Is NY BAGEL CAFÉ Violating Multiple State Franchise Laws?

The NY Bagel Café franchise, which has perhaps the highest failure rates of any active franchise seller we’ve encountered, appears to be unlawfully soliciting franchisees in states that require prior registration and disclosure of such information as franchise closures and past litigation. 

Unhappy Franchisee has asked each of these states’ franchise regulatory agencies to investigate the franchise practices of NY Bagel Café, CEO Joe Smith and franchise salesman Dennis Mason.

(UnhappyFranchisee.Com)  According to the California Code, the state established its Franchise Investment Law because many “California franchisees have suffered substantial losses where the franchisor or his or her representative has not provided full and complete information regarding the franchisor-franchisee relationship, the details of the contract between franchisor and franchisee, and the prior business experience of the franchisor.”

It is the intent of the California Franchise Investment Law “to provide each prospective franchisee with the information necessary to make an intelligent decision regarding franchises being offered. Further, it is the intent of this law to prohibit the sale of franchises where the sale would lead to fraud or a likelihood that the franchisor’s promises would not be fulfilled…”

California prohibits the sale of franchises in its state unless the franchisor is registered and approved, and furnishes franchisees with a Franchise Disclosure Document 14 days before they sign an agreement or accept money.  Franchisors must be registered and submit its ads prior to advertise its franchise in the state of California.

We confirmed with the California Department of Business Oversight that NY Bagel Café is not registered and therefore cannot legally advertise or sell franchises in their state.  Despite that, the NY Bagel Café franchise opportunity has been actively advertised to CA residents on Craig’s List and franchise advertising websites.  The company recently announced that it was developing an upcoming location in Palo Alto, CA.

Was the NY Bagel Café in Tracy, CA an Illegal Franchise?

In Fall, 2013 company press releases titled “NY Bagel Café Invades CA” announced the opening of its “first California location” on October 23rd, 2013.

According to one media outlet that picked up the story “The owner of this new establishment is Amber Robinson, a veteran and widowed mother of two boys. She was born and raised in California and became a new homeowner last year. She served in the U.S. Army on active duty in 2005. Her late husband was a dual-service veteran who passed away two years ago from an undiagnosed heart condition.”

Amber Robinson’s NY Bagel Café franchise in Tracy, CA closed just 5 months later on March 3, 2014.

The brash press release stated:

Franchise President Joseph Smith said, ‘I’m very excited about this being our first store in the state of California to open with many more to come.’

Which California city will be next?

Shortly after the Tracy Café closed, NY Bagel Café posted to Facebook:

This Location is Now Available, if you looking to be your own boss and Own your Own contact N.Y. Bagel Café 888-550-8020 or Sharon at Excel Trust  858-613-1800.

Joanne Ross, Senior Corporations Counsel for the California Department of Business Oversight, has stated that her department is actively investigating the advertising and sales practices of the NY Bagel Café franchises in California.

Why Wouldn’t NY Bagel Café Register as Required?

We have contacted both CEO Joe Smith & franchise salesman Dennis Mason to ask why they are seemingly promoting the NY Bagel Café franchise opportunity without registering where required, but have not received a response.  Both Smith and Mason have many years of franchise experience, and are certainly familiar with franchise registration requirements.

While we can’t be certain, one reason Smith might be avoiding franchise registration is because he would have to show that he is providing the required Franchise Disclosure Document (FDD) to franchise prospects, which would include such potentially deal-killing information as the high closure rate of NY Bagel Café franchises, the number of franchises that have been sold but never opened, and the litigation history of the company and its principals.

Additionally, some states require corporate financial statements and review them carefully to make sure the franchisor has sufficient funds to provide the promised services.

If Joe Smith and NY Bagel Café are providing prospective franchisees with the proper franchise disclosure documents and documentation already required by the FTC Franchise Rule, they would have no reason not to fulfill the requirements of state registrations.

If they are NOT providing franchisees with a proper Franchise Disclosure Document, that would explain their avoidance of scrutiny by state regulators.

NY Bagel Café Franchise Being Investigated by Multiple State Agencies

Unhappy Franchisee has been in touch with numerous state agencies which have agreed to look into the advertising and sales practices of NY Bagel Café, Joe Smith and Dennis Mason in their states.

Check back as we intend to update this page with the outcomes of their investigations.

If you have any information regarding the sale of NY Bagel Café franchises, please contact us at UnhappyFranchisee[at]gmail.com or leave a comment below.

NY Bagel Cafe Franchise Ad – New York	New York NY franchise law: “ New York Code:  “§ 683. Disclosure requirements. 1. It shall be unlawful and prohibited for  any  person  to  offer  to sell or sell in this state any franchise unless and until there shall have been registered with the department of law… [7.] No offer, advertisement, or sale of such a franchise shall  be made in or from the state of New York until the department has issued to the  franchisor  or  other  offer or  a  letter stating that the offering prospectus sought to be registered has  been  accepted…” Registration status:  We’ve been told the NY Bagel Café franchise is not registered in the  State of New York and therefore prohibited from advertising or selling franchises in NY. Investigation status:  Active NY residents who have been solicited by or paid money to NY Bagel Café, Joe Smith or Dennis Mason aka Keith or Ken should contact UnhappyFranchisee[at]Gmail.com.
Click to See a  NY Bagel Cafe Franchise Ad – California	California Registration status:We’ve been told the NY Bagel Café franchise is not registered in the  State of California and therefore prohibited from advertising or selling franchises in CA. Suspected violations:   NY Bagel Café is suspected of having unlawfully sold a franchise to CA resident Amber Robinson, a single mother of two.  NY Bagel Café touted its believed-to-be-unlawful CA expansion and the Tracy opening with press releases, Facebook, Twitter, and blog posts.  Ms. Robinson’s Tracy, California franchise closed just 5 months after opening. Despite not being registered, NY Bagel Café has continued to run CA-specific ads targeting Los Angeles and Orange County on Craig’s List and other  online advertising networks. Investigation status:  Active
Click to See a NY Bagel Cafe Franchise Ad – Virginia	Virginia Registration status:   We’ve been told the NY Bagel Café franchise is not registered in the  State of Virginia and therefore prohibited from advertising or selling franchises in VA. Suspected Violations: NY Bagel Café has run VA-specific franchise ads on Craig’s List, BizBuySell.com and BizQuest.Com Investigation status:  Active
Click to See a NY Bagel Cafe Franchise Ad – Maryland	Maryland Registration status:We’ve been told the NY Bagel Café franchise is not registered in the  State of Maryland and therefore prohibited from advertising or selling franchises in MD. Suspected Violations: NY Bagel Café has run MD-specific franchise ads on Craig’s List & BizBuySell.com Investigation status:  Active
Click to See a NY Bagel Cafe Franchise Ad – Illinois	Illinois Registration status:We’ve been told the NY Bagel Café franchise is not registered in the  State of Illinois and therefore prohibited from advertising or selling franchises in IL. Suspected Violations:  NY Bagel Café has run IL-specific franchise ads on Craig’s List & BizQuest.com Investigation status:  Active
Click to See a NY Bagel Cafe Franchise Ad – Michigan	Michigan Registration status:We’ve been told the NY Bagel Café franchise is not registered in the  State of Michigan and therefore prohibited from advertising or selling franchises in MI. Suspected Violations:  NY Bagel Café has run MI-specific franchise ads on Craig’s List. Investigation status:  Active
Click to See a NY Bagel Cafe Franchise Ad – Connecticut	Connecticut Registration status:  It appears the NY Bagel Café franchise is not registered in the  State of Connecticut and therefore prohibited from advertising or selling franchises in CT. Suspected Violations:  NY Bagel Cafe is suspected of soliciting Connecticut residents or buyers who will open a franchise in Connecticut via multiple CT-specific Craig’s List ads. A national franchise ad from a franchise lead generation portal states “New York Bagel Cafe is currently accepting inquiries from the following states: …Connecticut…” Investigation status:  Active
Click to See a NY Bagel Franchise Ad – Minnesota	Minnesota Registration status:  We’ve been told the NY Bagel Café franchise is not registered in the  State of Michigan and therefore prohibited from advertising or selling franchises in MI. Suspected Violations:  NY Bagel Café has run MN-specific franchise ads on Craig’s List and soliciting MN franchise prospects from other states. Investigation status:  Active

Also read:

NY BAGEL CAFÉ Franchise: How Many Have Closed? [UPDATED]

NY BAGEL CAFÉ & DELI Franchise Complaints

DENNIS MASON Franchise Complaints

NY BAGEL CAFE Kicked Off Franchise Sites for Deceptive Ads

NEW YORK BAGEL ENTERPRISES INC. Franchisor’s Corporate Status Revoked

NY BAGEL CAFÉ Franchise a Scam? MA Woman Says Yes

ARE YOU FAMILIAR WITH NY BAGEL FRANCHISE OPPORTUNITY, JOE SMITH OR DENNIS MASON?

PLEASE SHARE YOUR OPINION BELOW or Contact UnhappyFranchisee.com

TAGS: NY Bagel Cafe Deli, NY Bagel franchise, NY Bagel Cafe franchise, NY Bagel Cafe and Deli franchise, New York Bagel Cafe, NY Bagel Cafe, New York Bagel franchise, New York Bagel Cafe, State franchise laws, franchise registration states, NY Bagel complaints, NY Bagel lawsuits, Joe Smith, Joseph Smith, Dennis Mason, franchise scam, franchise failure rates, franchise advertising