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OLYMPIA FIELD, Ill. – Francorp Inc, self-proclaimed as the leader in franchise development, continues to sign on new clients despite its loss of staff and burden to pay off its big debt on tax liens and judgments. The question now is will Francorp be able to meet its legal obligations to its clients, and will these companies get accurate and reliable legal services that won’t come back to haunt them.
Francorp, operating since 1976, has everything it needs to capture new companies today: A new webpage with former McDonald’s president Ed Rensi singing Francorp’s praises; numerous YouTube video interviews with franchise executives giving Francorp big endorsements; and a long list of well-known clients, featuring ACE Hardware, Century 21, Jimmy John’s, Hallmark, Shell, Popeyes and Buffalo Wild Wings.
Judy Julin, founder and CEO of CosmicKids, states on her YouTube interview, “We’ve been working with Francorp for over two years now . . . Francorp has been one-stop-shop . . . and you guys are really the leader in franchising.” Ms. Julin continues, “It’s not like you have to go one place for legal and one place for marketing . . . We know we can go there and get all of our needs met.”
While Francorp projects itself to be a large successful company, clients probably have no idea what its financial status is. In addition to the numerous state and federal tax liens it is currently paying off, new filings continue to be posted. Recently, a federal lien dated May 21, 2009 for $939,623 has appeared, as well as a state tax lien dated October 20, 2011 for $57,614. These are public records on the Cook County, Illinois Recorder of Deeds.
Francorp continues to pay on a $400,000 judgment from a Florida lawsuit, and is now late on making those payments. While the consulting firm at its peak employed over 100 people, it now operates with only seven employees, Boroian and his non-working wife included in that figure.
Last June, Francorp’s general counsel Chris Galloway left the company after months of threatening to sue Francorp, its founder/owner Donald Boroian, and other officers for non-payment of wages in violation of Illinois Wage Payment and Collection Act. At the end of March 2012, it owed the attorney 12 weeks pay.
Blue MauMau obtained a draft copy of Galloway’s proposed lawsuit and emails between Francorp and its general counsel. Galloway explained that the Illinois statute provides rights and remedies to employees who are not paid, including damages totaling twice the amount that is owed to the employee. He reminded that “any officers of a corporation or agents of an employer who knowingly permit such employer to violate the provisions of this Act shall be deemed to be the employers of the employees of the corporation.” He further asserted, “That Boroian, despite Francorp not paying several of its employees, has and continues to receive full compensation for his wages.”
Galloway expressed his frustration, saying that employees are expected to perform their duties while their employer does not reciprocate its obligations. “The only time that we are advised as to the status of payroll is when there is a pipe dream of signing a few clients, or selling an international license. We constantly have to make inquiries as to the status of payroll.” The general counsel adds, “This email is not to be construed in any way other than as a demand for payment of past wages. This is not to be construed as a letter of resignation under any circumstances.” He states that unless the matter is resolved within the next seven days, he will be forced to exercise the rights and remedies that are provided to him under the Illinois Wage Payment and Collections Act.
In response to Galloway’s email, Boroian quickly fired back. “Please do not file anything yet.” He continued stating, “Any lawsuit filed will be picked up [in an article] by Janet Sparks and she will have a field day on this . . . It will only hurt our company and cost you and others their jobs. We will have to outsource legal and other work. We will get to you asap. It is not necessary for you to do this. Please work with me on this. We are working our way out of this situation.”
An analyst who had recently been fired by Francorp also threatened to file suit against Francorp, Boroian and vice president Bill Elliott if he was not paid in full the salaries owed him. Both the analyst and Galloway were then brought current on pay and Galloway continued to work until June. He then resigned his position as general counsel, leaving behind one paralegal.
Two other attorneys left Francorp in 2008. One stated in her resignation letter, “I am concerned that attorneys and compliance administrators are asked on a daily basis to engage in what could be interpreted as the unauthorized practice of law.” Another, the associate general counsel, stated, “Were I to continue working under the current conditions at Francorp, I would be placing my law license and myself in legal jeopardy.”
On its recently updated website Francorp explains its legal obligations to its clients. “Francorp will draft and submit to the client’s attorney for review and approval, a Franchise Agreement defining the contractual relationship between the franchisor and the franchisee.”
It continues, “This Agreement will be developed in conjunction with input received from Francorp’s program analysis and recommendations, and will be based on current industry practice and recent developments in franchise law.” After the client’s attorney has approved the final drafts, Francorp instructs that it will prepare the franchise registration applications required by various state regulatory agencies.
Francorp’s troubled history
Donald Boroian has had a history of problems, balancing his extravagant personal life with his business obligations, as his debts continue to accumulate. The latest word from insiders is that he is again trying to appease his remaining few employees with occasional paychecks so that his franchise development firm stays afloat. Boroian is still paying off numerous state and federal tax liens and a $400,000 judgment from a Florida lawsuit. He is required by the government to make payment of $30,000 a month, which takes precedent over all other expenditures. So far Boroian seems to be able to maintain his expensive lifestyle owning two homes, expensive cars, traveling abroad and paying for Blackhawk season hockey tickets.
Boroian was convicted on tax evasion in May 2006, which resulted in a one-year and one-day federal prison sentence. After his release he was placed into supervised probation until July 2007. From there, he again took control of his Francorp operation, only to face new legal problems.
In a lawsuit filed in Florida, Janice R Winters v South Beach Franchising, a jury held Boroian responsible for deceptive and fraudulent business practices against franchisees of the South Beach company. Besides the franchisor client being whacked by the court, the verdict also sent a strong message cautioning that “packaging houses” such as Francorp could be held accountable for preparation of false and misleading franchise documents for clients. The four-year case concluded with a decision that Boroian completely stepped out of the role of being a franchise consultant to become his client’s partner, Carol Brothers (aka Carol Baker and Carol Myers), her joint venture partner and her legal counsel.
Despite negative press, legal problems and employees jumping ship, Francorp continues to get new startup franchisor clients. Boroian stated recently that his company had signed on with Herbies Auto Sales, Liquid Nutrition, Mr. Ronnie’s Famous Hot Donuts, Storm Guard Restoration, and others. One source said that in lieu of partial payment for services, Boroian accepted an expensive car from a client.
Francorp continues to promote its services around the world proclaiming, “Francorp has been in operation for over 36 years, making it the world’s oldest and largest franchise consulting firm and has assisted over 3,000 companies with franchise expansion.”
Boroian recently touted, “With an entrepreneurial mindset, Francorp provides an “all under one roof” approach, which allows companies to focus on their business and have one single point of contact and consultation.”