Two Vending Machine Franchisors Pay Civil Penalty To Settle FTC Charges

American Coin-Op Services, Inc., based in Buffalo, New York, and its principals, Daryl J. Chase and Craig J. Schieder, have agreed to settle Federal Trade Commission charges that they failed to provide the pre-sale disclosures required by the FTC's Franchise Rule to prospective purchasers of their mint and candy vending machine opportunities. In a separate settlement, World Wide Coffee, Inc., based in Jupiter, Florida, and its principals, Jeffrey Salley and Terri Salley, also agreed to settle FTC charges that they failed to provide the pre-sale disclosures to prospective purchasers of their espresso coffee machine vending opportunities.

The Department of Justice, at the request of FTC, filed suits against the two companies and their principals as part of "Project Biz-illion$," a nationwide crackdown on fraudulent business opportunities. Under the terms of both proposed settlements, the defendants are prohibited from violating the Franchise Rule and making false and misleading representations in connection with the sale of business opportunities. In addition, the American Coin-Op Services defendants have agreed to pay an $11,000 civil penalty, and the World Wide Coffee defendants have agreed to pay a $20,000 civil penalty.

The settlements announced today end the litigation in these cases, which were among 22 cases the FTC referred to the DOJ for filing as part of "Project Biz-illion$," a multi-prong state/federal attack on business opportunity scams. These cases, like most of the "Project Biz-illion$" actions, were launched against defendants that advertised in the classified section of daily newspapers to peddle payphone, vending machine, display rack, and work-at-home scams.

According to the FTC, the defendants in the American Coin-Op Services case represented that they would set purchasers up in their own profitable vending business for a minimum investment of $5,985 for 15 vending machines. The defendants' promotional materials represented that prospective purchasers could expect to earn annual profits from $10,912 with 20 machines to $102,300 with 100 machines, and their classified ads claimed the business had a "$1000/wk potential."

Similarly, the defendants in the World Wide Coffee case represented that they would furnish the equipment and coffee, and secure restaurant and bar locations for their expresso coffee vending opportunity for a minimum investment of $9,300 for a package of five espresso machines. The defendants' promotional materials represented that prospective purchasers could expect to earn income of $15,000 with 5 machines averaging 25 servings a day, and their classified ads claimed the business would earn "2K/wkly."

In both cases, the complaints alleged that the defendants failed to provide prospective purchasers with an earnings claim document providing written substantiation for the defendants' earnings claims, including the number and percentage of prior purchasers who had earned that much, as the Franchise Rule requires. The complaints also alleged that the defendants failed to provide prospective purchasers with a basic disclosure document that included the names, addresses and telephone numbers of prior purchasers, as required by the Rule, to help potential purchasers protect themselves from false profitability claims.

In addition to paying civil penalties, the settlements, which require the court's approval, prohibit the defendants from future violations of the Franchise Rule; making false and misleading representations in connection with the sale of business opportunities; and selling their customer lists. The settlements also contain various recordkeeping and reporting requirements designed to assist the FTC in monitoring the defendants' compliance.

The Commission vote authorizing staff to refer the proposed settlement in the American Coin-Op Services matter to the Department of Justice for filing was 5-0. The stipulated judgment and order was filed in the U.S. District Court for the Western District of New York, in Buffalo, on April 6, 2001, by the Department of Justice, and approved by the court on April 9, 2001.

The Commission vote authorizing staff to refer the proposed settlement in the World Wide Coffee matter to the Department of Justice for filing was 5-0. The stipulated judgment and order was approved and entered by the U.S. District Court for the Southern District of Florida,West Palm Beach Division, on December 7, 2000.

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.

(American Coin-- FTC Matter No. X000029; Civil Action No. 00-CV 0126S(M))
(Worldwide Coffee--FTC Matter No. X000045; Civil Action No. 00-8137-CIV-GRAHAM)