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Several Noble Roman's franchisees sued the franchisor, charging fraud.

An Indiana court has issued a summary judgement in favor of Noble Roman's, ordering the franchisees to pay Noble Roman's legal fees and damages. The franchisees "were liable to the company for direct damages and consequential damages, including net loss future royalties, for breach of their franchise agreements. In addition, the Court determined that, as a matter of law, Noble Roman's was entitled to recover attorneys fees associated with obtaining preliminary injunctions, fees resulting from the prosecution of Noble Roman's counterclaims and fees for defending against fraud claims against the company and certain of its officers. The amount of the award is to be determined at trial."

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[Publisher's comments: You see, boys and girls, those franchise agreements you sign can have some nasty consequences.]

A man on supervised release for investment fraud did it again, conning people out of $500,000 by selling sham "Return-A-Pet" franchises.

According to the indictment, Stein told his victims: "'The concept is simple. For a one-time fee of $20, a pet's owner gets a lifetime membership to the service, and when someone finds the lost pet, he or she calls the toll-free number on the tag. Telephone operators are on call around the clock, seven days a week, to contact the pet's owner and return the animal.'"

Stein sold his "distributorships" for upfront fees of $5,000 to $50,000, and sold them to victims as far away as Texas, Georgia, Kentucky, North Carolina, and South Africa, "often falsely identifying himself as Robert Philips," prosecutors said.

In its statement, the U.S. Attorney's Office added: "Stein was publicly interviewed by a Wall Street Journal reporter in 2004, and on the television program 'American Greed' in 2008, concerning an investment fraud scheme he operated in Nevada for which he was previously convicted. In the interviews, Stein described how he had lured investors into believing that his business was legitimate by, among other things, paying people to give phony, 'wonderful' references - similar to his alleged operation of Return-A-Pet. In the Wall Street Journal interview, he stated it's all about the packaging and the picture that you paint for them - the image, all about the dream you're making for them.'"

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Franchisees sometimes obtain loans guaranteed by the Small Business Administration.

That's what many Atlanta Bread franchisees did -- and some of them failed.
The cost to taxpayers: $5 million.

Atlanta Bread is the story of a franchise which grew large then shrank.
Franchisees were among its casualties.

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Business is currently lackluster and unlikely to improve much going forward, according to an August survey of 134 executives representing both U.S. franchisers and franchisees. What’s more, they say conditions today are significantly worse than they were just a few months ago.

Slightly more than a third of respondents said business conditions were “somewhat poor,” up from about 20% who said the same in a March survey that polled 370 franchiser and franchisee executives, the IFA reports. Roughly 25% said conditions were “somewhat good” in August, down from 31% in March.

Franchise leaders noted that limited access to credit remains a major problem. Nearly two-thirds of those polled in August – 64% — reported “no improvement” in this area in recent months, up from 62% who said so in March. Looking forward, just 27% said they expect to see “moderate improvement” in credit access over the next 12 months, compared with 49% who said this in March.

http://blogs.wsj.com/in-charge/2011/09/01/current-conditions-outlook-dim-for-franchises/