COLUMBUS, Ohio (CN) - A federal class action claims Petland defrauds its franchisees by forcing them to accept a network of vendors who overcharge and pay kickbacks to Petland, and by lying about finances and providing diseased animals. When stores fail, Petland charges an "exorbitant termination fee," and flips the stores to "new unwary franchisees," the complaint states.
The plaintiffs say they had to pay more than $40,000 in veterinarians' bills alone, though one of them is a veterinarian herself.
Plaintiffs Robert Jones and Robert Hyde also sued Petland's alleged "network" of suppliers and associates: Hunte Kennel Systems & Animal Care, Hunte Delivery System, Loveland Pet Products, Dun & Dunn Data Systems, Coastal Pet Products, Rolf Hagen (USA) Corp., and Central Garden & Pet.
Plaintiffs opened a Petland franchise in Murfreesboro, Tenn. They say Petland typically charges franchisees $25,000 for a new store and $12,500 to take over an older one, plus a lot more for inventory and other items. "Petland sells to potential franchisees what it calls its 'System,' involving 'uniform standards, methods, techniques and expertise, procedures and specifications,'" the complaint states.
"Petland insists that its franchisees operate 'in strict accordance with the System' ... According to Petland, so long as the franchisees follow the 'System' they will be successful.
"The 'System', however, works in only one direction - for the benefit of Petland and its affiliated vendors. Plaintiffs and members of the class were fraudulently induced to purchase failing Petland franchises for hundreds of thousands of dollars per franchise when Petland knew, or should have known that the franchises could not success. ... (O)nce a franchise has failed and Petland has charged the franchisee an exorbitant termination fee, Petland looks to 'flip' the store by inducing new unwary franchisees into purchasing the franchise that is similarly doomed to fail. The 'sign up and shut down' modus operandi is a concerted scheme to defraud franchisees while reaping excessive, punitive and penalizing profits through the extortion of unlawful and liquidated damages against unwitting, and soon financially broke, franchisees," the complaint states.
"Beyond that, defendants further induced its franchisees to spend hundreds of thousands more on animals and merchandise from its network of 'approved vendors,' when defendants knew or should have known that its approved vendors' animals were often sick, and the approved merchandise overpriced. ... (A)s part of the unlawful scheme described herein, Petland's affiliated vendors paid kickbacks to Petland in exchange for their status of approved vendors. The named plaintiffs represent a putative class of dozens of deceived franchisees and former franchisees."
Plaintiffs say Petland estimates the cost of opening a store is $75,000 to $150,000, but Jones and Hyde say it cost them more than $750,000 to open their outlet.
They add, "At the outset, plaintiffs realized that a number of animals supplied by Petland's approved vendor, defendant Hunte, were sick. This cause plaintiffs to incur substantial veterinarian bills of approximately $40,000, even though Veronica Jones is a veterinarian herself ..."
They demand $20 million in damages for fraud, fraudulent inducement, breach of contract, misrepresentation, unjust enrichment, and aiding and abetting.
Plaintiffs' lead counsel is Gregory Melick with Luper Neidenthal.
Read the Top 8
Sign up for the Top 8, a roundup of the day's top stories delivered directly to your inbox Monday through Friday.