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Franchise case victory!

By June 27, 2008November 11th, 2020Uncategorized

Picture_5This week a federal judge granted my client’s motion to compel arbitration against franchisor Planet Beach. In the past I have typically represented franchisors, not franchisees. But I was contacted by an attorney in New York who asked me to handle the matter as local counsel. I had no conflict of interest, and I thought the client had a good case, so I took the representation.

Now that the case goes to arbitration my representation ends, and some of my attention can be redirected to my other cases.


P.S. If you appreciate these kinds of observations, you might want to read this as well.

18 Comments

  • Anonymous says:

    I am a PB franchisee as well. I have gotten nonsupport from the franchise. As a matter of fact more damage than anything else. Has any action been taken?
    Thanks!

    • Southerngirl says:

      Just curious if you received a response…I’m in the same boat and don’t know what to do.

  • james says:

    I too would like to join the effort to do something about massage envy! In my city of albuquerque there are also numerous complaints..everywhere i look on the web.. they are really bad. any luck? email me desert.desires@yahoo.com

  • Jessica says:

    I would like to start a class action lawsuit against massage evy. Particularly the Kendall, FL and Alpharetta, GA locations but there are hundreds of people who have had horrible experiences at other locations and many are wanting to be a part of a class action lawsuit against them for fraudulent charges and contracts that are scams.

  • John says:

    Ingraham v. Planet Beach Franchising Corp., No. 07-3555,2009 WL 909567, Bus. Franchise Guide (CCH) ¶ 14,159(E.D. La. Apr. 1, 2009)Plaintiffs/franchisees sued their franchisor alleging breach of afranchise agreement after the franchisor entered into a contractwith another franchisee to open a competing franchise approximatelyfive miles from plaintiffs’ location. The parties’ franchiseagreement prohibited the franchisor from establishing or locatinganother Planet Beach franchise within the protected territory,which was defined as “Philadelphia, PA 30,000 in Population.”Previously, plaintiffs successfully had moved for partialsummary judgment that the definition of territory in the agreementwas ambiguous. The franchisor now moved for summaryjudgment on four separate issues. As a preliminary matter, thefranchisor argued that the Uniform Franchise Offering Circular(UFOC) must be read in conjunction with the franchise agreement,but the court rejected that argument. The parties had notexpressly incorporated the UFOC into the agreement, the courtfound. Thus, the court relied only on the franchise agreement inmaking its ruling.First, with respect to the franchisor’s argument that the franchiseagreement prohibited the franchisor from “overlapping”(locating a second franchise within the prescribed territory) butprovided no other territorial rights to the franchisee, the courtfound that the language of the agreement was ambiguous anddenied summary judgment on that issue. The contract wasambiguous as to whether it merely guaranteed a “geographicbuffer” between franchisees and specifically allowed for crossmarketingby competing franchisees in each other’s territories,according to the court.Second, the court denied the franchisor summary judgment onplaintiffs’ detrimental reliance claim, which the franchisor arguedwas prohibited by the integration clause of the franchise agreement.Because the court found the definition of territory to beambiguous, the franchisor’s motion was premature. In addition,because parol evidence is admissible to illuminate the parties’intent when a contract term is ambiguous, it was not unreasonablefor plaintiffs to have relied on the oral representations toassist in their understanding of the contract, the court held.Third, the court granted the franchisor’s motion for summaryjudgment on plaintiffs’ claim for breach of the implied covenantof good faith and fair dealing. There was no specific evidenceof “ill will” on the part of the franchisor other than conclusoryallegations of financial greed, the court ruled.Fourth, the court granted the franchisor’s motion for summaryjudgment with respect to plaintiffs’ claims under the LouisianaUnfair Trade Practices Act (LUTPA) and the federal FTCAct, finding that plaintiffs lacked standing. Plaintiffs were notconsumers or business competitors under the LUPTA, and privatepersons have no standing to enforce the federal FTC Act.

    Ingraham v. Planet Beach Franchising Corp., No. 07-3555,2009 WL 1076713, Bus. Franchise Guide (CCH) ¶ 14,162(E.D. La. Apr. 17, 2009)In a separate opinion in the same action, the court grantedthe franchisor’s motion in limine to exclude testimony regardingconsequential damages. In so ruling, the court upheld thedamages waiver provision of the franchise agreement, whichprovided in relevant part that “[t]he parties waive to the fullestextent permitted by law, any right to or claim for any punitive,exemplary, incidental, indirect, special or consequential damages(including, within limitation, lost profits).”The court rejected plaintiffs’ argument that the contract termwas ambiguous, finding that although the inclusion of “lostprofits” in the waiver was confusing, it did not make the restof the provision particularly confusing. The court also rejectedplaintiffs’ argument that the franchisor had to prove the waiverhad been brought to plaintiffs’ attention. The new owner’s signaturewas at the bottom of the page, the waiver language washighlighted as a separate provision, and individual plaintiff wasa sophisticated businesswoman, the court noted. Accordingly,the court found that the waiver language was valid and appliedto plaintiffs’ damages claim in the case.

    SETTLEMENT FROM PLANET BEACH LISTED IN THE FDDMichael and Jeannine Ingraham v. Planet Beach Franchising Corporation, (No. 07-3555 In the United

    States District Court for the Eastern District of Louisiana). On July 2, 2007, franchisees Michael and

    Jeannine Ingraham filed an action alleging Breach of the Franchise Agreement, Unfair Trade Practices,

    Breach of Implied Covenants of Good Faith and Fair Dealing, Detrimental Reliance and Negligence.

    Plaintiffs allege an unspecified amount of damages. In August 2007, Planet Beach Franchising

    Corporation filed an Answer with Affirmative Defenses. At the date of filing of this FDD, the parties are

    engaged in discovery. Trial in this matter was set for April 20, 2009. On April 20, 2009 the parties

    reached a settlement whereby PBFC agreed to pay $20,000 to the Ingrahams, $100,000 in Royalty

    Abatement and $50,000 in product credits invoiced directly from PBFC. The settlement agreement was

    executed on May 8, 2009.

  • Jim Barnhill says:

    Hello Planet Beach Family:

    I’m not sure why the information that I’m about to share with you was not disclosed by our Franchisor but I’m sure they have a good reason.

    I have listed some highlights below that you may find interesting or you can review the entire IPO Filing documents at SEC/Planetbeach

    Proposed offering is $28 million

    As of December 31, 2009, Planet Beach had $53,810 in cash equivalents

    As of Jan 15, 2010 there are 345 salons open

    Operating revenues in fiscal 2009 was $13.3 million,decrease of $11.7 million, or 47%, from 2008

    PlanetBeach had net losses of $708,000 for 2009

    PlanetBeach had net losses of $758,000 for 2008

    PlanetBeach had net losses of $325,000 for 2007

    Steve Smith annual income for 2009 = $242,813

    Richard Juka annual income for 2009 = $185,625

    Mr. Juka is entitled to receive a monthly bonus of 5%of the net profit of the company’s equipment department

    Mr. Juka does not pay the 6% royalty that would berequired under our current franchise agreement

    Loan Schedule Shown Below – $3.2 Million Dollars in debt.

    Lender Amount Date Interest RateCapital One Bank $840,000 Mar-27 6.54%SBA $591,000 Jun-27 5.79%Whitney National Bank $619,000 Jul-12 8.25%Former Stockholder $46,000 Nov-11 0.00%New Sunshine LLC (Parent Company of ETS, Inc) $516,000 Apr-12 7.00%JTL Enterprises, Inc. (Hydration Station) $42,000 Mar-13 7.00%MT Industries, Inc. $174,000 Mar-13 7.00%OL Products, Inc. $234,000 Jan-13 7.00%Leaf Funding, Inc. $94,000 Jul-12 3.47%Irvine Company LLC $17,000 Aug-11 7.00%Stephen P. Smith $50,000 Jun-10 5.00%$3,223,000

  • Jim Barnhill says:

    To all customers of PB Bentley Ridge & Falls Pointe locations:

    You were recently informed by Planet Beach that our franchised stores had been terminated. That is untrue. Since late February 2010 we have been in the process of attempting to resolve issues regarding each of our franchises. That process is continuing. In an attempt to pressure us to back away from the issues in dispute, Planet Beach delivered to us what they claim to be a “notice of termination” of our franchises. We do not believe that there is any basis for this notice and our attorney has filed a motion before the appropriate authority to maintain the “status quo” until the completion of the present arbitration process that is prescribed by Planet Beach in their own franchise agreements.

    While this dispute moves to a resolution of these issues, we expect and intend to continue to act as Planet Beach franchises. We regret any inconvenience or uncertainty this may have caused any of our customers. We appreciate your patience as this matter moves to conclusion, which we hope will occur in the next few months.

    If you have any additonal concerns or questions, please feel free to email Lara or me atJamesrbarnhill@yahoo.com or larasbarnhill@yahoo.com.

    We appreciate your business and look forward to seeing you soon.

    Jim & Lara

    9660 Falls of Neuse Road – Raleigh NC 27615 – 919-841-06693434 Edwards Mill Road – Raleigh NC 27612 – 919-789-8266 (TANN)

  • James Barnhill says:

    Planet Beach Franchisees:

    I have reviewed the email from Toby Kendall regarding the new Millennium software.Please see my comments below aboutMillennium, the Tech Fee & Planet Beach.More than 65 franchisees have contacted my attorney and are opposed to any additional Technology Fee’s. Don’t pay any more money to Planet Beach!

    Planet Beach is getting desperate and is making every last ditch effort to try to justify why franchisees should pay for Millennium when we should be getting it for FREE.

    It’s clearly stated (and corroborated by my attorney) in the UFOC/FA that Planet Beach cannot raise our Technology Fees.Richard Farrell (my attorney) sent an email to Dawn Diaz last week asking her to reaffirm Planet Beach’s justification for increasing the Technology FeeDawn Diaz (Planet Beach’s corporate attorney) has yet to respond to my attorneys inquiries. They know they cannot do what they are trying to do and are buying time.Planet Beach cannot raise the Technology Fee or charge the franchisees for “Millennium” or the Nutrition and Skin Wellness Program . This is clearly stated in the UFOC/FA.

    Planet Beach is trying to blindside franchisees by saying we’ll receive the Nutrition and Skin Wellness Program for FREE. Planet Beach illegally was charging for this service in the first place and now they want you to think you are getting it for free. It’s clearly stated in the UFOC/FA what Planet Beach can charge us for and this service was not listed nor is the Technology Fee. This program is designed to increase salon revenue therefore increasing Plane Beach’s revenue by additional royalties.

    The money that was spent to develop Millennium ($370,000) should not be paid by increasing our Technology Fee’s. The cost of development for this software should be paid by the ongoing Royalties that each franchisee pays Planet Beach. THIS IS WHAT OUR ROYALTIES ARE FOR!Planet Beach cannot use the Technology for a PROFIT CENTER!

    Google Email – This is something that we are already paying for with our current Technology Fee of $69.95 or $49.95.Access to ORION and SpaCentral – This is also something that we are already paying for with our current Technology Fee of $69.95 or $49.95.

    Your spa’s customized content-managed web site and hosting fees ($150 savings per spa) – Another service we are already paying for with our current Technology Fee of $69.95 or $49.95.

    There are less than 100 franchisees using Millennium.

    Continued research and development into improvements for your information technology infrastructure – This is what our royalties are suppose to pay for.Planet Beach is going to profit more than $650k a year from the increased Technology Fee’s.

    Planet Beach claims they are only receiving $60.00 per salon revenue from the increased Technology Fee. That’s still $277,000 per year profit that Planet Beach is making off the franchisees.

    What did Planet Beach do with our money?Planet Beach made $14.7 million dollars from equipment & products sales last year. What did they do with this money?Planet Beach made $1.3 million in franchise fees last year. What did they do with this money?

    Planet Beach made $5.7 million in royalties last year. What did they do with this money?

    According to the new FDD (formally UFOC) Planet Beach is debt more than $7 million dollars. What did they do with our royalties?

    According to the new FDD (formally UFOC) Planet Beach paid it’s employees more than $5 million dollars last year in salaries.I have personally talked to over 75 franchisees and all of them are very upset about Planet Beach trying to “Nickel & Dime” us for everything possible.

    Some franchisees have stopped paying royalties and others are threatening to do so because they do not feel they are getting what they are paying for.

    Ask yourself the following questions and if you have problems answering them why even remain a Planet Beach franchisee?What has Planet Beach done for you lately?Could you operate as a stand alone tanning salon?

    What are you getting for your royalties?Are you happy with Planet Beach?Are you happy with Millennium?Are you happy with your current Technical support from Planet Beach?Do you know what Planet Beach is doing with your royalties?

    Why are we paying $100k for the winner of Miss Planet Beach from the National Advertising Fund?Has the SPA Equipment increased your revenue? It’s certainly has increased PB’s bottom line!

    Does Steven Smith thank you for being a Planet Beach franchisee?Did Steven Smith personally greet you at convention or even acknowledge you?If you have any questions please feel free to email me at fightplanetbeach@yahoo.com.

    Sincerely,James Barnhill

    Millennium Launch Announcement

    Why New SoftwareOver the years we have heard many of our franchisees asking for new spa management software, one that is supported and maintained by an independent software development house and provides advanced features such as online appointment booking, robust inventory management, reciprocation support, marketing tools, and billing support. With the change to the Contempo Spa model, it became even clearer to Planet Beach Franchising Corporation that new software is required. As a result, we investigated existing software available in the marketplace to identify one that meets all of our demands and needs.

    Why MillenniumSimply put, Millennium was and is the most robust and feature rich spa management software on the market. We researched Helios, Club Runner, Mind Body Online, and many other platforms before deciding on Millennium. It meets and already has nearly every feature we require. Millennium has a strong corporate staff and development team who can provide support and modifications in the future, and have an in depth understanding of the spa industry as a whole. With clients like Massage Envy and Paul Mitchell, we know its platform is sound, reliable and will get our spa to the next level of functionality available in spa management software.

    Why November 9thPreparation and training for your spa’s Millennium conversion takes 4-6 weeks to properly complete. This is the last opportunity to convert before the end of the year. For this conversion, Planet Beach Franchising Corporation will have 22 employees tasked to support you and your spa. On Nov 8th, you will be assigned a corporate team member to contact directly with any issues or questions you have, which will eliminate any bottlenecks that could exist . There will be no other launch with this amount of manpower to support you and your spa.

    There are multiple advantages to getting all spas converted to Millennium, including global reciprocation management. Once all spas are converted, you will no longer have to make or receive calls to verify memberships of reciprocal members. Also, with integrated gift cards, you can eliminate the monthly gift card fees by managing gift cards with Millennium. If you are not accepting gift cards yet, you will be able to do so without any additional cost by using Millennium.Why 199.99 per month

    With any improvement in systems and equipment, there is bound to be an increase in costs. Rest assured Planet Beach Franchising Corporation did everything we could to limit any increase in cost to the franchisee. So, where did the 199.99 figure come from? $139.99 of that fee goes directly to Harms Software on a monthly basis for Millennium. This means corporate is keeping $60 per month per spa. The majority of locations are on an existing $69.99 technology fee with some older spas paying $49.99. Overall, PBFC’s monthly revenue based on technology fees will decrease. Planet Beach Franchising Corporation has also invested over $370,000 into development, enhancements, and deployment of Millennium to make it the perfect solution for your spas. The remaining $60 per month provides the following services:

    · Google Email up to 3 mailboxes per spa

    · Your spa’s customized content-managed web site and hosting fees ($150 savings per spa)

    · Access to ORION and SpaCentral

    · Continued research and development into improvements for your information technology infrastructure.The version of Millennium you will be receiving in November is only available to Planet Beach Franchisees. We understand that times are difficult and even a $10 increase in fees is significant when you are watching your pennies. We believe and know that implementing Millennium will give you the tools necessary to keep existing members and recruit new members to your spa, which will increase your revenue and easily pay for the cost of Millennium.

    We know that adding products and services to your mix gives you the opportunity to increase revenue at the spa. As an added bonus and benefit for your spa transition to Millennium, you will be enrolled in the Nutrition and Skin Wellness Program for free granting your spa all the benefits of that program. This includes the ability to sell memberships to the online nutrition and wellness portal, and sell nutrition and skin wellness products in your spa. Those spas who are already enrolled in the nutrition program will receive 25% off all nutrition and skin care purchases until March 31, 2010.It is Planet Beach Franchising Corporation’s strong belief that the migration to Millennium is in your spa’s best interest and will help you generate more revenue at the spa level. Also, having access to nutrition and skin wellness products and services will give your spa a necessary line extension to differentiate you from your competitors and grow your revenue. It is our goal to provide you tools and resources to increase the performance and revenue at each and every Planet Beach Contempo Spa. If you have not done so, please take this time to contact your spa performance consultant and sign your Millennium sublicense agreement so that we can help you move to the next level.

  • Ryan says:

    Thats a great question. We should start by getting an email list together so will can build some community on this thing. Who’s in?!!!

  • JPG says:

    Has anything started with the class action suit. I am a former franchisee and know 3 others who would be interested in joining. Who can I contact?

  • Ryan says:

    I am in. How can we all get together? PB PA

  • Steve Spears says:

    count me in, I’m a PBF in estero florida. Tell me what I need to do!!

  • Robin says:

    Count us in….PB NJ

  • Don says:

    Several PBs in NJ

    Count me in. All they do is take our money without giving us anything in return.

  • Anony Mous says:

    We should just start blogging on many different websites so that the MANY PB Franchisees can stick together on this scam called PB Contempo Spa. I personally know 3-4 franchisees and may be more who would go for the Class Action.

    Check out Randy Richey vs. Planet Beach. I keep checking the internet to piece together info about lawsuits against PBFC that have been hidden from the public.

  • Anonymous says:

    Sure I would, but we have a “class action” clause in our UFOC. There aremany PB owners who are extremely frustrated. count me in.

  • anonymous says:

    Would you be willing to do a class action lawsuit against Planet Beach Franchise Corporation for MANY PB franchisees that have been taken advantage of? I’m currently searching the net for other franchisees in the same crisis.

    thank you,

  • Congrats on the success!

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