email indicated above. Finally, please refrain from any future communications with any of my aforementioned clients.
Mario L. Herman
Attorney for USA Mobile
Drug Testing Franchisees
Despite Mr. Strom’s insistence that there are 93 USA Mobile Drug Testing franchises, the USAMDT website indicates that there may be as few as 43.
With the defection of these 7, there may now be as few as 36.
We have contacted the corporate office of USA Mobile Drug Testing franchise about these concerns, and invite their clarification, correction or rebuttal.
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Tags: USA Mobile Drug Testing, USA Mobile Drug Testing franchise, USA Mobile Drug Testing complaints, USA Mobile Drug Testing franchise complaints, USA Mobile Drug Testing failure rate, drug testing franchise, mobile drug testing, Joseph Strom, Joe Strom, Mario Herman, franchisee rebellion