Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION NEWS: UPS misrepresented revenues, cash flow, franchisees claim, (Sep 22, 2015)

By Greg Hammond, J.D.

The UPS Store, Inc. illegally induced a company and two individuals to enter into a franchise agreement and personal guarantees based on misrepresentations concerning the revenue and cash flow that the potential franchise would experience, a complaint filed in the federal district court in St. Paul alleges (Moxie Venture L.L.C. v. The UPS Store, Inc., September 21, 2015).

Moxie Venture L.L.C., Melinda Vincent, and Anton Vincent claim that The UPS Store induced them to enter into a franchise agreement and personal guarantees by misrepresenting the cash flow and revenue they could expect by operating a UPS store in Bloomington, Minnesota. Specifically, the plaintiffs claim that The UPS Store failed to state facts concerning two stores in the same vicinity that had previously closed, including one that had not generated the kind of revenue in its fourth year of operation that The UPS Store claimed the plaintiffs could generate during their first year of operation.

The complaint also alleges that The UPS Store breached the franchise agreement and implied covenant of good faith and fair dealing by failing to provide a functioning software system; requiring the store to participate in a drop off program that transferred costs to the franchise; requiring the store to act as a customer drop point while The UPS Store’s parent company negotiated service contracts with online retailers, effectively reducing the plaintiffs’ potential to generate revenue and positive cash flow; and test marketing a new billing program that diverts revenue from the franchise to The UPS Store’s parent company.

The plaintiffs claim that had they known of the misrepresentations, they would not have entered into the franchise agreement. They brought claims for violation of the Minnesota Franchise Act; fraud; negligent misrepresentation; and breach of the franchise agreement and the implied covenant of good faith and fair dealing. The plaintiffs seek rescission of the franchise agreement and personal guarantees; restitution and actual damages; as well as costs, disbursements, interest, and reasonable attorney fees.

Attorneys: J. Michael Dady (Dady & Gardner, P.A.) for Moxie Venture L.L.C.

Companies: Moxie Venture L.L.C.; The UPS Store, Inc.

News: FranchisingDistribution MinnesotaNews