International Law

PLAY N TRADE's Franchise Registration Suspended

Watch Play N Trade's Founder, Ron Simpson on The Big Idea with from Play N Trade on Vimeo.

The internet allows fact checking to become social - more people can respond and provide clues as to the big picture in franchising.

For example, consider Play N Trade and this video, dated around August 2008.

First, we have an implied earnings claim, $20 million in revenue and $130 stores, a claim which doesn't show up in the Play N Trade's FDD.

But, what is more interesting is that over a year ago, at Ryan Knoll's Franchise Pundit, the following claims were made about Play N Trade.

1. Sorry to be a buzz kill but if I were considering buying a Play N Trade franchise I'd want to know the whole picture. The stores keep closing -- the one in Blaine, MN just closed in September and there are other posts about the several other closings. It appears this thing's a bit of a Ponzi Scheme to sell franchises but they don't make money.

2. Don't do it! These guys are thieves! You hit the nail on the head. They were the Yakety Yak Wireless franchise people. Dave Timlin is a LIAR!

3. "Play N Trade is the best thing to happen to the Video Game Industry since the NES. It's a franchise model, which means the owners have the ability to make alot of money or screw it up. The store and everything it stands for, is the best thing out there. Why does everyone jump on the Franchisor and forget about the moron that didn't follow their proven system? If you are going to let negative blogs affect you decision about Quiznos, or Play N Trade or any other franchise out there, Stay in your dead end job! Your too weak minded to make it anyway. Owning a franchise is for the strong minded, not the weak and pathetic."

Your premise is faulty. Strictly following a franchise model does not ensure success by any means, just like those franchisees who fail cannot universally be attributed to straying from the franchise system. You need to have an obvious competitive advantage, systematic and reliable customer acquisition process, great location with a lease premium no higher than the additional revenue the premium location will generate, franchisor offering innovative and increasingly profitable product or service offerings.

Most of these negative comments turned out to be true,  and the California Regulator has revoked Play N Trades's ability to sell franchises in California:

"The Commissioner finds that beginning on or about June 1, 2006, Play N Trade Franchise, Inc., Yuvi Shmul, and Thomas C. Bozarth violated multiple provisions of the California Franchise Investment Law, including but not limited to Corporations Code sections 31110, 31200, and 31123, as set forth in greater detail herein. Pursuant to section 31406 of the Corporations Code, Play N Trade Franchise, Inc., Yuvi Shmul, and Thomas C. Bozarth are hereby ordered to desist and refrain from: (a) Making unregistered, non-exempt offers to sell a franchise in violation of section 31110;

(b) Making material misstatements or omissions in a franchise registration application filed with the Commissioner in violation of section 31200; and,

(c) Failing to notify the Commissioner of material changes made to the terms of the registered franchise offer in violation of section 31123."

Click here for the California order against Play N Trade.

Full post as published by Misleading Advertising Law on May 05, 2009 (boomark / email).