California Car Wash Franchisor Settles FTC Charges

The Car Wash Guys International, Inc., based in Agoura Hills, California, and its principals have agreed to settle Federal Trade Commission charges that they made false earnings claims to market and sell mobile car washing franchises throughout the United States. The FTC alleged that the defendants violated the FTC Act and the Commission's Franchise Rule when they failed to provide prospective franchisees with written substantiation for their earnings representations. Under the terms of the settlement, the defendants are prohibited from making misleading representations or omissions in connection with the sale of franchises or business ventures. The settlement would also prohibit the defendants from future violations of the Franchise Rule.

The Franchise Rule requires a franchisor to provide prospective franchisees with a complete and accurate basic disclosure document containing 20 categories of information. The Rule also requires that a franchisor have a reasonable basis for any oral, written, or visual earnings or profit representations, and that it provide prospective franchisees with an earnings claim document containing certain substantiating information.

In July 2000, the FTC filed a complaint in federal district court naming The Car Wash Guys International, Inc.; Wash Guy.com, Inc., based in Tempe, Arizona; the president of both companies, Lance Winslow, III; and Michelle Portney, also known as Michelle Winslow. According to the complaint, franchisees use mobile car wash trucks to clean cars, trucks, and other motor vehicles and perform other washing work, in a specified territory. The FTC alleged that the defendants misrepresented the earnings potential of their franchises and the support they would provide. In addition, the complaint alleged that the defendants violated the Franchise Rule by failing to provide earnings claims documents and by making statements inconsistent with those disclosure documents. (Shortly after the complaint was filed, the federal district court issued a temporary restraining order against the defendants and froze their assets.)

The settlement, which was approved by the court on February 28, 2001, prohibits the defendants from making the types of misrepresentations alleged in the complaint and from misrepresenting the size of their business operation or the number or identities of their purchasers. The settlement also prohibits the defendants from making any representation concerning any franchise or business venture unless they have a reasonable basis for making such representation and possess written substantiation. In addition, the defendants are prohibited from violating the Franchise Rule in the future. The settlement further prohibits the defendants from taking any legal actions to enforce franchise agreements executed before the start of the Commission's enforcement action and from collecting on promissory notes signed by franchisees.

The settlement contains a "right to reopen" provision that would trigger a monetary judgment of at least $320,000 if the FTC finds that the defendants misrepresented their financial condition. Finally, the settlement contains various recordkeeeping provisions to assist the FTC in monitoring the defendants' compliance.

The Commission vote to authorize staff to file a stipulated final order for permanent injunction was 5-0. The settlement was filed in the U.S. District Court, Central District of California, Western Division, in Los Angeles, on February 26, 2001.

NOTE: This stipulated judgment and order is for settlement purposes only and does not constitute an admission by the defendants of a law violation. Consent judgments have the force of law when signed by the judge.

Copies of the legal documents associated with these cases are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint in English or Spanish (bilingual counselors are available to take complaints), or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to thousands of civil and criminal law enforcement agencies in the U.S. and abroad.

(FTC Matter No. 0023186)
(Civil Action No. 00-8197 abc (RNBx))