Company Will Pay $65,000 Civil Penalty
J.C. Pro Wear, Inc. of Escondido, California, a seller of sports-apparel outlets, and James L. O'Laughlin, the company's principal officer have agreed to settle Federal Trade Commission charges of falsely claiming to be in compliance with the FTC's Franchise Rule and with violating the Rule, in part, by failing to provide prospective franchisees with the disclosure documents required by the Rule. The proposed settlement would prohibit the defendants from making similar
misrepresentations and from violating the Rule in the future, and require them to pay a civil penalty in the amount of $65,000.
The FTC's Franchise Rule requires franchise sellers to give potential buyers a detailed disclosure document containing information about the business, the terms and conditions under which the franchise operates, audited financial information concerning the franchisor, information about existing franchisees and information about the circumstances surrounding the termination of franchises.
J.C. Pro Wear sells franchises throughout the United States for retail outlets that sell sports apparel. The franchise fees for J.C. Pro Wear's stores range from $22,000 to $30,000. The franchises are located in leased space in Montgomery Ward stores. The FTC's March 1994 complaint detailing the charges in this case alleged that the defendants failed to provide prospective franchisees any disclosure document, or, in some instances, provided prospective franchisees with a disclosure document that did not comply with the Rule. The FTC further alleged that the defendants made earnings claims but did not provide the required documentation substantiating those claims.
In addition, the FTC alleged that the defendants had included on their non-complying disclosure document that they gave to prospective purchasers of their franchises the statement that "J.C. Pro Wear, Inc. adheres to Federal Trade Commission requirements." According to the complaint, J.C. Pro Wear had not complied with FTC requirements.
The proposed settlement to these charges, which requires the court's approval to become binding, would prohibit the defendants from violating the FTC's Franchise Rule in the future, and require the defendants to pay a civil penalty in the amount of $65,000. The proposed settlement also would prohibit the defendants, in connection with the marketing or sale of any franchises, from making any representations that the defendants adhere to FTC requirements.
At the request of the FTC, the Department of Justice filed the proposed settlement in the U.S. District Court for the Southern District of California, in San Diego on Oct.31. The Commission vote to authorize filing of the settlement was 5-0.
NOTE: This consent decree is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Consent decrees have the force of law when signed by the judge.
Copies of the proposed consent decree and other documents associated with this case are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC's World Wide
Web site at: http://www.ftc.gov
(Civil Action No. 94-0440 (GT))
(FTC File No. 912 3405)