News Briefs

Yum! Brands Steps in When Pizza Hut Franchisee is Hit with Workers' Comp Charges

RLLW, the owner of 62 Pizza Hut franchises in San Diego, is facing criminal complaints for not contributing to the state's workers' compensation insurance program for a 2-week period in 2003. The restaurants were shut down for about a day in late May, while the franchisee arranged for insurance, and subsequently YUM! Brands, which is the franchisor of Pizza Hut, has taken over the restaurants.

“Pizza Hut has taken over the restaurants in the San Diego market,” said spokesperson Patty Sullivan. “We never want to see a franchisee struggle, so if having us repurchase franchises is the best solution for all of us and to keep our competitive standing in the marketplace, then that's what we do.”

RLLW is owned by Jackie Lee Robinson Trading Company, a Las Vegas-based multibrand franchisor that has annual revenues of about $50 million, according to statements it has made in the past to the media. RLLW representatives did not return phone calls by FBLA.

Workers' compensation payments are a serious matter in California, said San Diego County Deputy District Attorney Dominic Dugo. “Not paying workers' compensation is a criminal violation,” said Dugo.

The complaint, filed in Superior Court of California, County of San Diego Central Division, alleges 16 counts, the first 15 of which relate to RLLW not paying workers' compensation for the period of July 3 to July 17, 2003. The estimated cost for those weeks is about $1 million for 1,200 employees, according to the California Labor Commission, which co-investigated the situation.

Arraignment in the case originally was set for June 17, but attorneys for RLLW requested an extension until September 20, which was granted. As part of the extension, RLLW had to prove that it has workers' compensation coverage. “They showed us that they have it through YUM! Brands, so the arraignment has been delayed. But new charges may come out before then,” said Dugo.

The 16th count alleges that RLLW ignored a “stop order” issued on July 17, 2003, when the unpaid workers' compensation first came to light. Because it kept operating until May 28, 2004, it is possible that other charges will arise from that period, if it was operating without workers' compensation coverage during some or all of that period.

RLLW has faced other legal trouble recently. RLLW settled a class action lawsuit by some of its employees over unpaid overtime in April 2004, and the company is facing a complaint filed by the San Diego district attorney about a 50 cents/pizza “energy surcharge” that some of its stores levied for a while in early 2004.

Arby's Held Not Vicariously Liable by Wisconsin Supreme Court

By a 6-0 vote, the Wisconsin Supreme Court upheld lower court rulings that dismissed a lawsuit filed against Arby's Inc. after the 1999 killing committed by one of the employees of a Madison franchisee. The case is Robert Kerl, et al. v. Dennis Rasmussen, Inc., et al (and the court of appeals case that first denied vicarious liability was 2003 WI App. 226 Court of Appeals of Wisconsin, published opinion, Case No.:02-1273).

Representatives of the estate of the man who was killed and his fiancee, who survived the attack, had sued both the franchisee, Dennis Rasmussen Inc., and Arby's.

The court ruled that Arby's was not vicariously liable for a crime committed by an employee of one of its franchisees because it did not have control, nor right of control, over the daily operation of the specific restaurant outlet. Even though the franchisee hired the killer, who was out of prison on a work-release program, without checking into his criminal background, the training that Arby's gives its franchisees about hiring did not make it liable.

Coffee Franchisors Violate Consent Decree

Would-be coffee franchisors Jeffrey M. Salley and Terri L. Salley were indicted in the U.S. District Court for the Southern District of Florida on June 4 for violating a December 2000 consent decree. The Salleys face 20 counts of criminal contempt for selling coffee franchises through telemarketing from an office in Jupiter, FL. They sold franchises under the names Worldwide Coffee, Salley's World Wide Coffee, Coffees of the World, and Specialty Gourmet Supply.

The Salleys signed a consent decree in 2000 after facing U.S. Department of Justice action over violations of the Federal Trade Commission's (FTC's) Franchise Rule. The Department alleged that the Salleys provided inadequate disclosure to prospective franchisees about their past criminal convictions and bankruptcies, and they exaggerated potential earnings claims. The two principals promised not to violate the Franchise Rule in the future, but the new indictment charges them with continuing to sell franchise opportunities under the names.

California Shuts Down Weight-Loss Franchisor

On June 18, the California Department of Corporations (Department) issued a cease-and-desist order to the directors of Why Weight Women's Total Fitness, Inc., which has allegedly been selling franchises since February 2004 without approval by the Department.

Why Weight applied for franchise registration in October 2003 and did not reveal at that time, nor in several amendments to the application, the criminal history of Matthew Craig Rubin, nor a past bankruptcy of his partner, Ivan Bondy, according to the Department. In a rejection letter dated June 17, the Department noted that Rubin failed to disclose a 1994 U.S. Central District Court conviction on five felony counts of mail fraud and a 2002 judgment for $16.5 million in restitution to victims in a separate telemarketing scheme. Bondy failed to disclose a 1997 bankruptcy. Moreover, in April 2004, other directors of Why Weight promised that both men would disassociate themselves from the company, which apparently Bondy did not do.

“This pair has a reputation for trying to mislead and lure the public into shady investment schemes,” said Department of Corporations Commissioner William P. Wood. “They have lost their right to engage in this type of business.”

The Department added that at least 17 investors purchased Why Weight franchises since October 2004 in at least 11 other states.

Yum! Brands Steps in When Pizza Hut Franchisee is Hit with Workers' Comp Charges

RLLW, the owner of 62 Pizza Hut franchises in San Diego, is facing criminal complaints for not contributing to the state's workers' compensation insurance program for a 2-week period in 2003. The restaurants were shut down for about a day in late May, while the franchisee arranged for insurance, and subsequently YUM! Brands, which is the franchisor of Pizza Hut, has taken over the restaurants.

“Pizza Hut has taken over the restaurants in the San Diego market,” said spokesperson Patty Sullivan. “We never want to see a franchisee struggle, so if having us repurchase franchises is the best solution for all of us and to keep our competitive standing in the marketplace, then that's what we do.”

RLLW is owned by Jackie Lee Robinson Trading Company, a Las Vegas-based multibrand franchisor that has annual revenues of about $50 million, according to statements it has made in the past to the media. RLLW representatives did not return phone calls by FBLA.

Workers' compensation payments are a serious matter in California, said San Diego County Deputy District Attorney Dominic Dugo. “Not paying workers' compensation is a criminal violation,” said Dugo.

The complaint, filed in Superior Court of California, County of San Diego Central Division, alleges 16 counts, the first 15 of which relate to RLLW not paying workers' compensation for the period of July 3 to July 17, 2003. The estimated cost for those weeks is about $1 million for 1,200 employees, according to the California Labor Commission, which co-investigated the situation.

Arraignment in the case originally was set for June 17, but attorneys for RLLW requested an extension until September 20, which was granted. As part of the extension, RLLW had to prove that it has workers' compensation coverage. “They showed us that they have it through YUM! Brands, so the arraignment has been delayed. But new charges may come out before then,” said Dugo.

The 16th count alleges that RLLW ignored a “stop order” issued on July 17, 2003, when the unpaid workers' compensation first came to light. Because it kept operating until May 28, 2004, it is possible that other charges will arise from that period, if it was operating without workers' compensation coverage during some or all of that period.

RLLW has faced other legal trouble recently. RLLW settled a class action lawsuit by some of its employees over unpaid overtime in April 2004, and the company is facing a complaint filed by the San Diego district attorney about a 50 cents/pizza “energy surcharge” that some of its stores levied for a while in early 2004.

Arby's Held Not Vicariously Liable by Wisconsin Supreme Court

By a 6-0 vote, the Wisconsin Supreme Court upheld lower court rulings that dismissed a lawsuit filed against Arby's Inc. after the 1999 killing committed by one of the employees of a Madison franchisee. The case is Robert Kerl, et al. v. Dennis Rasmussen, Inc., et al (and the court of appeals case that first denied vicarious liability was 2003 WI App. 226 Court of Appeals of Wisconsin, published opinion, Case No.:02-1273).

Representatives of the estate of the man who was killed and his fiancee, who survived the attack, had sued both the franchisee, Dennis Rasmussen Inc., and Arby's.

The court ruled that Arby's was not vicariously liable for a crime committed by an employee of one of its franchisees because it did not have control, nor right of control, over the daily operation of the specific restaurant outlet. Even though the franchisee hired the killer, who was out of prison on a work-release program, without checking into his criminal background, the training that Arby's gives its franchisees about hiring did not make it liable.

Coffee Franchisors Violate Consent Decree

Would-be coffee franchisors Jeffrey M. Salley and Terri L. Salley were indicted in the U.S. District Court for the Southern District of Florida on June 4 for violating a December 2000 consent decree. The Salleys face 20 counts of criminal contempt for selling coffee franchises through telemarketing from an office in Jupiter, FL. They sold franchises under the names Worldwide Coffee, Salley's World Wide Coffee, Coffees of the World, and Specialty Gourmet Supply.

The Salleys signed a consent decree in 2000 after facing U.S. Department of Justice action over violations of the Federal Trade Commission's (FTC's) Franchise Rule. The Department alleged that the Salleys provided inadequate disclosure to prospective franchisees about their past criminal convictions and bankruptcies, and they exaggerated potential earnings claims. The two principals promised not to violate the Franchise Rule in the future, but the new indictment charges them with continuing to sell franchise opportunities under the names.

California Shuts Down Weight-Loss Franchisor

On June 18, the California Department of Corporations (Department) issued a cease-and-desist order to the directors of Why Weight Women's Total Fitness, Inc., which has allegedly been selling franchises since February 2004 without approval by the Department.

Why Weight applied for franchise registration in October 2003 and did not reveal at that time, nor in several amendments to the application, the criminal history of Matthew Craig Rubin, nor a past bankruptcy of his partner, Ivan Bondy, according to the Department. In a rejection letter dated June 17, the Department noted that Rubin failed to disclose a 1994 U.S. Central District Court conviction on five felony counts of mail fraud and a 2002 judgment for $16.5 million in restitution to victims in a separate telemarketing scheme. Bondy failed to disclose a 1997 bankruptcy. Moreover, in April 2004, other directors of Why Weight promised that both men would disassociate themselves from the company, which apparently Bondy did not do.

“This pair has a reputation for trying to mislead and lure the public into shady investment schemes,” said Department of Corporations Commissioner William P. Wood. “They have lost their right to engage in this type of business.”

The Department added that at least 17 investors purchased Why Weight franchises since October 2004 in at least 11 other states.