NY Bagel Scam Ordered to Repay VA Victims and were also fined more than $700,000, according to the UnhappyFranchisee.com website.
(NY Bagel Scam) According to the Unhappy Franchisee website, the website authors reported that the notorious franchise sellers Dennis Mason (aka Keith Samuels, aka Brian Scofield, aka Denis Mason many other names) and Joe Smith were selling unregistered and fraudulent NY Bagel Cafe franchise (or what they call “license”) opportunities to Virginia residents.
The Commonwealth of Virginia assigned veteran investigator Barry Braun to look into the allegations. Barry Braun came to the conclusion that the UnhappyFranchisee.Com allegations were accurate, and worked with the website publisher to identify and contact victims and document the legal violations.
The Commonwealth of Virginia determined that Dennis Mason and Joseph Smith sold franchises in Virginia without being legally registered to do so.
They determined that they used documents that had not been reviewed or approved by their franchise regulators.
And they determined that those documents contained fraudulent, untrue misrepresentations:
…the Defendants informed two of the Franchisees that New York Bagel had 14 stores open as of November 2011 and that no stores had closed from 2008 to 2011.
Defendants, however, failed to inform the Franchisees about new stores opening after 2011 and – more importantly — that at least 17 New York Bagel stores had closed from 2012 to 2014.
29. Additionally, the Defendants made misrepresentations to the Franchisees about litigation involving New York Bagel. The Defendants informed the Franchisees that the franchise had no history of litigation. New York Bagel, however, was a defendant in at least four
civil lawsuits concerning the franchise from 2010 to 2014.
30. The Defendants also represented to the Franchisees during the offer and sale of the franchises that New York Bagel would provide them with assistance in setting up and operating a store- including assistance with obtaining financing, identifying a location and signing a lease,
and providing training for staff.
31. The Franchisees, however, received little or no assistance from the Defendants after signing the Agreements and paying their initial franchise fees.
32. Only two of the three Franchisees have opened for business as a New York Bagel store, and one of those Franchisees already has closed his store. Each of the Franchisees, however, has incurred substantial costs and expenses in attempting to open and operate a New York Bagel franchise- including expenses for rent, renovations and equipment.