The Teriyaki Madness Franchise Disclosure Document (posted below), submitted for CA state registration in April, 2013, raised questions and objections from the California Department of Corporations – Securities Regulation Division.
(UnhappyFranchisee.Com) The most serious of the objections was the financial condition of the franchisor.
The Teriyaki Madness franchisor reportedly had a whopping $218 in the bank and stockholders equity of $-25,726.68 (That’s right. NEGATIVE $25,726.68)
CA Senior Corporations Counsel Shohreh Aram wrote:
Franchisor’s audited financial statements as of December 31, 2012 indicate that it has working capital of $218. It does not appear that the franchisor has satisfied the requirements of Rule 310.313 for adequate financial arrangements to fulfill obligations in the offering
California Corporations Commissioner Jan Lynn Owen has issued an order that Teriyaki Madness franchise fees for any franchises sold in California must be placed in escrow and not released to the franchisor until the franchisee’s unit has is open for business.
Additionally, Teriyaki Madness is required to include the following warning on its California FDD:
#4 The franchisee will be required to make an estimated initial investment ranging from $234,048 to $327,213. this amount exceeds the Franchisor’s Stockholder Equity as of March, 2013 which is $-25,726.68.
CA Corporations Counsel Shohreh Aram raised the concern shared on UnhappyFranchisee.Com (read TERIYAKI MADNESS Franchise Warning) that Teriyaki Madness was being highly selective in including profitability numbers from only one “affiliate” (not franchise) location in its Item 19 Financial Performance Representation.
Teriyaki Madness Attorney Michael Drumm added the profitability for a second “affiliate” location, which was 28% lower than the first. However, neither of these locations are Teriyaki Madness franchises, and neither pay royalties.
Read: Teriyaki Madness CA Correspondence (includes required changes to Teriyaki Madness FDD).
Read: Teriyaki Madness 2013 FDD (does NOT include CA-required changes).
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Tags: Teriyaki Madness, Teriyaki Madness franchise, Teriyaki Madness FDD, Teriyaki Madness Franchise Disclosure Document, Teriyaki Madness franchise warning, Rod Arreola, Alan Arreola, Michael Haith, Franchise Sherpas
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