Major lawsuit filed in the U.S.District Court accusing Luminate Bank and Dickey's Barbecue Pit Restaurants, Inc. of fraudulent misrepresentation and deceptive practices. The plaintiffs claim they were misled into taking out multi-million dollar loans and opening failing franchises based on fabricated financial projections. Case: 5:24-cv-00975-JRA
KENT, Ohio, Oct. 13, 2024 /PRNewswire-PRWeb/ -- Franchisees File Lawsuit Against Luminate Bank and Dickey's Barbecue Restaurants, Citing Fraudulent Inducement and Misrepresentation
A group of former Dickey's Barbecue Pit franchise owners, including Daniel Unsworth of Ohio and Jeremy and Nicole Kolbach of Idaho, have filed a civil lawsuit against Luminate Bank Inc. and Dickey's Barbecue Restaurants, Inc., alleging fraudulent inducement, misrepresentation, civil conspiracy, and violations of the Ohio Business Opportunity Plans Act.
The lawsuit, filed in the United States Federal District Court for the Northern District of Ohio, Case: 5:24-cv-00975-JRA claims that both Luminate Bank and Dickey's provided inaccurate financial information and failed to disclose key details about the profitability and operational costs associated with opening a Dickey's franchise. The plaintiffs allege that they were led to believe their franchises would be profitable based on pro forma financial statements provided by the Defendants. These statements, the plaintiffs claim, were exaggerated to facilitate the securing of franchise agreements and loans through Luminate Bank, despite both parties having knowledge that the actual financial outlook was far less favorable.
Plaintiff Daniel Unsworth stated, "We were given projections that lacked any basis in reality. My Dickey's franchise, located in Kent, Ohio, was not the only one to fail within months. It is clear that Dickey's was more focused on enrolling new franchisees than on helping them succeed.With nearly 100 Dickey's failing in 2024 this leads me to describe Dickey's as a 'franchise mill.'
Furthermore, Luminate Bank, backed by the SBA, issued loans based on what I believe to be inaccurate and misleading information, with strong reasons to believe they were aware of its inaccuracy."
The complaint alleges that Dickey's provided nearly identical pro forma statements to both Unsworth and the Kolbachs, despite significant differences in location costs between Ohio and Idaho. This pattern of behavior, the plaintiffs assert, may extend to numerous other franchisees nationwide, many of whom have suffered substantial financial losses.
Daniel Unsworth also noted that "a representative from Luminate Bank informed me that several other Dickey's Barbecue franchises, funded by the bank and backed by the SBA, had already failed or were on the verge of failure before my loan was approved. The representative expressed surprise that no lawsuits had been filed and indicated that the only known success was attributed to an individual acquiring distressed locations with ties to Dickey's Barbecue."
Unsworth raised concerns, stating, "Why would Luminate Bank continue financing, fully aware that a significant portion of the Dickey's franchises it funded had failed? This raises serious questions about potential unethical and possibly fraudulent practices by both Luminate Bank and Dickey's Barbecue, especially considering that nearly million-dollar investments in Dickey's restaurants were liquidated or sold for mere pennies on the dollar after opening."
Jeremy Kolbach, whose Star, Idaho franchise also closed shortly after opening, added, "Dickey's misled us at every turn, and Luminate Bank did nothing to prevent it. They seemed more interested in collecting fees than protecting small business owners."
According to Restaurant Business Magazine, nearly half of Dickey's Barbecue franchisees either closed or sold their stores in the past year. The company's most recent franchise disclosure document (FDD) reveals that 97 restaurants closed during the 2024 fiscal year, which ended on May 31, while another 106 locations were sold to other franchisees, resulting in a "churn" rate of 46%.
The plaintiffs are seeking damages to recover their initial investments and debts incurred, as well as punitive damages and attorney fees. They are also requesting that the court rescind their franchise agreements and loan guarantees.
About the Lawsuit: The plaintiffs accuse Luminate Bank Inc.and Dickey's Barbecue Restaurants, Inc.of misleading franchisees about the profitability of their franchises, encouraging them to take on significant financial risks based on fabricated financial projections. The lawsuit seeks to shed light on the broader issues within Dickey's franchise model and advocates for reforms to prevent future franchisees from falling victim to similar practices.
For more information, please contact:
David S. Nichol, Attorney
Roderick Linton Belfance, LLP
Phone: (330) 434-3000
Email: [email protected]
Media Contact
Danny Unsworth, DLU, LLC, 1 330-618-7202, [email protected]
SOURCE DLU, LLC
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