Planet Beach Franchise Warning has been issued by UnhappyFranchisee.com.
Planet Beach Franchising Corporation has issed a response to our franchise warning here:
PLANET BEACH Responds to UnhappyFranchisee.Com Franchise Warning.
[Originally published July 9, 2012)
Are you considering investing in a Planet Beach Contempo Spa franchise? UnhappyFranchisee.com urges you to investigate fully and proceed with caution. Please hire a competent and unbiased industry attorney or professional to assist with your due diligence.
Are you familiar with the Planet Beach franchise opportunity or do you own a Planet Beach franchise? Please share your opinion and experiences – good or bad – with a comment below.
Why has UnhappyFranchisee.com issued a Franchise Warning for the Planet Beach franchise? There are several reasons.
Planet Beach Franchise Owners Have an Unacceptably High SBA Loan Default Rate of 57%.
The Planet Beach franchise has one of the worst SBA loan default rates in the industry.
A report released in 2012 by the US Small Business Administration (SBA) indicated that 57% of the Planet Beach franchise owners who were granted SBA guaranteed loans were unable to repay those loans. The actual failure rate of Planet Beach franchises may be higher than 57%, as it could be assumed that those with SBA loans were better better qualified and better financed than those without SBA financing.
Tanning salon franchises as a group demonstrated alarmingly high SBA franchise loan default rates on the 2012 list, including the Planet Beach franchise (57%), Image Sun franchise (70%), Executive Tans franchise (81% ) and Hollywood Tans franchise (37%).
The Planet Beach Franchise Chain is Closing Centers at an Alarming Rate
According to the Planet Beach’s listing in Entrepreneur magazine, the number of Planet Beach franchises operating in the U.S. has declined by 34% since 2008. While this reflects an overall decline of 128 Planet Beach franchises, it is likely that more than 128 franchises have ceased operation.
[CHART] The Shrinking Planet Beach Franchise Chain
|# of Planet Beach US Franchises||375||361||302||267||247|
|Difference from prior year||-14||-59||-35||-20|
Planet Beach Franchise Marketing is Misleading
UnhappyFranchisee.com has reviewed the Planet Beach franchise marketing literature and the Planet Beach Franchise Disclosure Document.
The Planet Beach “Franchise Report 2012” states:
The first tanning spa — and the spas that followed — were an overnight success. The Planet Beach franchise system grew to several hundred locations and many foreign countries. Today, there are over 340 franchise units in 38 states and 9 foreign countries. The company is still based in New Orleans and the original uptown location is still posting great numbers.
Planet Beach is attempting to paint a picture of steady growth, when the reality is that their system has been in decline since 2008. It is a bright red flag that the Planet Beach FDD lists 272 US and foreign locations, yet the Planet Beach digital brochure (which can be easily updated) claims there are 340 total franchise units.
Industry statistics in the brochure are outdated, reflecting industry sales numbers and growth from before the economic downturn.
In the past year, the Planet Beach stopped providing average gross sales in its Item 19 Financial Performance section of the FDD, and now only provides sales data on its top grossing salons. In its “Franchise Report 2012,” it’s pretty obvious that Planet Beach is trying to feed franchise buyers’ inclinations to focus on unrealistic, best-case scenarios:
How Much Can I Make?
Quite frankly, it’s up to you.
Nobody wakes up in the morning and says to themselves “I want to be average today,” yet
most people focus on averages when they research buying a franchise.
Average is average…
We want people who see themselves as potential top-producers and can’t wait to break our records.
If you want to be above average, we can tell you how.
In other words, Planet Beach wants unrealistic dreamers who will not be prepared for average or below-average sales.
Planet Beach Franchise Lawsuits
Perhaps as a result of the warning factors stated above, the Planet Beach Franchise Disclosure Document (FDD) lists quite a bit of franchise litigation it is required to disclose.
It’s important to note that if your franchise fails before the end of your contract, the franchisor may sue you for future royalties you would have paid had you remained open. Failing franchisees often sue their franchisor. It seems Planet Beach has had lawsuits of both kinds.
Here are some excerpts:
Planet Beach Franchising Corporation v. David and Rachel Marsh (No. 12-cv-0045l, United Slates
District for the Eastern District of Louisiana).On February 17. 2012. Planet Beach Franchising
Corporation filed suit against David and Rachel Marsh seeking damages arising out of a Single Unit
Franchise Agreement. PBFC alleged, inter alia, that David and Rachel Marsh breached their obligation to
make monthly royalty payments. PBFC also alleged that David and Rachel Marsh abandoned their Spa
and opened a new spa in the same territory, in direct violation of the covenant not to compete. Finally.
PBFC alleged that the Marshes had misappropriated confidential customer data and other proprietary
business information owned by PBFC- PBFC sought $221.894.31 in monetary damages, in addition to
attorney’s fees and costs due under the contract. PBFC also sought a preliminary and permanent
injunction, barring the Marshes from operating a competing spa or misappropriating PBFC’s confidential
or proprietary information. As of the date this summary was prepared, the Marshes had been served with
a copy of the complaint but had not filied responsive pleadings.
Planet Beach Franchising Corporation v. Michael Daubney lAAA AAA-No. 69 114 54 12). On March 7.
2012. Planet Beach Franchising Corporation sent a Demand for Arbitration to Michael Daubnev pursuant
to an arbitration agreement contained in a Single Unit Franchise Agreement- PBFC alleged in its demand
that Mr. Daubnev had failed to remit monthly royalties and fees due under the contract. PBFC sought an
award of monetary damages, in addition to attomey’s fees and costs. As of the time this summary was
prepared, no file number had been assigned by the American Arbitration Association, and Mr. Daubney
had not responded to PBFC’s arbitration demand.
Planet Beach Franchising Corporation v. Domenick and Allison Siciliano (No, ll-cv-02634. United
States District Couit for the Eastern District of Louisiana). On November 20. 2011. Planet Beach
Franchising Corporation filed suit against Domenick and Allison Siciliano seeking damages for breach of
a Single Unit Franchise Agreement. PBFC alleged, inter alia, that the Sicilianos’ had failed to
honor their obligation to make monthly royalty payments. PBFC later learned that the Sicilianos had
illegally transferred their salon/spa to a third party with the assistance of a national broker known as R.D.
Cessna and Associates. PBFC sought a judgment equal to the amount of all past and future royalties due
through the end of the contractual term, in addition to attorney’s fees and costs. On March 3. 2012. The
Sicilianos agreed to enter into a consent judgment and pay PBFC S35,0O0.
James R. Barnhill and Lara Bamhill v. Planet Beach Franchising Corporation (No. 04 CVS 011235,
Superior Court Division in Wake County, State of North Carolina). On August 12, 2004, our franchisees,
Mr. and Mrs. Bamhill filed an action in which they alleged breach of contract and specific performance
arising from a purported award by PBFC of an Area Representative Agreement to the Bamhills. On
November 24, 2004, Mr. and Mrs. Bamhill dismissed the action without prejudice. Thereafter, on or
about December 7 of 2004, the parties reached an amicable resolution in which PBFC awarded Mr. and
Mrs. Bamhill an Area Representative Agreement and granted them an option to acquire an additional
franchise at a discoimted price.
Other actions (See FDD for details and many more lawsuits):
Planet Beach Franchising Corporation v. James Barnhill et. ux.. (No. 68909-5-N in the 24ih Judicial
District Court. Parish of Jefferson. State of Louisiana).
Steadman Concepts. Inc. v. Planet Beach Franchising Corporation (No. 2:09-cv-07008-CJB-JC\V In the
United States District Court for the Eastern District of Louisiana).
James and Lara Barnhill v. Planet Beach Franchising Corporation (AAA No. 69 114 00132 10).
Michael and Sukie Chappuis v. Planet Beach Franchising Corporation; (No. 689880-G in the 24th judicial
District Court. Parish of Jefferson. State of Louisiana).
Seller and Associates, L.L.C. and Michelle Seller, individually and d/b/a Planet Beach West Esplanade v.
Stephen P. Smith. Nancy Price, Richard L. Juka, Planet Beach Franchising Corporation.
Bryce and Neda Burk v. Planet Beach Franchising Corporatiom (No. 017-190429-01, 17th District Court,
Tarrant County, Texas).
Melissa Smith. Bumell Smith and Vita Amoure. L.L.C. v. Planet Beach Franchising Corporation? (No.
366-02108-01, 366th District Court, Collin County, Texas).
Jeffrey A. Brewer, individually. Bert R. Struck, individually. Robert F. Struck, individually and Sun
King. L.L.C. v. Planet Beach Franchising Corporation and Planet Beach Tanning Salon Inc., Stephen P.
Smith and Ronald Simmons (No.CV0406488, Circuit Court of Jefferson County, State of Alabama).
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