Most fraud claims in franchising arise in the sales process when the franchisee comes to believe that the value of the franchise was misrepresented as the result of an express misrepresentation by the franchisor or its sales agent, or omitting material facts that, if known, would have dissuaded the buyer from purchasing on the same terms.
However, fraud claims may also arise at other stages of the franchise relationship, whenever one party believes it was damaged by its reliance on deception by the other.
Carmen D. Caruso Law Firm has extensive experience bringing and defending against claims for fraud in franchising. These claims may be brought under franchising statutes such as the Illinois Franchise Disclosure Act, statutes known as “Little FTC Acts” that create state law claims for violations of the Federal Trade Commission Franchise Rule and in severe cases, the federal Racketeer Influenced & Corrupt Organizations Act (“RICO”), as well as under the common law. We have reviewed hundreds of Franchise Disclosure Documents (or their predecessors, Uniform Franchise Offering Circulars) and comparable prospectuses for other forms of business, and we know what to look for to prove or disprove fraud in franchising or similar relationships involving dealerships, business opportunities or other distribution arrangements.
Some highlights include:
The Illinois Franchise Disclosure Act and the Illinois Consumer Fraud & Deceptive Business Practices Act (and similar statutes in other states) protect the buyer of a franchise from failure by the franchisor to accurately comply with the franchise disclosure laws even where the disclosure violation would not rise to the level of fraud.