At Marks & Klein in Red Bank, NJ, some attorneys are pushing back against fee increases on behalf of a trampoline franchisee association, while others are laying the groundwork for a new association for hydraulic hose franchisees and independent dealers.
(UnhappyFranchisee.Com) When Urban Air Adventure Park franchise owners formed the Adventure Park Franchisee Association (APFA) in 2019, they were grappling with shared concerns about perceived internal threats to their profitability and viability… namely the imposition of fees, mandatory programs and other required changes being forced upon them by their franchisor, Bedford, TX-based Urban Air (UATP Management LLC).
They had no idea that the stakes, and the need to be organized to protect their rights, would rise dramatically within a year.
They had no idea that the COVID-19 pandemic was about to force all of them to close – and pay rent and expenses on huge spaces now sitting empty and deathly quiet.
While the outcome is unclear, the pandemic will undoubtedly create a smaller pie for many industries, concepts and companies… and each side will surely want to grab some of the other party’s slice as theirs is shrinking. Whether smart or lucky, the members of the APFA had the forethought to organize to advocate for their rights and push back against their franchisor’s need to extract a bit of their bottom line to add to their own.
Yesterday, 4/23/20, Marks & Klein attorneys Brent M. Davis and Justin Klein filed a Complaint for Declaratory Judgement on behalf of the APFA vs. UATP Management, LLC in the United States District Court, District of New Jersey.
The complaint states:
1. Defendant, Urban Air, a national franchisor of indoor adventure parks, has unilaterally and unfairly forced a series of system-wide changes on its franchisees in violation of its form franchise agreement and the law, including, without limitation, the imposition of undisclosed fees and the implementation of programs, mandatory vendors and suppliers and material changes to the franchise system in bad faith and with complete disregard for franchisee profitability.
2. The mandatory vendor relationships and changes, programs and initiatives compelled by Urban Air have materially diminished and impaired franchisee profitability to the substantial detriment of franchisees and the significant benefit of Urban Air who is, upon information and belief, collecting millions of dollars in fees, payments, revenues and rebates as a result of these forced relationships and wholesale, material changes which have been imposed.
The APFA is asking the District Court to intervene, and prohibit the franchisor from imposing new and onerous fees and restrictions on franchisees that were neither disclosed nor part of their agreement. Here are the first few:
WHEREFORE, Plaintiff APFA respectfully prays for the following relief
1. For a judicial declaration that:
a. Urban Air may not, without franchisee consent, unilaterally amend the franchise agreements and require the payment of the “Membership Program Fee” of 2.5% to Urban Air.
b. Urban Air may not, without franchisee consent, unilaterally amend the franchise agreements and require the payment of the “NAF Fee” of 5% to Urban Air.
c. Urban Air may not, without the franchisees consent, unilaterally amend the franchise agreements and require the payment of the fees and costs for the development and implementation of the Urban Air Membership Program.
d. Urban Air’s implementation of the Membership Program and associated fees is not permitted under Urban Air’s franchise agreement.
e. The “Amendment to Franchise Agreement (Membership Program)” was procured fraudulently and under false pretenses and is therefore unenforceable.
f. The “Amendment to Franchise Agreement (Membership Program) is unenforceable for lack of consideration.
g. Urban Air may not require franchisees to execute new ACH Authorizations which are inconsistent with terms and provisions of the franchise agreement and that impose obligations which are greater than those agreed upon in the franchise agreement and declare that such authorizations which have been previously signed are unenforceable and in violation of the terms of the franchise agreement.
h. Urban Air may not, without the franchisees consent, unilaterally amend the franchise agreements and require the payment of four percent (4%) of monthly Gross Sales directly to Urban Air for local store marketing services provided by Zimmerman.
i. Urban Air has not negotiated purchase agreements “for the benefit of franchisees” by virtue of the substantial fees, payments, rebates and revenues it has derived and continues to derive based on franchise purchases from mandatory vendors and suppliers.
j. Urban Air through its various actions, as fully detailed herein, abused its authority under the franchise agreements, failed to exercise such authority in good faith and in a commercially
reasonable manner, and has dealt with Urban Air franchisees in bad faith, in an unfair manner and in contravention of the intention and spirit of the franchise agreements.
[and so on…]
While these issues likely predate any notion of an impending pandemic, the Urban Air franchisees have an organization and legal counsel in place to push back and defend their rights as the competition for diminishing profits intensifies.
Mobile Hydraulic Hose Franchisees (PIRTEK USA) and Their Independent Colleagues May Join Forces in New Association
Trampoline parks and industrial hose repair franchisees may be on opposite sides of the franchise industry, but their concerns are being discussed in side-by-side conference rooms at Marks & Klein.
PIRTEK franchisees and their independent counterparts perform mobile hose repair, replacement, and services franchisees and independent operators provide services that are essential to their industrial, municipal and manufacturing clients. They are highly integrated with numerous industries, and they are often available 24 hours per day, 7 days per week, 365 days per year. While it is not yet clear how the pandemic will affect their already-stressful businesses long-term, a group of forward-thinking operators want to make sure they are ready.
According to Marks & Klein Senior Partner Gerald “Jerry” Marks, the purpose of the budding association would be to encourage franchisor-franchisee communications and relations, increase franchisee and dealer awareness through publications and seminars, improve franchise & dealer business conditions, and promote and foster the interests of franchisees of PIRTEK USA, as well as those of independents.
According to Marks, the as-yet-unnamed hydraulic hose association membership may also include dealers of related products and services, including automotive parts, automotive new and used cars, in order to help them to improve their independent dealerships through greater buying power and programs to enhance their common interests.
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