Unlimited MedSearch Sells Franchises without Registering

New California Franchisor Disregards Franchise Legalities; Charges 30% Royalty Fee

SAN DIEGO (Blue MauMau) - A California-based franchisor that wants to set up a chain of medical staff recruiters, Unlimited MedSearch, is selling franchises online without bothering to meet franchise regulations. California requires franchisors to register their firm and their franchise disclosure documents with the state before offering franchises.

MedSearch has done no such thing.

According to Mark Leyes, Director of Communications for California's Department of Corporations, which is the state department that accepts and publishes franchise disclosure documents, "We have no record of Unlimited MedSearch as a franchiser (or anything else)."

Lack of meeting state requirements aside, the company seems to be aggressively looking for franchise buyers. A person answering the phone for Unlimited MedSearch said, "the firm is accepting franchise buyers pretty much anywhere, including California."

Its web site declares the firm has been franchising since July 2007 and projects to have 10 franchises by the end of 2007 and another 35 for 2008.

Besides the message of its website, the firm is actively using other methods to recruit franchise buyers. An email message (listed below) was sent to Arthur Downing, who lives in New York and works for a government entity of New York State. It asks:

"Are you in control of your own destiny? Does your career/ industry and present situation provide the long term growth and stability of Healthcare? Are you tired of the endless meetings, office politics, wasted time, not seeing your kids, or having to ask permission to go to the dentist at 3:00 pm during your typical 60 hr work week? If you answered yes to any of these questions, then you need to seriously consider becoming an Unlimited MedSearch franchise owner."

Some might think that not registering a franchise is simply forgetting to fill the right form among many that a government bureaucracy requires. "Not so," says franchisee attorney Rod Hatter of Newport Beach, California. He explains, "This is a shocking report. Failure to register before offering or selling franchises to California residents creates both serious civil damages liability and criminal sanctions."

Thirty Percent Royalty Payments

Not being registered is not all that is strange about this franchise offering. It has a royalty fee that seems quite high for the industry. Franchisor Unlimited MedSearch charges 30%.

Mr. Hatter observes, "A 30% royalty is three to six times the norm for ongoing franchise fees. I have never heard of such a high royalty in my over 30 years of franchise law practice. It is hard to believe a franchisee could be profitable with a rate like that."

The franchise fee, an up-front fee paid once by the buyer that enables them to run a franchise unit, is $54,500.

National Brand Recognition From One Unit

In selling the franchise, MedSearch's site states, "you’ll also enjoy the benefits of national brand recognition and the ability to either work from home during the hours you choose or open your own office."

It could be argued that there is not much of a national brand at the moment. The firm's website states it actually has one corporate unit "founded in 2001".

MedSearch's president and vice president of franchise development were traveling and unable to contact Blue Maumau all day Tuesday. Also, since a New York resident was solicited to buy a MedSearch franchise, the state of New York has been contacted to see if the franchisor is registered there. The state has not replied by the publishing time but updates to this story will be issued when they are received.