Is It Legal for Franchisors to LIE to Franchisee Investors? (Mike Gould – Hounds Town USA Franchise) Part 1
Franchise sellers claim that “buying” a franchise is a safer path to business ownership since franchising is “highly regulated.” The Franchise Disclosure Document (FDD) & Franchise Agreements (FA) franchisors like Hounds Town USA provide to prospective franchisees give the false impression that someone, somewhere, is protecting the inexperienced & trusting franchise investor. Yet within the hundreds of pages of legalese are clauses that allow franchise sellers like Mike Gould (franchisor of Hounds Town USA) to get away with saying whatever they need to close the sale & get the check… and not be held accountable for even the most blatant lies and deception. by Sean Kelly, Founder, Franchise Truth
I am launching the Franchise Truth for All & Franchise Truth for Veterans initiatives to determine & expose the myths, the dangerous assumptions & the intentionally deceptive propaganda that makes responsible individuals & families vulnerable to polished & deceptive franchise pitches.
Trusting franchisee investors are not the only victims of these lies and half-truths.
Legitimate franchisors & franchise sellers lose qualified franchise prospects to aggressive sellers who are not restrained by ethics or conscience. The American taxpayer foots the bill for the myriad SBA loan defaults repaid to banks that happily dispense loans based on unfounded & inflated sales projections.
I propose & offer for discussion what I believe to be the first, of many, Franchise Truths:
I expect some will disagree that the use of fraudulent misrepresentations and blatant lies to lock someone into a 10 or 15 year agreement, hundreds of thousands of dollars and loss of their freedom of speech is legal.
But the practical truth is that franchise sellers can – and do – tell blatant lies to franchisee investors without serious consequence.
It must be legal because it’s done all the time with no civil or criminal penalties.
It seems hard to believe that there is robust protection for the buyer of a $50 stock but none whatsoever for a family investing $500,000 in a franchise opportunity… but it’s true.
Don’t believe me?
I will provide many documented examples in posts to come – and invite readers to submit more.
But first, let’s take a look at the untrue franchise claims franchisor Mike Gould has publicly used since 2018 to sell Hounds Town USA doggy day care franchise opportunities.
In Part Two I’ll feature the real-life effect of these lies: A couple that allegedly lost more than $600,000, including their retirement savings, in the 2 YEARS it took to get their ill-fated Hounds Town USA franchise location open.
For the past six years, Mike Gould’s Hounds Town USA “Franchise Show” on YouTube has promoted a number of representations designed to convince prospective franchisees that they are protected by strict governmental regulations.
In this video, Gould states that there is state-level oversight of franchisors like Hounds Town USA.
Gould falsely states that franchisors must register their franchise in every state in which they do business.
While there are a few states that require franchise registration, and fewer still that actually read and respond to submitted Franchise Disclosure Documents (FDDs), the vast majority require no registration or “license” as Gould states.
There is no Federal oversight or enforcement of individual franchise sellers either… which is one reason Gould’s false statements are allowed to circulate for 6 years.
As the “required” wording on the Hounds Town USA FDD states: “…No governmental agency has verified the information contained in this document.”
Contrary to Gould’s representation of the FDD & Franchise Agreement (FA) as protecting the franchisee “consumer,” these are one-sided document drafted to give the franchisor nearly unlimited power over the franchisee and the franchise relationship.
There are two standard clauses in the FDD that give franchisors like Hounds Town USA a license to lie.
The standard “merger & integration clause” states that the Franchise Disclosure Document (FDD) and its attachments “constitutes the entire understanding and agreement between Franchisee and Franchisor and supersedes all prior understandings, whether oral or written…” (Hounds Town USA 2014 Franchise Agreement).
So… if a franchisee realizes that they relied on blatant lies on the website, in the brochure, at Discovery Day, and/or in the franchise sales video, franchisors can point out that they signed an agreement saying they only relied on what’s in the FDD…. and nothing else.
In the Hounds Town USA FDD, that clause is on page 148 of 235 pages of legalese.
Another clause puts a short one-year statute of limitations to bring a fraud claim (potentially superseding state statutes of three or four years).
In the franchise lawsuit filed in U.S. District Court for the Western District of North Carolina, Charlotte Division, (BIGELOW CORPORATION AND SARAH BIGELOW v. HOUNDS TOWN USA, LLC, and ELEVATE DESIGN AND BUILD), HTU pointed out that the franchisees had a one-year statute of limitations from the moment that the alleged fraud occurred to sue.
So… by the time the franchisees realize they’d been lied to and wouldn’t be able to survive the deception, after two years of struggling to get open, they were prevented from legal remedy even if blatant fraud had occurred.
In the case of the Bigelows, the nightmarish year (70 weeks) it took to get open effectively ran out the clock on their ability to seek legal remedy.
They lost $600,000, including their retirement, based on the claim of support that Mike Gould & Jackie Bondanza continue to promise in their video and on their website.
In the franchise video currently posted to the Hounds Town USA YouTube channel, Mike Gould states:
The fact that these inexperienced franchisees paid substantial fees based on Mike Gould’s expertly induced trust… and that Gould, Bondanza & Hounds Town USA appear not to have fulfilled their publicly stated promises… do not seem to matter in this “civil” court.
Though U.S. District Judge Frank D. Whitney rather brutally admonished the Bigelow’s attorney (Jackson Williford of Williford Law) for procedural errors, it was the 234 pages of franchisor legal advantage that gave Hounds Town USA the license to lie and a total dismissal.
Those considering signing a franchise agreement would do well to read Judge Whitney’s Hounds Town Lawsuit Dismissal Order and note the underlying message:
If you find a franchisor or franchise seller you’re sure you can trust… don’t.
WHAT DO YOU THINK? SHARE A COMMENT BELOW.
OPEN INVITATION*: The opinions expressed here are that of the author and are just that: opinions. I’m not an attorney and welcome corrections to my legal interpretations (or anything else). Unhappy Franchisee extends an open invitation to all those discussed to provide corrections, explanations, clarifications and/or rebuttals. We will correct factual errors & alternative views fairly. Anonymous or signed comments are welcome below or can be emailed in confidence to UnhappyFranchisee[at]Gmail[dot]com.
Images, trademarks & video clips are the property of their respective owners and used herein under the Doctrine of Fair Use for educational purposes. We are independent and not affiliated with any of the entities discussed nor their competitors.
Sean Kelly is an independent investigative journalist with 35 years of franchise industry experience. Since founding UnhappyFranchisee.Com in 2006, his reporting has exposed & shut down several predatory franchise & investment schemes. Sean Kelly is a franchise watchdog who prompted and aided the FBI investigation that shut down the 165-victim multi-million-dollar NY Bagel franchise scam and landed perpetrators Dennis Mason & Joseph Smith in federal prison. Sean was featured in the ABC Four Corners expose of 7-Eleven wage theft in Australia and has served as an advisor to Dateline NBC. He has withstood bullying, intimidation & frivolous lawsuits as high as $35M and never lost. His crack editorial staff and fact checkers include Chick, Gem, Red, Pru & Joanie the Rescue Chicken.
Contact the author at UnhappyFranchisee[at]Gmail[dot]com
TAGS: Doggy Daycare franchise, pet franchise, Hounds Town USA, Hounds Town USA Franchise, Mike Gould, Jackie Bondanza, Bill Wotochek, Raintree, franchise regulation, Franchise Truth
* We are Requesting for Input, Corrections, Rebuttals & Other Responses From:
Contributions to the Franchise Truth & Franchise Truth for Veterans initiatives will save countless Veterans and military families from under-informed investment decisions.
Contribute to: Franchise Truth & Franchise Truth for Veterans Initiative
URL: https://www.unhappyfranchisee.com/support-franchise-fairness/
I am launching the Franchise Truth for All & Franchise Truth for Veterans initiatives to determine & expose the myths, the dangerous assumptions & the intentionally deceptive propaganda that makes responsible individuals & families vulnerable to polished & deceptive franchise pitches.
Trusting franchisee investors are not the only victims of these lies and half-truths.
Legitimate franchisors & franchise sellers lose qualified franchise prospects to aggressive sellers who are not restrained by ethics or conscience. The American taxpayer foots the bill for the myriad SBA loan defaults repaid to banks that happily dispense loans based on unfounded & inflated sales projections.
I propose & offer for discussion what I believe to be the first, of many, Franchise Truths:
Franchise Sellers are Legally Allowed to Lie to Prospective Franchisees.
I expect some will disagree that the use of fraudulent misrepresentations and blatant lies to lock someone into a 10 or 15 year agreement, hundreds of thousands of dollars and loss of their freedom of speech is legal.
But the practical truth is that franchise sellers can – and do – tell blatant lies to franchisee investors without serious consequence.
It must be legal because it’s done all the time with no civil or criminal penalties.
It seems hard to believe that there is robust protection for the buyer of a $50 stock but none whatsoever for a family investing $500,000 in a franchise opportunity… but it’s true.
Don’t believe me?
I will provide many documented examples in posts to come – and invite readers to submit more.
But first, let’s take a look at the untrue franchise claims franchisor Mike Gould has publicly used since 2018 to sell Hounds Town USA doggy day care franchise opportunities.
In Part Two I’ll feature the real-life effect of these lies: A couple that allegedly lost more than $600,000, including their retirement savings, in the 2 YEARS it took to get their ill-fated Hounds Town USA franchise location open.
“Franchising is SO Regulated in Favor of the Consumer!” Mike Gould, Hounds Town USA
For the past six years, Mike Gould’s Hounds Town USA “Franchise Show” on YouTube has promoted a number of representations designed to convince prospective franchisees that they are protected by strict governmental regulations.
In this video, Gould states that there is state-level oversight of franchisors like Hounds Town USA.
Gould falsely states that franchisors must register their franchise in every state in which they do business.
While there are a few states that require franchise registration, and fewer still that actually read and respond to submitted Franchise Disclosure Documents (FDDs), the vast majority require no registration or “license” as Gould states.There is no Federal oversight or enforcement of individual franchise sellers either… which is one reason Gould’s false statements are allowed to circulate for 6 years.
As the “required” wording on the Hounds Town USA FDD states: “…No governmental agency has verified the information contained in this document.”
Contrary to Gould’s representation of the FDD & Franchise Agreement (FA) as protecting the franchisee “consumer,” these are one-sided document drafted to give the franchisor nearly unlimited power over the franchisee and the franchise relationship.
Two Clauses Buried in the FDD Give Franchisors a License to Lie
There are two standard clauses in the FDD that give franchisors like Hounds Town USA a license to lie.
The standard “merger & integration clause” states that the Franchise Disclosure Document (FDD) and its attachments “constitutes the entire understanding and agreement between Franchisee and Franchisor and supersedes all prior understandings, whether oral or written…” (Hounds Town USA 2014 Franchise Agreement).
So… if a franchisee realizes that they relied on blatant lies on the website, in the brochure, at Discovery Day, and/or in the franchise sales video, franchisors can point out that they signed an agreement saying they only relied on what’s in the FDD…. and nothing else.
In the Hounds Town USA FDD, that clause is on page 148 of 235 pages of legalese.
Another clause puts a short one-year statute of limitations to bring a fraud claim (potentially superseding state statutes of three or four years).
In the franchise lawsuit filed in U.S. District Court for the Western District of North Carolina, Charlotte Division, (BIGELOW CORPORATION AND SARAH BIGELOW v. HOUNDS TOWN USA, LLC, and ELEVATE DESIGN AND BUILD), HTU pointed out that the franchisees had a one-year statute of limitations from the moment that the alleged fraud occurred to sue.
So… by the time the franchisees realize they’d been lied to and wouldn’t be able to survive the deception, after two years of struggling to get open, they were prevented from legal remedy even if blatant fraud had occurred.
The Hounds Town USA “Silver Platter”: 2 Years & $600,000
In the case of the Bigelows, the nightmarish year (70 weeks) it took to get open effectively ran out the clock on their ability to seek legal remedy.
They lost $600,000, including their retirement, based on the claim of support that Mike Gould & Jackie Bondanza continue to promise in their video and on their website.
In the franchise video currently posted to the Hounds Town USA YouTube channel, Mike Gould states:
Franchisees come into this, saying, “How am I going to do this?
They want to know: How is Hounds Town USA going to support them?
So… we shake hands, we sign agreements & they have to trust me…
They have to look in my eyes and say this guy, he may have a lot of faults, but he’s not a B.S. artist…
It’s straightforward trust between franchisor and franchisee…
“They have to trust me… It’s straightforward trust between franchisor and franchisee…” – Mike Gould
The fact that these inexperienced franchisees paid substantial fees based on Mike Gould’s expertly induced trust… and that Gould, Bondanza & Hounds Town USA appear not to have fulfilled their publicly stated promises… do not seem to matter in this “civil” court.Though U.S. District Judge Frank D. Whitney rather brutally admonished the Bigelow’s attorney (Jackson Williford of Williford Law) for procedural errors, it was the 234 pages of franchisor legal advantage that gave Hounds Town USA the license to lie and a total dismissal.
Those considering signing a franchise agreement would do well to read Judge Whitney’s Hounds Town Lawsuit Dismissal Order and note the underlying message:
If you find a franchisor or franchise seller you’re sure you can trust… don’t.
WHAT DO YOU THINK? SHARE A COMMENT BELOW.
OPEN INVITATION*: The opinions expressed here are that of the author and are just that: opinions. I’m not an attorney and welcome corrections to my legal interpretations (or anything else). Unhappy Franchisee extends an open invitation to all those discussed to provide corrections, explanations, clarifications and/or rebuttals. We will correct factual errors & alternative views fairly. Anonymous or signed comments are welcome below or can be emailed in confidence to UnhappyFranchisee[at]Gmail[dot]com.
Images, trademarks & video clips are the property of their respective owners and used herein under the Doctrine of Fair Use for educational purposes. We are independent and not affiliated with any of the entities discussed nor their competitors.
Sean Kelly is an independent investigative journalist with 35 years of franchise industry experience. Since founding UnhappyFranchisee.Com in 2006, his reporting has exposed & shut down several predatory franchise & investment schemes. Sean Kelly is a franchise watchdog who prompted and aided the FBI investigation that shut down the 165-victim multi-million-dollar NY Bagel franchise scam and landed perpetrators Dennis Mason & Joseph Smith in federal prison. Sean was featured in the ABC Four Corners expose of 7-Eleven wage theft in Australia and has served as an advisor to Dateline NBC. He has withstood bullying, intimidation & frivolous lawsuits as high as $35M and never lost. His crack editorial staff and fact checkers include Chick, Gem, Red, Pru & Joanie the Rescue Chicken.Contact the author at UnhappyFranchisee[at]Gmail[dot]com
TAGS: Doggy Daycare franchise, pet franchise, Hounds Town USA, Hounds Town USA Franchise, Mike Gould, Jackie Bondanza, Bill Wotochek, Raintree, franchise regulation, Franchise Truth
* We are Requesting for Input, Corrections, Rebuttals & Other Responses From:
- Mike Gould, Hounds Town USA
- Jackie Bondanza, Hounds Town USA
- Rob Flanagan, Hounds Town USA
- Ed Bharath
- Shaheid Hasan
- Hounds Town USA franchisees, past & present
- Hounds Town USA attorneys (H. Michael Drumm, Jason James, Adam deNobriga)
- Raintree Growth (franchise sellers)
- Raintree Franchise Broker Bill Wotochek
- Other related parties
Franchise Truth & Franchise Truth for Veterans Initiative
Contributions to the Franchise Truth & Franchise Truth for Veterans initiatives will save countless Veterans and military families from under-informed investment decisions.Contribute to: Franchise Truth & Franchise Truth for Veterans Initiative
URL: https://www.unhappyfranchisee.com/support-franchise-fairness/
Sean Kelly, I can’t speak to Hounds Town USA as I need to learn more about them. However, franchising in that space has appeared to be doing well.
As you rightly point out, there seems to be a lot of ‘Puffery’ in franchising, which is less highly regulated than this franchisor would have anyone believe. Terms like ‘Business in a box,’ ‘Served on a Silver Platter,’ ‘responsible franchising,’ ‘candidate,’ and ‘franchise partner’ often raise my eyebrows. I could go on, but I know you get the picture far better than most. Besides this, we have a character limit.
I’m deeply interested in understanding the details about Sarah & Allen Bigelow. It’s truly saddening to hear about their experience, and it’s crucial to learn from such cases to improve franchising and overcome the bullshit brought to us by the IFA.
Sean, as you know, the need for fair franchising standards is paramount. Many of today’s franchise lawyers repeatedly use onerous, template-form agreements and FDDs with the same miserable terms. Individuals like yourself, and others who advocate for Franchisees are crucial in pointing out the disparities between ‘Fair Franchising Standards©’ and the subpar agreements produced by those who care little about Cherished Franchisee Investors.
As is always the case, your fair and honest post allows those named to respond and perhaps even “fix” the situation for the Franchisees who have lost a tremendous amount of money. We’ll see.
Keep digging. There is a forest fire under this smoke with HT/Jackie/Rob. HTUSA is built on a massive lie and every ad they have also put out is blatantly false advertising. Just go down the FDD and start calling the franchisees. You will find material for the next month on HT and their lies and the unbelievable franchisee wealth destroyed by them. Many are facing ultimate bankruptcy or will make it but have exhausted their retirement. Massive fraud at HT.
Thank you, Sean, for exposing the real Jackie and Mike….and Rob too!!! As the other franchisee in their comments stated, Keep Digging!!! Great work!!