we were lied to about the franchise we bought

[anchorbeach]

What is the name of your state? Connecticut

In August 2006 my wife and her sister bought a Curves in Oxford,CT. They had been shown papers listing around 200 active members . Once they took the keys and got into the computer it turned out there were only 65 members. Not only that , but the previous owner knowing full well she lied about the income of this business, gave the manager a $1.00/hr raise before she left.
This club has been struggling since day one, although my wife and her sister have increased the membership to around 130 members, it isn't doing better than breaking even and that is only because my wife works most of the hours for no money.
My wife wants to know if she can pursue legal action against the previous owner.
We had thought about closing the club, but Curves, seeing a lot of their clubs closing recently, says their new policy is if we close, we have to pay them $10,000 and will be responsible for three more years of royalties.
Curves at the beginning refused to verify any of the information abour club membership when we first delved into this purchase.
We also have five years on a lease for the club that the owner says he will go after us if we just close up.
Right now it is a financial and legal nightmare and it all started with the previous owner's dishonesty
do we have any legal recourse
Thanks

 

[Some Random Guy]

Did the previous owner ever provide you with the papers showing 200 active paying members? Without proof of your allegations, your case will be very hard to win.

 

[DStaub]

If there is misrepresentation or fraud, as you seem to say, then you certainly have a claim. However, the burden of proving the facts is going to be on you. As Some Random Guy has already commented, without evidence showing the misrepresentations, you will have a hard case. It will be your word against the seller's.

There may be evidence other than the list. Were you given financial statements that were false? Did you have a written purchase agreement with representations or warranties that were breached by the seller?

If there is no written evidence, did you use a broker who may be aware of the misrepresentations? A third party's testimony might carry enough weight to tip the scale in your favor.

You should talk to an attorney and lay out all the facts.

 

[anchorbeach]

yes we were shown papers

Yes we were shown a list of members that long, I do not know if we have a copy of it, I would have to ask my wife. My wife in an attempt to verify that these memberships were valid, contacted Curves corporate and asked that they verify the information. Curves wouldn't verify the numbers but they said if there was a glaring disparity between what we were being told and what the real numbers were, that they would let us know that and they did not. I think they are more concerned about keeping the clubs opens and their royalty fees coming in and not about the welfare of their franchise owners.

 

[Some Random Guy]

Curves wouldn't verify the numbers but they said if there was a glaring disparity between what we were being told and what the real numbers were, that they would let us know that and they did not.

Do you have any written evidence of Curves promising to do this and making themselves partially liable for the fraud?

 

[Texas Pooh]

Go back to the beginning

You need to look at the documents you signed when you bought the franchise (or better yet, have the attorney who helped you with the purchase answer your question). When most franchises are sold, there are many documents that the franchise owner (in this case, Curves) requires to be signed - including the sale and purchase agreement, the franchise license, etc. Almost all have sections disclaiming any representations (in other words, ensuring that you are buying the franchise as is, after appropriate due diligence, without relying on any information provided by the seller or by the franchise owner). Typically, representations about revenue, income, etc., by either the prior owner or the franchise owner are specifically set out as representations that are disclaimed. If you had a good attorney, s/he would have negotiated what representations you were entitled to rely on, and, further, set out exactly how such claims must be asserted. When you are entitled to rely on such representations, they are often set out in the scheduled or exhibits to the documents.

Therefore, you really need to look at the documents before going further.

 

[justalayman]

and to the managers $1 raise.

unless there is a contract, you can give her a reduction in pay.

Heck, unless there is a contract, you should be able to fire her and since your wife is working so hard, step in as manager. That would be a huge savings.

 

[jackmcmanus21]

and to the managers $1 raise.

unless there is a contract, you can give her a reduction in pay.

Heck, unless there is a contract, you should be able to fire her and since your wife is working so hard, step in as manager. That would be a huge savings.

I was just about to say that. Why do you have an overpaid manager if your wife is there all the time? At least get rid of the mgr and give your wife her pay.