BEFORE THE SECURITIES COMMISSIONER OF MARYLAND IN THE MATTER OF: * * Our Town America, a Franchising Corporation, * Case No. 2006-0686 Respondent, * * * * * * * * * * * * * * CONSENT ORDER WHEREAS, the Maryland Division of Securities (the "Division") initiated an inquiry into the franchise-related activities of Our Town America, a Franchising Corporation ( Our Town ), pursuant to the authority granted under the Maryland Franchise Registration and Disclosure Law, MD. CODE ANN. BUS. REG. 14-201 et seq. (2004 Repl. Vol. and 2006 Supp.) (the "Maryland Franchise Law"); and WHEREAS, based on information presented by the Division, the Maryland Securities Commissioner (the "Commissioner") has concluded that grounds exist to allege that Our Town violated the provisions of the Maryland Franchise Law and an Escrow Order of the Commissioner, in relation to the offer and sale of Our Town franchises in Maryland; and WHEREAS, before the holding of a hearing in this matter, without trial or final adjudication of any issue of fact or law, and without Our Town admitting or denying any violation of law, the Commissioner and Our Town have reached an agreement to enter into this Consent Order: NOW, THEREFORE, IT IS HEREBY ORDERED AND DECREED:
I. JURISDICTION 1. The Commissioner has jurisdiction in this proceeding pursuant to Section 14-210(a) of the Maryland Franchise Law. II. STATEMENT OF FACTS 2. Our Town is a Florida corporation with a principal business address of 3845 Gateway Centre Blvd., Suite 300, Pinellas Park, Florida 33782. Our Town offers franchises for the operation of a direct mail marketing business directed to individuals and families that have indicated a change of address. 3. Our Town was initially registered with the Division to offer and sell franchises in Maryland from April 15, 2005 through April 15, 2006. 4. On April 5, 2005, as a condition of granting Our Town s initial franchise registration in Maryland, the Commissioner issued an Escrow Order requiring Our Town to deposit all franchise fees and other funds received by Maryland franchisees into an escrow account (the Escrow Account ) until Our Town s obligations under its franchise agreements with Maryland franchisees have been satisfied. 5. Between April 15, 2005 and April 15, 2006, on four separate occasions, Our Town deposited fees received from four Maryland franchisees into the Escrow Account and subsequently petitioned the Division for the release of those funds, after representing to the Division that Our Town had fulfilled its obligations under those respective franchise agreements. 6. On April 14, 2006, Our Town filed an application with the Division to renew its registration in Maryland. The Division reviewed Our Town s renewal application and, on May 1, 2
2006, sent Our Town a letter outlining deficiencies in the application that had to be corrected before Our Town s franchise registration could be made effective in Maryland. 7. On May 23, 2006, Our Town responded to the Division s May 1, 2006 comment letter and, on May 31, 2006, the Division sent Our Town a subsequent letter outlining several remaining deficiencies in the application that had to be corrected before Our Town s franchise registration could be made effective in Maryland. 8. Our Town never responded to the Division s May 31, 2006 comment letter. 9. Our Town acknowledges that on September 7, 2006, after Our Town s franchise registration in Maryland had expired, Our Town entered into a franchise agreement with Richard Guilfoyle, a resident of Annapolis Maryland, to operate an Our Town franchise. 10. Our Town also acknowledges that on September 7, 2006, it accepted from Guilfoyle a check for Fifteen Thousand Dollars, representing one half of Our Town s initial franchise fee Guilfoyle agreed to pay under his Our Town franchise agreement. Guilfoyle also executed a promissory note payable to Our Town for an additional Fifteen Thousand Dollars, representing the balance of his initial franchise fee. 11. Our Town further acknowledged that it gave Guilfoyle a franchise disclosure document ( Our Town UFOC ) about the Our Town franchise offering. That Our Town UFOC did not include information about the Commissioner s Escrow Order and Our Town s agreement to deposit into the Escrow Account all franchise fees and other funds received from Maryland franchisees. 12. Our Town did not deposit the funds its received from Guifoyle into the Escrow Account, as required under the Commissioner s Escrow Order. 3
13. Although Our Town gave Guilfoyle a franchise disclosure document discussing the Our Town franchise offering, that disclosure document was not registered with the Division at the time of the sale to Guilfoyle and did not contain all of the material information about the Our Town franchise offering required by the Division. 14. Our Town represents that it has ceased offering and selling Our Town franchises in Maryland and to any Maryland residents. 15. Our Town also represents that it has developed new compliance procedures to ensure that, in the future, it complies with all required provisions of the Maryland Franchise Law, including the Commissioner s Escrow Order. 16. Our Town further represents that, other than the sale to Guilfoyle identified above, Our Town did not offer or sell any franchises in Maryland or to any Maryland residents after April 15, 2006. III. CONCLUSIONS OF LAW 17. By engaging in the above activities, the Commissioner has determined that Our Town violated 14-214, 14-217, 14-223, and 14-229 of the Maryland Franchise Law and the April 5, 2005 Escrow Order of the Commissioner. IV. ORDER AND CONSENT 18. THE COMMISSIONER HEREBY ORDERS, AND OUR TOWN HEREBY REPRESENTS AND CONSENTS THAT: A. Our Town shall immediately and permanently cease and desist from the offer and sale of franchises in violation of the Maryland Franchise Law; 4
B. Our Town shall diligently pursue the completion of an application to register the Our Town franchise offering in Maryland; C. Upon notification by the Division that Our Town s franchise offering has been effectively registered for use in Maryland, Our Town shall send to Guilfoyle: (i) a copy of a Franchise Disclosure Document effectively registered by the Division (ii) a letter, in substantially the form attached to this letter as Exhibit 1, notifying him that he has the right to rescind his Our Town franchise agreement; D. Our Town shall enroll an officer of the franchisor who is primarily responsible for franchise compliance matters, in a franchise law compliance training program approved by the Division; E. Our Town acknowledges that this Consent Order is a discloseable order as described under Item 3 of the Uniform Franchise Offering Circular Guidelines and 14-216(c)(9)(I)(4) of the Maryland Franchise Law. V. JURISDICTION RETAINED 19. Jurisdiction shall be retained by the Commissioner for such further orders and directions as may be necessary or appropriate for the construction or enforcement of the Consent Order. VI. CONSEQUENCES OF VIOLATING THIS CONSENT ORDER 20. If Our Town fails to comply with any term of this Consent Order, the Division may bring administrative or judicial proceedings against it to enforce this Consent Order or to sanction it for violating an order of the Commissioner, and may take any other action authorized under the Maryland Franchise Law or any other applicable law. In any such proceeding in which, after an opportunity for a hearing, the Commissioner or a court finds that Our Town has violated this Consent Order, the Statement of Facts and the violations of the Maryland Franchise Law alleged in the 5
Consent Order shall be deemed admitted and may be introduced into evidence against Our Town. VII. MODIFICATION OF CONSENT ORDER 21. The terms of this Consent Order may be modified only by a subsequent order issued by the Commissioner. SO ORDERED: BY CONSENT: SECURITIES COMMISSIONER Melanie Senter Lubin DATE OF THIS ORDER:, 20 Our Town America, a Franchising Corporation Michael Plummer, President 6
Exhibit 1
FORM (On Company Letterhead) Certified Mail Return Receipt Requested Re: [Company] Notice of Offer to Rescind Franchise Agreement Dear : In accordance with discussions our attorneys have had with the Division of Securities of the Maryland Attorney General's Office (the "Division"), [Insert name of Company] ("we") have agreed to offer rescission to all persons who purchased Franchise Agreements to operate our [Company] program in Maryland. This offer of rescission is made in settlement of the administrative proceeding that the Division may bring for the offer and sale of an unregistered franchise under the Maryland Franchise Law and does not affect any civil liability for which we may be responsible. If you elect to rescind and terminate your Franchise Agreement, we agree to return to you the franchise fees you paid, and cancel any indebtedness, less the wholesale cost for any unreturned items and equipment included in the purchase price you paid under your Franchise Agreement. If you purchased any optional items as part of your Franchise Agreement, we will reimburse you for the cost you paid us for any of the items that you return. In the event you elect to rescind, you will give up your Franchise Agreement and any rights to use our trademarks and system. Also, you will be obligated to refrain from using and disclosing any of our trade secrets and any of our confidential and proprietary information. This offer will remain open for thirty (30) days from the date you receive this letter. Please check the appropriate place below and return a signed copy of this letter to me within the time period. If you have any questions, please contact Dale E. Cantone, Assistant Attorney General, at the Division (410-576-6368). Sincerely, THE COMPANY
A CCEPTANCE OR REFUSAL OF OFFER TO RESCIND FRANCHISE AGREEMENT 1. I, the undersigned Franchisee, acknowledge that I have read the preceding Notice of Offer to Rescind Franchise Agreement and understand its contents. 2. I understand that I have not waived my rights under the Maryland Franchise And Disclosure Law by signing this document. 3. I hereby make the following choice to accept or refuse your offer to rescind my Franchise Agreement: CHECK ONE I hereby accept your offer of rescission and agree to not use your trademarks and system and to not use or disclose to anyone the trade secrets, and confidential and proprietary information that we obtained from you. I do not accept your offer of rescission. I wish to remain a Franchise under my Franchise Agreement. Franchisee