Helen Schumaker, a defendant in a Federal Trade Commission suit against International Computer Concepts, Inc.(ICCI), a Twinsburg, Ohio franchisor of computer software display-rack businesses, has agreed to settle charges of misrepresenting the potential earnings of franchise buyers and using shills as references, among other violations of the FTC's Franchise Rule and the FTC Act. Under the settlement, Schumaker is permanently restrained from making misrepresentations about the income, profits or sales volume that franchise buyers could expect to earn and from violating the Franchise Rule in the future.
ICCI sells franchises consisting of display racks that hold computer disks, which contain programs, bearing the defendants' trade name "ICC" and "Accusoft" the predecessor name. These racks are designed to be placed in retail stores.
On August 17, 1994, the FTC filed its complaint against ICCI and its principals Larry Schumaker and Helen Schumaker, also known as Helen Negrich. Thereafter, the Commission won a court order temporarily halting the defendants from engaging in allegedly illegal practices. Under the settlement, Helen Schumaker is permanently restrained from misrepresenting:
- the income, profits or sales volume likely to be achieved;
- the income, profits or sales volume achieved by other business venture purchasers;
- the authenticity of any reference;
- the territorial rights to, or amount of competition within, any geographic territory;
- the number of locations that will be provided;
- the availability of pre-selected locations for display racks;
- the availability of national stores that have agreed to locate display racks;
- the amount of assistance provided to distributors by the defendants; and
- the availability of refunds.
The FTC's Franchise Rule requires franchise sellers to give potential buyers a detailed disclosure document containing information about the business, including the cost of operating the franchise, the terms and conditions under which the franchise operates, and the background and experience of the key franchise executives. If franchise sellers choose to make claims about earnings potential for franchisees, they must have a reasonable basis for the claims, and must provide a document to potential franchisees substantiating them.
The settlement prohibits Helen Schumaker from violating any provision of the rule, including those requiring potential franchisees to be provided with two documents -- a complete and accurate disclosure document within the times stated in the rule, and an earnings claim document if any earnings claim is made.
The Commission vote to approve the filing of the consent judgment against Helen Schumaker was 5-0. The judgment was filed August 23 in U.S. District Court for the Northern District of Ohio, Eastern Division, in Cleveland, and requires the court's approval to become binding.
The FTC's Chicago Regional Office handled this investigation. The Postal Inspection Service and the Ohio Attorney General's Office provided the FTC with assistance.
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 earlier press release outlining the entire charges and all 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 FTC news as it is announced, call the FTC's 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
(FTC File No. X940071)
(Civil Action No. 5:94CV1678)