NY BAGEL CAFÉ SCAM Claims Validated by VA Corporations Commission
NY Bagel Café ads continue to run on Craig’s List promising opportunity seekers a chance to own a Panera-like bagel café for only $24,500 down. We’ve received numerous complaints from victims who paid between $15,000 and $30,000 to Joe Smith and Dennis Mason yet received neither the promised funding nor an operational franchise. The victims and UnhappyFranchisee.com have been urging law enforcement to shut down the NY Bagel Café franchise scam and help recover lost funds for the victims. Our 2015 complaint prompted the Virginia Attorney General to investigate the NY Bagel Café franchise offering. The Order to Show Cause issued by the Commonwealth of Virginia validates what this website and the victims it is assisting have claimed is true: That NY Bagel Café is violating state and federal franchise laws and decieving trusting opportunity seekers.
(UnhappyFranchisee.com) New York Bagel Enterprises (one of the franchisor entities of NY Bagel Café), founder Joseph “Joe” Smith and franchise seller Dennis Mason (aka Keith Samuels) are facing penalties that could include payment of full restitution to its Virginia victims, civil penalties, repayment of the costs of the investigation, and an injunction barring future violations.
A Virginia State Corporations Commission investigation determined that Dennis Mason and Joe Smith collected $61,000 in franchise fees from three Virginia residents despite not being registered to sell franchises in the state.
Furthermore, the Commission determined that Dennis Mason and Joe Smith provided documents to prospective franchisees that contained material misrepresentations and omissions regarding prior litigation and the failure rate of NY Bagel Café stores.
Read excerpts below, or click here for a PDF of the 9-page order:
The Virginia Commission’s findings of illegal franchise sales by NY Bagel are consistent with those of the Maryland Attorney General:
NY BAGEL CAFÉ Franchise Fraud Investigation by MD Attorney General
The Virginia charges are also consistent with multiple lawsuits going back many years, listed here:
Joe Smith, Dennis Mason & NY Bagel Café Franchise Exposed: 10 Things You Should Know
Here are excerpts of the investigation by the Virginia Corporations Commission Order to Show Cause.
Have you paid money for a NY Bagel Café & Deli franchise?
Contact us in confidence at UnhappyFranchisee[at]gmail.com
Summary of Allegations Against NY Bagel Café, Joe Smith, Dennis Mason
Here is the summary of the allegations against NY Bagel Café from the Virginia Corporations Commission Order:
I. Summary of Allegations
I . The Defendants offered and sold three bagel franchises to be operated in the Commonwealth of Virginia (“Virginia”) when the franchise was not registered with the Division. In connection with these sales, the Defendants accepted over $61,000 in franchising fees.
2. When selling these unregistered franchises, the Defendants failed to provide req uired disclosures to franchisees concerning store closings and material litigation involving the franchise. The Defendants also made misrepresentations to franchisees regarding support that New York Bagel would provide regarding financing for franchise locations, logistical support and training.
3. Accordingly, the Defendants violated: (i) § 13.1-560 of the Act by offering and/or selling unregistered franchises in Virginia; (ii) § 13.1-563 (4) of the Act by failing to provide franchisees a disclosure document that had been cleared by the Division; and (iii) § 13.1-563 (2) of the Act by making false statements or material omissions to franchisees in connection with an offer or sale of a franchise.
4. The Division requests restitution, civil penalties, and costs of investigation, and an injunction barring the Defendants from further violations of the Act and from future franchise sales in Virginia.
II. The Defendants
5. New York Bagel is a company organized under the laws of New Jersey with its principal offices located in Rutherford, New Jersey. New York Bagel has never received a certificate of registration as a foreign corporation to transact business in Virginia. As part of its business, however, New York Bagel has offered and sold franchises in numerous states, including Virginia, as well as offered and sold franchises to be located in Virginia.
6. Smith is a resident of New York and the President of New York Bagel.
7. Mason purportedly is a resident of New Jersey and is a franchise sales agent or broker for New York Bagel. Mason is alleged to use at times the alias “Keith Samuels” in connection with his work for New York Bagel.
Joe Smith & Dennis Mason Allegedly Deceived Prospective NY Bagel Franchisees
According to the NY Bagel Order to Show Cause:
…the Defendants informed two of the Franchisees that New York Bagel had 14 stores open as of November 2011 and that no stores had closed from 2008 to 2011. The Defendants, however, failed to inform the Franchisees about new stores opening after 2011 and – more importantly – that at least 17 New York Bagel stores had closed from 201 2 to 2014.
23. Additionally, the Defendants made misrepresentations to the Franchisees about litigation involving New York Bagel. The Defendants informed the Franchisees that the franchise had no history of litigation. New York Bagel, however, was a defendant in at least four civil lawsuits concerning the franchise from 2010 to 2014.
24. The Defendants also represented to the Franchisees during the offer and sale of the franchises that New York Bagel would provide them with assistance in setting up and operating a store – including assistance with obtaining financing, identifying a location and signing a lease, and providing training for staff.
31 . The Franchisees, however, received little or no assistance from the Defendants after signing the Agreements and paying their initial franchise fees.
32. Only two of the three Franchisees have opened for business as a New York Bagel store, and one of those Franchisees already has closed his store. Each of the Franchisees, however, has incurred substantial costs and expenses in attempting to open and operate a New York Bagel franchise – including expenses for rent, renovations and equipment.
NY Bagel Violated the Virginia Retail Franchising Act
According to the Virginia State Corporations Commission, Mason’s & Smith’s deceptive sales practices were in clear violation of the franchise laws designed to protect Virginia residents from such sleazy sales tactics:
32. The Defendants violated § 13.1-563 (2) of the Act, in connection with the sale or offer to sell a franchise i n Virginia, by making untrue statements of a material fact or omitting to state a material fact necessary in order to avoid misleading the offeree. Among other things, the Defendants violated § 13.1-563 (2) of the Act by:
(a) failing to inform the Franchisees about the number of New York Bagel store closings from 2012 to 2014;
(b) misrepresenting that New York Bagel had no history of litigation while failing to disclose at least fom civil lawsuits concerning the franchise; and
(c) misrepresenting that New York Bagel would provide assistance with obtaining financing, identifying a location and signing a lease, and providing staff training.
NY Bagel Given a Chance to Respond
The Virginia State Corporations Commission now gives the defendants an opportunity to respond to the allegations.
They’ve assigned a Hearing Examiner who will conduct all further proceedings and file a final report.
On January 1 1, 2017, at 10 a.m., the Commission’s Hearing Examiner shall convene a hearing in this case in the Commission’s Courtroom, Second Floor, Tyler Building, 1300 East Main Street, Richmond, Virginia 23219, at which time and place the Defendants may appear and show cause why:
(i) the Defendants should not be requested to make restitution to the Franchisees pursuant to § 13.1-570 of the Act;
(ii) the Defendants should not be penalized pursuant to § 13.1-570 of the Act;
(iii) the Defendants should not be permanently enjoined from violating the Act pursuant to § 13.1-568 of the Act;
(iv) the Defendants should not be assessed the costs of investigation pursuant to § 13.1-567 of the Act; and
(v) the Defendants should not be subject to any other sanctions authorized by the Act. The Defendants should understand that the Commission may enter a default judgment against the Defendants should the Defendants elect not to appear at the hearing scheduled herein.
(4) On or before November 4, 2016, the Defendants shall file with the Clerk of the Commission a responsive pleading in which the Defendants expressly admit or deny the allegations contained in the Rule and present any affirmative defenses to the allegations that the Defendants intend to assert. If the Defendants present any affirmative defenses, they shall set forth in their responsive pleading a full and clear statement of all the facts upon which the Defendants are prepared to prove such affirmative defenses. The Defendants shall expressly indicate in such responsive pleading whether or not they desire and intend to appear and be heard before the Commission on the scheduled hearing date. If not filed electronically, an original and eight (8) copies of the responsive pleading shall be delivered to Joel H. Peck, Clerk, State Corporation Commission, c/o Document Control Center, P.O. Box 2118, Richmond, Virginia 2321 8, and shall contain the caption setting forth the style of this case and its number.
(5) The Defendants may be found in default if they fail to either timely file a responsive pleading as set forth above or other appropriate pleading or if the Defendants file such a pleading and fail to make an appearance at the hearing. If found in default, the Defendants shall be deemed to have waived all objections to the admissibility of evidence and may have entered against them a judgment by default imposing some or all of the aforesaid sanctions permissible by law.
(6) The Defendants may offer to negotiate a settlement of this matter by telephoning the Office of General Counsel at (804) 371 -9671. Any negotiated settlement is subject to approval by the Commission.
Have you paid money to NY Bagel Cafe and feel you’ve been defrauded? Contact us in confidence at UnhappyFranchisee[at]gmail.com
Law enforcement and attorney generals can contact us for victims willing to share their stories and experiences.
Check back for new posts being published on an ongoing basis.
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NY Bagel Café Franchise Scam Overview