THE BIZOP NEWS

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Richard A. Solomon, Paul Steinberg, and I have often talked about getting proper pre purchase advice before buying a franchise, over at the Blue Mau Mau site for franchise news. We note it generally should cost between $3,000 - $5,000 and between four to six months learn about a franchise. However, very few franchisees, even highly experienced business owners spend the correct amount of time and investigation. Richard and I would rather see you in our office before your franchise purchase, rather than afterwards.

Consider the latest legal result for a group of franchisees trying to obtain redress from a franchisor that the Court ruled had materially mislead them about their purchase.

A group of ten Peaberry franchisees were dished out a major loss in a Colorado district court. The franchisees had taken to the court system alleging that they lost millions of dollars because of a fraudulent franchise system and that they had been misled to buy a franchise by Peaberry's false claims.

In spite of a district judge rendering a decision that Peaberry Coffee Inc. (PCI) defendants actively concealed material financial facts from the franchisees with the intent that the franchisees purchased their franchises ignorant of the true facts, he nonetheless still ruled for the franchisor.

Although Judge William D. Robbins shows that franchisees would have been entitled to $4,211,467 in damages to put them back into the position they were in before purchasing their franchises, he instead surprised many and ordered the franchise owners to pay Peaberry for back-royalties and incurred attorney fees.

Why did this happen? The answer is simple. The franchisees relied upon information given to them by the franchisor, in marketing materials and orally, which contained information that was not in the Franchise Disclosure Document. Further, they signed - without really knowing it- a franchise agreement which contained an integration clause. The integration clause prevents the franchisee from relying upon anything other than what it is in the Franchise Disclosure Document.

These franchisees were experienced business people, who used professional counsel, but failed to engage in proper due diligence - a prepared checklist of the incongruence between what was being relied upon and what was in the Franchise Disclosure Document.

Don't purchase disclosure advice from an attorney who "reads" the contract to you; you need much more than this, unless you want to lose $500,000, your mental health and family support.