In our previous post, PLANET BEACH Franchise Warning, we raised concerns about possible red flags encountered while researching the Planet Beach franchise opportunity.
Are you familiar with the Planet Beach franchise opportunity or do you own a Planet Beach franchise? Please share your opinion and experiences – good or bad – with a comment below.
Some of those concerns arose from information supplied by the Planet Beach franchisor itself within the documents known as Franchise Disclosure Documents, or FDDs.
You can view or download the two most recent Planet Beach FDDs here:
According to the FTC, its Franchise Rule requires franchise sellers to provide to prospective purchasers with a current Franchise Disclosure Document. The FTC does not require filings of these documents, so they are unable to provide copies to consumers. A total of 13 states keep franchise offering circulars on file.
There are 23 categories of information that must be provided by the franchisor to the prospective franchisee via the FDD at least 10 business days prior to the execution of the franchise agreement. These categories (or “Items”)include:
Item 1 The franchise company
Item 2 Business experience of franchise executives
Item 3 Litigation
Item 4 Bankruptcy
Items 5, 6 and 7 Initial fees, other fees and initial investment
Item 8 Restrictions on sources of products and services
Item 9 Franchisee’s obligations
Item 10 Financing
Item 11 Franchisor’s assistance, advertising, computer systems and training
Item 12 Territory
Items 13 and 14 Trademarks and patents, copyrights and proprietary information
Item 15 Obligation to participate in the actual operation of the franchise business
Item 16 Restrictions on what the franchisee may sell
Item 17 Renewal, termination,transfer and dispute resolution
Item 18 Public figures
Item 19 Financial performance representations
Item 20 Outlets and franchise information
Item 21 Financial statements
Items 22 and 23 Contracts and receipts
Some areas of obvious concern specific to the Planet Beach franchise are contained in Item 3 (Litigation). Item 19 (Financial Performance Representations), and Item 20 (Outlets and franchise information). In addition to showing the decline in overall units, Item 20 also lists a high number of Planet Beach franchises that were Sold but Not Opened (SNO).
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James and Lara Barnhill v. Planet Beach Franchising Corporation (AAA No. 69 114 00132 10). On March 12, 2010, franchisee filed a Demand for Arbitration and alleged various breaches of obligations by Planet Beach Franchising Corporation related to computer systems and fees, marketing, evolving franchise concept, product suppliers, and bad faith. The Barnhills seek rescission of the franchise agreements, an unspecified amount of damages, attorney’s fees, and a declaratory judgment. Planet Beach Franchising Corporation filed an answer denying all allegations and brought counter-claims against the Barnhills for enforcement of contractual post-termination obligations, breach of contract, and disparagement. On or around August 29, 2011, the parties reached an amicable resolution, whereby PBFC agreed to pay the Barnhills $365,000 in settlement of all claims.