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Window World: Not Squeaky Clean Under Franchise Laws
by Mario Herman, Esq.
Recent claims against Window World point out the danger of selling
license agreements when in fact the relationship is actually a franchise. This
can be a costly mistake for the licensor.
Window World, Inc. claims to be America’s largest replacement window company.
According to its website, it has almost 186 Window World offices in 45 states
and is still growing. The problem is that it sold these locations under
“license agreements,” without complying with franchise registration and
disclosure laws at the state and federal level. On November 29, 2011, the
California Department of Corporations issued a Desist and Refrain Order against
Window World, Inc. based on unlawful Franchise Investment Law activity (Cal.
Corp. Code Section 31110). On the same date, Window World, Inc. entered
into a Stipulation to Cease and Refrain Order. Window World, Inc. is
headquartered in North Wilkesboro, N.C., and has locations in more than 200
cities throughout the United States. It is not registered to sell
franchises in California.
Window World, Inc.’s legal problems did not end in California. On
January 29, 2012, Window World of Chicagoland, LLC and David Hampton filed suit
against Window World, Inc. and its principals Tammy Whitworth and Dana Deem in
the United States District Court, Illinois Northern District. The lawsuit
alleges: “This is an action for rescission and damages based on Defendants’
violations of the Illinois Franchise Disclosure Act . . . by and among other
things, failing to register as a franchise under the Illinois Franchise
Disclosure Act (“IFDA”) and making fraudulent representations and omissions in
connection with the sale of an unregistered franchise.” The lawsuit seeks
rescission of the License Agreements and/or an award of damages, punitive
damages, reasonable attorneys’ fees and court costs.
In November 2011, the Attorney General of the State of Illinois filed a
Complaint in the Court for the Seventh Judicial Circuit, Sangamon County, State
of Illinois against Window World, Inc. captioned People of the State of Illinois
v. Window World, Inc., 2011 CH 1524 (the "AG Action"). In the AG Action,
Window World entered into a Final Judgment and Consent Decree ("FJCD") with the
Attorney General on November 29, 2011, admitting it sold illegal franchises in
the State of Illinois to at least fourteen "licensees" between 2003 and 2011. In
the FJCD, Window World is enjoined from selling any franchises in the State of
Illinois until such time as it is registered to do so, and is enjoined from
failing to provide prospective franchisees with an FDD that meets the
requirements of the IFDA, and fines are imposed on Window World and require
Window World to make an offer of rescission that meets the requirements of the
IFDA.
Window World, Inc. has sent a letter to those who have entered into license
agreements which offers two options: (1) enter into a new franchise
agreement with Window World, Inc., or, (2) rebrand as an independent and return
all proprietary materials to Window World, Inc., and Window World, Inc. will pay
back their initial fee minus any profit which was derived from the business.
The Chicagoland lawsuit alleges that this letter does not comply with the IFDA.
Mr. Herman based in Washington, D.C., represents franchisees domestically and
internationally negotiation, mediation, arbitration, and litigation.
mherman@franchise-law.com
www.franchise-law.com
www.internationalfranchiselaw.com
202-686-2886 (ph)
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