Franchisee Brandon Moore: NASAA S.O.P. Allows Franchise Accountability to be a 2-Way Street

This guest post contains the opinions submitted to the National Association of Securities Administrators (NASAA) by former DentalFix RX franchisee Brandon Moore on January 5, 2022.

(UnhappyFranchisee.Com)

READ RELATED POSTS & DISCUSSIONS:   Franchise Discussion, Documents, Links: NASAA Proposed S.O.P., Franchisor Questionnaire Example (Generic)

Read more about the DentalFix RX franchise and its Trojan Earnings Claims; 

View the DentalFix RX Franchisee questionnaire.

READ PDF Version: Brandon Moore Ltr to NASAA 010422

Brandon Moore
brandon.c.moore [at] gmail [dot] com
Corporate Finance Section
Franchise and Business Opportunities Project Group
North American Securities Administrators Association, Inc
750 First St NE # 1140
Washington, DC 20002

January 4th, 2022

RE: Proposed NASAA Statement of Policy Regarding the Use of Franchise Questionnaires and
Acknowledgements (“Statement of Policy”)

Dear Sir or Madam,
I am writing in response to your call for public commentary dated December 6th, 2021. I am a
former Franchisee of the now defunct Dental Fix Rx Franchise. Unfortunately, we were negatively
affected by many of the behaviors that your group seeks to address.

In late 2017 I organized a group of Franchisees as an attempt to fight back and return our lives to normalcy. To date, we have had success in
obtaining regulatory settlement orders in both Virginia¹, and Washington State² through our combined
efforts and additional information obtained during discovery in my personal legal action. The Washington
State Action is notable, because it found that actual fraud had occurred.

While our efforts are not over, and we plan on renewing our push for regulatory action in the
wake of the Washington Order, this call for public commentary is very welcomed and timely in nature.
This request speaks to the core issue of why we were unable to obtain rescission after the fraud was
uncovered. It also speaks to why the Franchisor and their Legal Counsel feel emboldened enough to
continue, after these rulings, to sue victims of this scheme who simply try to walk away and restart their
lives.

The Proposed Statement of Policy Allows Accountability to be a Two-Way Street.

Throughout the legal process I have been involved with, it has become very apparent that the
base franchise agreements are indeed weaponized against Franchisees. The Questionnaires and
Acknowledgements that are being discussed are one of the primary means that unscrupulous Franchisors
use to evade being held liable for whatever misrepresentation that was made. They are used to essentially
have the prospective Franchisee put in writing that they weren’t deceived and that no inappropriate
comments were made, prior to finding out that they were deceived, or that a comment was indeed
inappropriate!

“The Questionnaires and Acknowledgements that are being discussed are one of the primary means that unscrupulous Franchisors
use to evade being held liable for whatever misrepresentation that was made.” 

–  Former Franchisee Brandon Moore

These documents are then used in various legal proceedings against the Franchisee in
order to beat back fraud allegation; or presented to regulatory agencies with oversight, after a complaint
has been made, in order to vindicate the illicit acts. Having been on the receiving end of a weaponized Questionnaire and Acknowledgement, I can accurately state that they are nothing more than Legal SealClubs used to keep the Franchisees at bay.

The combined impact of Questionnaires and Acknowledgements in the franchise purchase
process presents an ill-fated scenario for franchising, particularly amongst emerging brands, that the only
winning move for prospective Franchisee is not to play. If anything, our experience has shown that even
in cases of outright fraud, and combined with regulatory orders that validate that, it is still impossible to
prevail civilly, and even attempting to obtain rescission will likely only result in further financial loss for
the Franchisee in the form of needing to pay judgements to the Franchisor as well as their Legal Fees
incurred to sue them.

”These documents are then used in various legal proceedings against the Franchisee in
order to beat back fraud allegation; or presented to regulatory agencies with oversight, after a complaint
has been made, in order to vindicate the illicit acts.” 

–  Former Franchisee Brandon Moore

The proposed Statement of Policy would level the playing field from the beginning in a
straightforward manner and allow Franchisees to be able to prevail in the legal process in a way that is
fair to all parties involved. Essentially, if a Franchisee wants to allege fraud, they will get their day in court,
with the case being heard on the facts alone, not documentation that was clearly put in place to exculpate
misrepresentations.

What this language does not do, is it does not remove the Franchisee’s burden of
proving reliance on, or the materiality of, whatever statement was made. I believe this important
distinction that will help temper any excessive or unjustified claims against Franchisors that could come
in as a result.

The Current Landscape is Inhospitable to Franchisees

As I discussed this exact topic in a panel with the Federal Trade Commission in November of 2020,
I stated plainly that by the time Franchisees become aware that there was misconduct with the sales
process, it is typically too late. The effects that misrepresentations cause can be slow to surface,
meanwhile they have caused missed expectations with the Franchisee, its employees, and their family,
even with the best due diligence being performed. This usually ends with a scenario where the Franchisee
is broke, unable to continue, and needing a quick exit, most will turn to Bankruptcy.

In the rare case that a Franchisee has the means to fight back, the problem then becomes funding
a legal defense that can easily go into the hundreds of thousands of dollars, which is out of reach for many.
I would argue that there exists Attorneys willing to take these types of cases on contingency, however
that is no longer a viable option since we have recently seen that these Questionnaire and
Acknowledgements defeat actual, legitimate, claims of Fraud, meaning, a contingency based
representation would only serve to delay the inevitable for the Franchisee.

“In the rare case that a Franchisee has the means to fight back, the problem then becomes funding
a legal defense that can easily go into the hundreds of thousands of dollars, which is out of reach for many.”

–  Former Franchisee Brandon Moore

For the 13 Registration States, Franchisees with issues may submit complaints to the relative
agencies. This is the most viable and productive option for Franchisees currently. These complaints are
also a long shot for the impacted Franchisee and may take up to two years, if not more to resolve. Just
as with civil litigation, the expectation is that the Franchisee continues to operate under the influence of
the Franchisor during this time. The other issue is the recovery via this route. State rescission orders also
may be limited in scope, and not able to provide full rescission; not to mention provisions limiting the
Franchisee’s speech, non-compete clauses, or limit other recovery options for the Franchisee. Keeping
in mind, that this is only applicable if the State Regulators have decided to pursue the complaint, which
we have+ also learned, is not consistent from state to state. The other 37 States must rely on the FTC to
enforce regulations, in spite of the fact that they have historically focused their enforcement powers on
other areas of industry they regulate.

Furthermore, if you have obtained a loan to start your business, the bank is certainly going to
want its money back and continue to be repaid during this time, regardless of what happened between
you and the franchise. If you close your business prior to paying off the loan, your loan is likely in default
and can be accelerated by the bank. If this loan is backed by the SBA, that also means that Taxpayers will
end up reimbursing the bank for the losses and then send the U.S. Treasury to accept pennies on the dollar
in the ensuing bankruptcy proceedings. It is also my belief that when this happens, in the case that the
Taxpayer coffers are diminished due to a partially or wholly uncollectible bankruptcy action resulting from
this behavior, that the Government itself may have become a victim of Franchise Fraud.

The other side of this story is where the Franchisee continues in business, unable to thrive in a
system that does not work for them. This creates an environment where Franchisees are afraid to speak
up without fear of reprisal, fully aware that the Franchisors will terminate the agreement without
hesitancy, and pursue for legal damages after the fact. This creates an industry where no one will warn
prospects about the shortcomings of the system in the due diligence process, because they themselves
are fearful of the Franchisor finding out they spoke negatively about them, and again, using contractual
means to enforce this.

The reality of this situation is that it creates a nightmare scenario where the Franchisor can
operate more as an extortion racket than an actual franchise, since it is fact that at least one unethical
Franchisor and their legal team can and will:

• • Cease Providing contractually called for Training to the Franchisees and their New Hires.³

• • Cease Producing Disclosure Documents and Sales of New Units, killing the brand’s viability.⁴

• • Place in front of the Franchisee an Addendum to the Franchise Agreement to sign them over to
    the Franchisor’s latest venture, that actively competes against existing Franchisees in their own
    territory, with a strong release for fraud, or stay behind in an abandoned system.⁵

• • Continue to sue those who merely want to walk away and move on with life, even after being
    found liable for fraud by a regulatory authority. ⁶

• Pursue Criminal Contempt Charges against Franchisees who don’t pay their judgement for the
  court awarded Legal Fees. ⁷

This is what it looks like when accountability is a one-way street. This is what is currently not
only possible, but actually happening in franchising realm as we speak.

Do the Right Thing

I will be the first to point out that the franchising experience I’ve had is atypical, and I certainly
recognize that not all Franchisors capitalize on these behaviors, nor do I want to paint the industry with a
broad brush. In truth, I would not hesitate to purchase another franchise again.

The tough reality is that current laws and regulations provide for an environment that is perilous
for Franchisees. Now that this issue has been brought to the forefront of franchising issues, it is important
we address it. This letter does not even scratch surface on the true human cost of the impacted
Franchisees being unable to defend against this behavior, from numerous bankruptcies, ruined college
plans, retirements that are now deemed impossible, broken families, the list goes on.

The phrase “The standard you walk past is the standard you accept” is applicable in this case. I
am glad to see a group such as NASAA willing to not walk past this lapse in franchising and is willing to
help restore integrity in the system.

”I am glad to see a group such as NASAA willing to not walk past this lapse in franchising and is willing to
help restore integrity in the system.”

–  Former Franchisee Brandon Moore

I would like to end with a quote that appeared in a Franchise Times Interview in October of 2015,
in which David Lopez, Founder and CEO of Dental Fix Rx, is repeating advice he received from his Attorney,
whose firm he used to sue me in order to extract a $97,000 judgement8, notable Industry Legal Expert and
Franchisee Rights advocate Robert Zarco:

“You know the attorney Robert Zarco, who represents only Franchisees, but he also represents me and he
represents any company I’m involved with. I call him up, and he says, ‘David, do the right thing.’ At the end
of the day, you have to live with yourself.”⁹

I think everyone should take Robert Zarco’s advice when it comes to these types of issues and do
the right thing. Adopting the proposed policy is exactly that.

Very Respectfully,
Brandon Moore

¹ SEC-2018-00041, Settlement Order, Commonwealth of Virginia State Corporation Commission, Division of
Securities and Retail Franchising, November 20, 2019,
² S-19-2776-20-CO01, Consent Order, Washington State Department of Financial Institutions, Securities Division,
June 3, 2021.

³ Chris Canada Deposition, Dental Fix Rx, LLC vs. Smile 17, LLC et al, Florida Southern District Court, 0:20-CV-62098,
Docket Entry #50, Page 20, Entered on April 2, 2021.
⁴ Eric Masson Trial Testimony, Dental Fix Rx, LLC, vs Practiceworks, LLC, et al, Florida Southern District Court, 0:17-
CV-62218, Docket Entry #156, Page 63, Trial Date March 29, 2021
⁵ Addendum to Franchise Agreement, Dental Fix Rx, LLC vs. Smile 17, LLC et al, Florida Southern District Court,
0:20-CV-62098, Docket Entry #50, Page 78, Entered on April 2, 2021
⁶ Letter to Eric Masson, Dental Fix Rx, LLC vs Global Dentistry Solutions, LLC, Broward County Civil Court,
CACE21012982, Initial Complaint , Page 153, Entered June 29th, 2021
⁷ Motion for Order to Show Cause why Defendant should not be held in Criminal Contempt of Court, Dental Fix
Rx, LLC vs ART Services, LLC, Broward County Civil Court, CACE17020450, Entered on July 25th, 2019.
⁸ Final Judgement, Dental Fix Rx, LLC vs. Practiceworks, LLC et al, Florida Southern District Court, 0:17-CV-62218,
Docket Entry #148, Entered on May 14th, 2021
⁹ Dental Fix CEO Learns his Lessons one sip at a time, Interview with David Lopez, Franchise Times,

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About Brandon Moore:

Brandon Moore was a franchisee of DentalFix RX from  August, 2015 to October, 2017 (2 years 3 months). 

In two short years, Brandon was able to grow the business to more than 140 clients, and nearly $250,000 in billables per year. 

A resident of Northern Virginia, Brandon Moore is an outspoken advocate  for fair franchising practices and legal reform.

In 2020, Brandon was invited by the Federal Trade Commission (FTC) to participate as a panelist for its formal review of The Franchise Rule.

TAGS: NASAA, North American Securities Administrators Association, Federal Trade Commission, FTC, Franchise Legislation, Franchise Disclosure Document, FDD, NASAA SOP, Brandon Moore, DentalFix RX, Dental Fix,  David Lopez, Dental Whale, Robert Zarco, Robert Einhorn, Franchisor questionnaires