Florida Phone Vending Opportunity Franchisor Agrees To Pay To Settle Charges
Miami-Ameritel Payphone Distributors and its owner, RoyBarnett Goodman, which were targeted by the Federal TradeCommission as part of a nationwide crackdown on fraudulent businessopportunities, have agreed to pay $40,000 to settle the chargesagainst them. As part of the settlement with the FTC, they'rerequired to comply with the commission's Franchise Rule, apre-purchase disclosure rule designed to give potential franchiseeskey information about the business, its officers, and their legaland financial history, as well as the names and addresses of formerand current franchisees.
The settlement ends the litigation in this case, which was among35 brought by the FTC and the Department of Justice as part of"Project Biz-illion$," a multiprong joint state/federalattack on traditional business opportunity scams. This case waslaunched against defendants that advertised in the classifiedsection of daily newspapers to peddle pay phone, vending machine,display rack or work-at-home business opportunity scams. Thedefendants made unsupported earnings claims and failed to giveconsumers critical pre-purchase information about the businessopportunity, as required by the Franchise Rule.
According to the FTC, Ameritel sold pay phone businessopportunities. The FTC charged the company and its owner withmaking false and misleading claims about the earnings that could berealized, the availability of local, profitable pay phone locationsand the inclusion of such locations as part of the businessventure. The FTC also charged them with failing to comply with theprovisions of the Franchise Rule designed to help potentialpurchasers protect themselves from false profitability claims. Aninvestment for three pay phones was about $4,500. Thedefendants' advertisements often included estimates ofpotential earnings of up to $200,000 per year.
Under the consent judgement, Ameritel and Goodman are prohibitedfrom misrepresenting any fact material to a consumer'spurchasing decision in connection with the sale of businessopportunity ventures. The settlement, which required thecourt's approval, also prohibits the defendants frommisrepresenting that a purchaser would earn in excess of aspecified amount or would be provided profitable locations for thepayphones. The settlement also prohibits the defendants fromviolating or assisting others to violate the Franchise Rule.Specifically, the defendants are prohibited from failing to provideprospective franchisees with a complete and accurate basicdisclosure document or an earnings claim document as required bythe rule and from making any earnings claims or projections withouthaving a reasonable basis for the claims or projections at the timethey are made.
In addition, the settlement requires the defendants to pay$40,000 in consumer redress with an avalanche clause that wouldrequire them to pay $8 million if they are found to have madeomissions or misrepresentations about their financial condition.Finally, the settlement contains various record keeping andreporting requirements designed to assist the FTC in monitoring thedefendants' compliance. -Federal Trade Commission