Alabama Vending Machine Franchisor Settles FTC Charges

Univend, LLC, and its owner Paul Hall, have agreed to settle Federal Trade Commission charges that they failed to provide the pre-sale disclosure documents required by the FTC's Franchise Rule to prospective purchasers of their vending machine business opportunities. The Mobile, Alabama-based company sold bulk candy vending machines for a package price that included the machines, the services of a locating company, assistance from the defendants, and warranties on the machine. In June 2002, the Department of Justice, at the request of the FTC, filed a suit against the defendants as part of "Project Busted Opportunity," alleging that the defendants violated the earnings claim and disclosure requirements of the Franchise Rule.

Under the terms of the settlement, the defendants are: required to pay an $11,000 civil penalty; prohibited from making false and misleading representations in connection with the sale of business opportunities; prohibited from providing prospective business opportunity purchasers with the names of references other than those that the Franchise Rule requires; and required to comply with the Franchise Rule. The settlement contains various recordkeeping provisions to assist the FTC in monitoring the defendants' compliance.

"Project Busted Opportunity" was a law enforcement sweep launched by the FTC, the Department of Justice, and 17 state law enforcement agencies, targeting fraudulent work-at-home and business opportunities. In its complaint, the FTC alleged that the defendants solicited consumers primarily through classified ads, touting statements such as: "$400+MONTH Vending Route" with "Prime Locations." According to the FTC, the defendants, when advertising their vending machines, made specific earnings claims without providing an earnings claim document and without having a reasonable basis for those claims. In addition, the FTC alleged, they failed to provide prospective purchasers with the required list of franchisees in the basic disclosure document.

The Commission vote to authorize staff to file the proposed stipulated judgment and order was 5-0. It was filed in the U.S. District Court for the Southern District of Alabama, by the Department of Justice. The court entered the judgment on February 13, 2003.

(FTC Matter No. X020084)
(Civil Action No. 02-0433-P-L)