The Franchise Owner's most trusted news source


Log In / Register | Dec 21, 2014

Meat House Tainted by Lawsuits, Liens and Finance Woes

HAMPTON, N.H. – The Meat House ignited its growth of neighborhood butcher shops across the country through its national franchise program in 2003. Today, its fiery ambition has been doused by lawsuits, tax liens and state investigations.

The company’s financial problems began two years ago, when American Express Bank filed a lawsuit in Rockingham County Superior Court against Meat House Management. At that time, the firm had six locations in New Hampshire and 22 other stores in 10 states. American Express was seeking repayment of credit card balances totaling more than $200,000.

The litigation escalated when one of its largest investors filed a lawsuit against the company on January 22, 2014, followed by a second investor on February 20. Several landlords also took aim at the company at that time, all totaling more than $2 million in court claims.

State actions began to emerge when the Attorney General’s Office announced it was conducting an investigation surrounding 10 to 12 consumer complaints of unredeemable gift cards. And the state Department of Labor started looking into 27 unpaid wage claims. A well-known New Hampshire charity, Chaplain’s Emergency Relief Fund, that assists members of the military also claimed it is still owed $40,000 from a fundraising event Meat House conducted last summer.

Regarding federal actions, on February 27, a television news report stated that the Internal Revenue Service placed liens on Meat House Franchising for $191,006 for unpaid taxes, dating back to 2011.

Franchisees sue Meat House

WMUR Channel 9 New Hampshire has reported on the troubled Meat House situation. It has stated that while four of the six corporate-owned locations have closed, the company still has 22 franchised locations across the country. Now, in addition to all of Meat House’s financial and legal problems, some franchisees filed lawsuits against the franchisor. Two complaints have been filed by franchisees, one whose store is already in operation, and the other who is looking to open a shop. Both claim Meat House Franchising was misleading in selling its franchises.

The franchisee operating a store in Long Island area of Roslyn, New York, Arnold Schwartz, filed his lawsuit against Meat House in district court, stating that he suffered losses of $2 million. He claims Meat House owner Justin Rosberg and other representatives repeatedly furnished him written and oral financial performance representations, known as earnings claims, concerning the franchise opportunity.

Schwartz, a surgeon, made the decision to enter a franchise agreement after he saw power point documents. It showed 2010 sales projections of franchised and corporate locations, ranging between $3.06 million and $3.62 million. The lawsuit states that the arrangement was for Schwartz to contribute the capital for his business, and the franchisor, under TMH Management, would operate and manage his store.

A year later when they were ready to open the location, Schwartz alleges Meat House inexplicably failed to obtain a restaurant permit which restricted what could be sold. He also claims they failed to pay bills to the landlord and key vendors which led to supplier issues and the lawsuit.

Schwartz also alleges that Meat House wrongfully withheld insurance proceeds collected in the wake of Hurricane Sandy. When the company did eventually pay, the check bounced. The Long Island franchisee closed down his location in January 2014, after Meat House stopped operating the store last October.

The other franchisee, not in operation, filed his lawsuit in New Jersey court stating founding owners Jason Parent and Justin Rosberg took their $200,000 deposit but never gave him a franchise and haven’t returned his money. 

Meat House mess prime example for legislation in New Hampshire

A New Hampshire Union report stated that “the first ten years of its existence, Meat House looked like it was destined for long-term success.” But it further speculated, “For reasons that may be known only to [owners] Rosberg and Parent, their corporate operation began to unravel, even as franchise holders claim to enjoy continued financial success.”

Senior Assistant Attorney General James T. Boffetti, head of the consumer protection bureau, summed up his investigation this way, “It’s going to take a little bit of time to sort all this out, but we’re working on it.”

Restaurant analyst John A. Gordon sees the Meat House legal and financial debacle in a different light. “The problems with Meat House is a great example of franchising run violently amok, why there needs to be additional statutory control of franchising in New Hampshire, and how there can be very negative consequences to many, including investors, employees and franchisees, if a franchise brand is not built properly."

--

Related Articles:

Your rating: None Average: 3.7 (3 votes)