Sage Seminars, Inc., a franchisor of opportunities to produce "Dreamwalk" motivational seminars, has agreed to settle Federal Trade Commission charges that it overstated the earnings of potential investors in the franchise, in violation of the FTC’s Franchise Rule and the FTC Act. Under the terms of the settlement, William R. Dempsey and Peggy Ann Davenport, owners and officers of the company, will be banned from the sale or marketing of any franchise or similar business venture in the future and from offering employment opportunities for which they charge money. In addition, the FTC has asked a U.S. District Court to establish a claims procedure to determine the amount of consumer redress to be ordered for those who invested in the franchise.
Dempsey, Davenport and Sage are currently based in Las Vegas, Nevada, but were originally based in Rohnert Park, California. They advertised Sage Seminar management positions as income opportunities in high circulation national publications.
According to the FTC complaint detailing the charges, Sage sold business opportunities for fees ranging from $10,000 to $130,000 on promises that franchisees -- or "SageManagers" -- would quickly recoup their initial investment. Sage advertised that SageManagers, who arranged personal growth seminars and solicited paid attendance, would earn $15,000 per seminar and would typically earn over $100,000 per year. In fact, according to the FTC, few, if any, investors recouped their initial investment or earned the income Sage touted. Sage also claimed that its nationwide marketing program would provide SageManagers with ongoing marketing support and assistance in their efforts to recruit seminar participants. No nationwide marketing program existed, according to the FTC.
The FTC’s Franchise Rule requires that a franchisor provide prospective franchisees with a complete and accurate basic disclosure statement, containing 20 categories of information,
including information about the history of the franchisor, information about litigation by former franchisees that involves the franchisor/franchisee relationship, any state or federal restrictive order that affects the franchisor/franchisee relationship, the terms and conditions under which the franchise operates, as well as information about other franchisees. Disclosure of this information enables a prospective franchisee to assess the potential risks involved in the franchise. The rule also requires that franchise sellers have a reasonable basis for any earnings or profit claims; that any earnings projections must be accompanied by the number and percentage of franchisees that have achieved the claimed result; and that specific documentation be provided to substantiate the claims.
The FTC alleged that Sage failed to provide the disclosure documentation required by the Rule.
In addition to the permanent ban on the sale or marketing of franchises or similar business ventures and on offering employment opportunities for which they charge money, the FTC will seek proof of claim forms from individuals who purchased the franchise to allow consumer redress. The settlement resolves an FTC suit filed in U.S. District Court for the Northern District of California in August, 1995. Franchisees may obtain proof of claim forms by writing to:
Sage -- Proof of Claim
Federal Trade Commission
901 Market Street, Suite 570
San Francisco, CA. 94103
The forms must be completed and submitted by January 29, 1997.
The Commission vote to accept the stipulated permanent injunction was 5-0.
NOTE: This stipulated permanent injunction is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Consent judgments have the force of law when signed by the judge.
Copies of the complaint, stipulated permanent injunction and other documents related to this matter, and a free FTC fact sheet, "Franchise and Business Opportunities," 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
Claudia Bourne Farrell
Office of Public Affairs
Jeffery A. Klurfeld or Sylvia J. Kundig
San Francisco Regional Office
901 Market Street, Suite 570
San Francisco, California 94103
(FTC File No. X950 065)
(Civil Matter No. C-95-2854-SBA)