A company that promised fabulous earnings for investors in an Internet website development business has agreed to settle Federal Trade Commission charges that it violated the FTC’s Franchise Rule. The settlement bars future violations of the Franchise Rule, provide refunds for investors, and bans the company from selling its customer lists.
New Hampshire-based GreenHorse Communications, Inc., and its president, Lynn Haberstroh, ran promotions on its website and in ads in the Boston Globe, the Manchester Union Leader, the New Hampshire Business Review, and the Portland Press Herald. The ads also ran on a website titled, "Franchise Solutions." The ads claimed that working only part-time, investors in the Internet website development business could expect to earn as much as $134,992 within their first year in business. The company sold the franchise business for $14,000- $15,000.
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. Disclosure of the 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 GreenHorse and Haberstroh failed to provide prospective franchisees with the disclosure documents required by the Rule and failed to substantiate earnings claims.
The settlement of the FTC charges bars GreenHorse and Haberstroh from future violations of the Franchise Rule. In addition, they are required to offer refunds and contract cancellation to any investor in the business opportunity. Finally, the settlement bars them from selling, renting or transferring their customer lists or information about their customers.
The Commission vote to file the settlement was 5-0. It was filed in U.S. District Court for the District of New Hampshire and entered by the court May 4.
NOTE: This consent judgment 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 and stipulated final judgment and order for permanent injunction are available from the FTC’s web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD 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 File No. 972 3227)
(Civil Action No: 98-CV-245-M)