Many prospective & current franchisees incorrectly assume that, if they are blatantly lied to, fraudulently induced or otherwise treated unfairly, there is a sympathetic judge or arbitrator who will surely mete out justice and hold their franchisor accountable once he or she hears their compelling story. The Franchise Truth is that Judges & Arbitrators aren’t guided by what’s fair, what’s right or what’s ethical. It’s all about what’s in that big fat contract the franchisee signed – but didn’t read. by Sean Kelly, Founder, Franchise Truth
You may contact the author in confidence at UnhappyFranchisee[at]Gmail[dot]com (
UnhappyFranchisee.Com) This is the second part of a series.
Related content: Is It Legal for Franchisors to LIE to Franchisee Investors? (Mike Gould – Hounds Town USA Franchise) Part 1 Hounds Town USA Fact Check 1 Hounds Town USA Franchise Warning There are two great franchise realizations that come crashing down on many of the franchisees I hear from.
The first is the realization that people they thought they could trust looked them right in the eye and lied in order to get their signature on their franchise agreement and their franchise fee (or commission check) in their bank account.
The second realization is that the franchisee had mistakenly assumed that there was a law enforcement and legal system that would come to their aid if they were cheated, treated unfairly or fraudulently induced into investing their life savings in a particular franchise.
Decades of franchise industry propaganda and misinformation has established the widespread belief that franchising is a “regulated industry,” like securities or banking.
It’s simply not true.
Franchisees who believe they’ve been defrauded (and want justice) end up either in civil court or private arbitration – two venues that are, for the most part, unsympathetic to the story franchisees think will win them over.
I truly sympathize with franchisee attorneys who receive calls on a daily basis from unhappy franchisees seeking
justice or at least
fairness from the legal system.
In my experience as an active observer and student of franchisee unhappiness, I submit this observation:
Judges and arbitrators, as a general rule, don’t base their decisions on right or wrong, on fairness nor on ethical considerations.
Their decisions will be based on 1) technical points of law non-lawyers rarely understand, and 2) contract terms franchisees unwittingly agreed to in the fat legal contract most never read nor paid to have reviewed.
The story of Hounds Town USA franchisees Sarah & Allan Bigelow clearly illustrate this point and provide a cautionary tail (pun intended) for anyone considering a franchise investment.
Mike Gould “They’ve Got To Trust Me!”
“We Trusted Him…” – Hounds Town Franchisees Who Lost Everything
I believe it’s likely* that franchisees Sarah and Allan Bigelow were misled by franchisor Mike Gould…
It’s likely they didn’t receive the promised support they were told they’d receive…
And it’s likely true that they lost $600,000 and their retirement savings during the nightmarish two years it took to get their Hounds Town USA doggy daycare franchise open.
Allan Bigelow says that Mike Gould had assured him he did not need any construction knowledge, experience or even involvement.
Gould had allegedly told him that if he hired their construction manager, that manager would simply hand him the keys to his brand new franchise facility on opening day.
This sounds consistent with Mike Gould’s video representations that Hounds Town USA franchisees are given “a business on a silver platter.”
Even today, the Hounds Town USA website promises “Our dedicated franchise team is here to help you quickly and affordably open your dream doggy daycare business…”
And “We also help find the right General Contractor for the job to open as quickly and affordably as possible…”
Hounds Town USA even charges a $20,000 “Launch Fee” in addition to the Franchise Fee:
The Launch Fee offsets our costs in supporting your efforts to open the Hounds Town USA Business, design approval and vetting of construction professionals…
Gould set up the Bigelows with their designated construction manager at the time, Ed Bharath, and left them to struggle on their own.
*
This, of course, is my non-lawyer opinion. But these points were never disputed by the judge nor argued against. And the Bigelow’s contentions are consistent with Mike Gould’s statements in public videos. Hounds Town USA Disavows Any Responsibility or Control in the Construction Process
After a series of construction fiascos over two years that devastated the Bigelows both financially and emotionally, Hounds Town USA denied that it had any responsibility for or involvement with the construction process.
“[Franchisees] are responsible for the buildout and because [the Bigelows] had the contract with the contractor, there was not much [Hounds Town USA] could do,” they stated in a legal filing.
The Charlotte Franchisees Sue Hounds Town USA For Fraud… And Lose
Believing they were blatantly lied to and fraudulently induced into investing in a Hounds Town USA franchise, the franchisees sued.
The Bigelows used the last of their retirement savings to hire attorney Jackson Williford of Williford Law and sued Hounds Town USA January 20, 2023 (Bigelow Corporation and Sarah Bigelow v. Hounds Town USA, LLC CASE NO. 3:2023cv00134, US District Court for the Western District of North Carolina).
The Bigelows complaint alleges that Hounds Town USA committed fraud, unfair and deceptive trade practices, negligent misrepresentation, breach of contract, unjust enrichment, negligence, negligent infliction of emotional distress, and punitive damages.
The entire case against Hounds Town USA was dismissed with prejudice on August 2, 2023.
Judge Cites the “I Agree That I Wasn’t Lied to Even If I WAS Lied To” Clause (My Interpretation) U.S. District Judge Frank D. Whitney heard the franchisees’ entire story but focused strictly on contract terms the Bigelows likely didn’t know they’d agreed to.
The judge cited two clauses in the franchise agreement in dismissing most of the counts.
In his dismissal or, Judge Frank D. Whitney cites the standard
merger and integration clause from the Hounds Town USA the Bigelows signed:
Franchisee agrees and acknowledges it has not been induced to enter into this Franchise Agreement in reliance upon, nor as a result of, any statements, representations, warranties, conditions, covenants, promises or inducements, whatsoever (oral or written), whether directly related to the contents of this Franchise Agreement or related matters, made by Franchisor, its officers, directors, agents, employees or contractors except as stated in this Franchise Agreement…
At the time they signed the agreement, the Bigelows had signed a statement that they had not relied on any statements other than what was in the Franchise Agreement & related documents.
In essence, they stated that they had not relied on anything Mike Gould, Jackie Bondanza or other sales representatives had told them.
They signed a document that they hadn’t relied on anything relayed to them in Mike’s video, or in the brochure, in franchise ads or on the website.
To put it another way, at the very moment that they were fully sold on the trustworthiness of the franchisor
they agreed that they weren’t lied to even if they WERE lied to.
The Franchisees Had Unknowingly Signed Away their Rights
The second clause Judge Whitney cited in dismissing the Bigelow’s lawsuit was the shortened statute of limitations they agreed to in the franchise agreement.
According to North Carolina law, the Bigelows would have been well within the three-year statute of limitations period to sue for breach of contract, unjust enrichment, fraud, negligent misrepresentation, negligence, and negligent infliction of emotional distress.
They would be well within the four-year statute of limitations period North Carolina law (N.C. GEN. STAT. §1-52) allows for claims of unfair and deceptive trade practices.
However, by signing the 233 pages of franchise legalese, the Bigelows agreed to be bound by a shortened
one-year statute of limitations.
The Judge cites the Hounds Town USA franchise agreement:
Any claim or controversy arising out of or related to this Franchise Agreement, or the making, performance, breach, interpretation, or termination thereof, brought by any party hereto against the other, will be commenced within one year from the occurrence of the facts giving rise to such claim or action, or such claim or action will be barred.
Statute of Limitations Ran Out Just As Franchise Finally Opened
Here’s the timeline:
- On May 29, 2020, the Bigelows signed the Hounds Town USA Franchise Agreement
- By August, 2021, they would have realized they had been lied to (defrauded, contract breached, etc.) according to the Judge.
- In July, 2022 they finally managed to open their Hounds Town USA franchise.
- By the end of July, the statute of limitations to sue would have run out, according to the judge
- October 18, 2022 Hounds Town USA terminated their franchise agreement
- January 10, 2023, 17 months after they should have realized they were defrauded, etc., Bigelows filed their original complaint.
So, by continuing to try to salvage their investment, by hiring a second contractor to build out the empty building they’d been paying rent on with no income, by getting their franchise open and trying to reach profitability the Bigelows let the clock run out on the abbreviated statute of limitations they agreed to on page 133 of the 233-page agreement package.
Hounds Town USA Continues Selling Franchises Nationwide on a Questionable Promise
Hounds Town USA appears to be an example of a franchisor who:
- promised to deliver a functional, turnkey business on a “silver platter,”
- charged a $30K “launch fee” for “vetting of construction professionals,” then
- disavowed responsibility for guiding the opening process after its franchisees lost $600,000+ trying to get open
Even after raising these issues with Hounds Town USA, Mike Gould’s franchise video is still live and the representations on their website haven’t changed.
From a practical standpoint, they have no reason to change.
If other Hounds Town USA franchisees feel they’ve been lied to now or in the future, they’ll have to face the same hurdles that the Bigelows and Jackson Williford faced… and couldn’t overcome.
Disclaimer: Neither the author nor the publisher represent either the plaintiffs nor defendants in this or any litigation. Our mission is to prompt public dialogue and converstation, to educate and inform prospective franchise investors and to urge lawmakers to enforce the FTC Franchise Rule and protect consumers from increasingly blatant & deceptive franchise sales practices. All companies and individuals are invited to provide corrections, clarifications, rebuttals, and opinions to the author at UnhappyFranchisee[at]Gmail.com. 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: Hounds Town USA, Hounds Town USA franchise, Hounds town franchise, Hounds Town lawsuit, Mike Gould, Jackie Bondanza, Rob Flanagan, Ed Bharath, Edward Bharath Construction, Raintree franchises, Raintree Growth, Elevate Design and Build, Shaheid Hasan, Pet franchise, doggie daycare franchise, Franchise Litigation, Franchise lawsuits, Franchise Fraud, H. Michael Drumm, Drumm Law, attorney Jason B. James, attorney Adam R. deNobriga, JAMES DENOBRIGA Law Firm, Jackson Williford, Williford Law
* 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
- Franchise Fastlane
- Other related parties
View Comments
Great reporting as always Sean.
I am aware that a franchisee out in Henderson, NV used the Hounds Town Construction Manager, Ed Bharath and had HUGE issues with Edward Bharath. I believe they started their buildout in March of 2020 and even with these issues ( franchisee stated Ed was not being truthful about what his money was being used for and franchisee wasn't sure where the money was going, Architectual drawings had to be redone at this franchisee's expense, franchisee felt that Ed was double dipping, Not much was accomplished while they used Ed, and this franchisee also stated that he nearly sued Hounds Town and had a confrontational phone call with Mike Gould who talked him into staying on) ....all of these issues yet Mike Gould continued to represent Ed Bharath as a competent, capable and highly skilled contractor which cost numerous franchisees dearly.
There is no such thing as a coincidence...The Bigelow's were not the only franchisees in North Carolina (and probably other states as well) that trusted Mike Gould, had little if any construction experience, signed on with Edward Bharath and ended up being hundreds of thousands of dollars over budget with unusually long buildouts. Connect the dots.....they circle back to Mike Gould's misrepresentation of Edward Bharath, the Hounds Town Construction Manager.