Legacy Academy has had a number of former franchisees accuse (and successfully sue) the company for allegedly making misleading, deceptive and/or unlawful financial representations during the franchise sales process.
UnhappyFranchisee.Com has volunteered to share concerns about certain representations being made on the Legacy Academy franchise sales webpage.
We offer our concerns in the hope that future Legacy Academy franchisees cannot claim that they were enticed by promises of success and abundant student enrollment from the start.
Here’s our letter to Legacy Academy franchisors Melissa & Frank Turner, sent to them via their attorney Kathleen Hart:
Frank & Melissa Turner
Legacy Academy, Inc.
4536A Nelson Brogdon Blvd.
Sugar Hill, GA 30518
January 27, 2014
Dear Frank & Melissa:
I am the person who contacted you last August asking for comment, clarification, rebuttal, etc. etc. regarding the news (posted on UnhappyFranchisee.Com) that Legacy Academy has now lost a bunch of lawsuits and over $1M in judgements to unhappy franchisees. The most serious allegations, I believe, involved you making prohibited earnings claims and/or promises of performance to prospective franchisees.
I didn’t get a response for 5 months, then received your attorney Kathleen Hart’s letter on January 24th, 2014 objecting to our use of your logo in proximity to our URL, and warning use not to make libelous comments. I think we’ve complied with her requests and put that behind us. No hard feelings on our end. She seems very nice. In the future, feel free to just shoot us an email with any requests – I imagine threatening letters from attorneys of Ms. Hart’s caliber get expensive!
I know that no one truly wins these franchise lawsuits. Even though your franchisees appear to have “won,” I’m sure they would rather not have gone through the ordeal in the first place. And from your standpoint, you not only have to pay (I imagine) significant attorney fees, judgements, and other legal bills, you have to try to sell franchises with a bunch of litigation disclosed in your FDD and negative stories about you on the Internet.
I’m sure you’d rather avoid going through that aggravation ever again! From our standpoint, we’d rather move on to other topics and never write about Legacy Academy franchise lawsuits in the future.
In the spirit of helping you reduce the likelihood of Legacy Academy getting sued (and losing) future lawsuits based on the marketing representations posted on your website, please accept the suggestions below in the constructive spirit in which they’re intended.
The Legacy Academy website states: “Legacy Academy offers investors an exciting opportunity to earn a profitable return, while helping families and children with our very successful Daycare Franchises.”
With all due respect, do you really think it wise to promise a “profitable return” to investors? I was taught it was always bad for franchisors to even mention the word “profit” because they have no control over franchisee profitability, what expenses they run through the business, etc. Also, do you think it’s prudent to refer to your franchises as “very successful””? I don’t know what your failure rate is, exactly, but this seems like a representation that could come back to bite you. At least several, it seems, have not been successful.
The Legacy Academy website states: “Legacy Academy’s, success is tied to the success of each new childcare franchisee…”
The old saw that franchisors only make money when their franchisees make money is clearly in dispute. I think I recall allegations of making money on real estate sold to Legacy Academy franchisees, construction, etc. (I could be wrong). Plus royalties are collected on gross sales, not profits, right? So it’s conceivable you could make money even if a franchisee is unsuccessful, correct? Someone could make the claim that this was an inaccurate and misleading statement.
The Legacy Academy website states: “Franchise operation is not for everyone but it is one of the most secure forms of business operation available…”
Do you have a source that validates your claim that franchises are one of the most secure forms of business operation? Several studies and a report by the SBA suggest that franchises are, in fact, riskier than independent business startups. Again, how many Legacy Academy schools have opened and closed? Someone could challenge your assertion that the Legacy franchise is one of the most secure forms of business, could they not?
The Legacy Academy franchisee video may violate Federal Trade Commission (FTC) regulations
Now I’m not an attorney and I’m not saying you are violating FTC regulations, but if I were you I’d have your attorneys take a good hard look at the content of the Cindy Agnew franchisee testimonial that you’ve put on YouTube and your website.
It’s my understanding that franchisees are free to share their enrollment or sales numbers with prospective franchisees directly, but testimonials posted in franchise marketing materials or on the franchisors website are just the same as if the franchisor stated them directly.
It’s also my understanding that franchisors are prohibited from providing sales or performance representations unless they disclosing them in Item 19 of the FDD, unless they provide the factual basis for the representations, and unless they include disclaimers such as the fact that prospective franchisees might not achieve the same results.
In the video, the Greenville, SC franchisee state that, despite being in a recession, “Our first summer we had 22 kids… we filled up to just over 180 children… We started with just 22 kids and we’d eventually have a waiting list that is about 40 deep…”
Cindy Agnew states that 250 people attended her center’s graduation ceremony, and that she already has 9 kids signed up for her second facility months ahead of opening. Prospective franchisees may feel that Cindy’s is the typical result that they can expect.
As I haven’t reviewed your Franchise Disclosure Document (I would be glad to if you want to share it with me), but I am guessing that Ms. Agnew’s sales representations are NOT included in Item 19 Financial Performance Representations section of the FDD. Maybe they don’t have to be, maybe “enrollment numbers” don’t count as “sales,” but I would think you are in ultra-cautious mode at this point, and would not want to be accused of providing Financial Performance Representations without proper disclosure.
Let me know what you think of these suggestions, and also anything you would like the world to know about your philosophy, practices, and and expansion plans for the Legacy Academy franchise!
All the best,
Read more about the Legacy Academy franchise:
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TAGS: Legacy Academy, Legacy Academy franchise, Legacy Academy child care, Legacy Academy lawsuit, Legacy Academy franchise complaints, Legacy Academy franchise lawsuits, M. Kathleen Hart, Attorney Kathleen Hart, Anderson Tate and Carr, Frank Turner, Melissa Turner, Unhappy Franchisee, Cindy Agnew