When Social Media Is Ahead of Law Enforcers: The Example of Play N Trade

Founder Ron Simpson on The Big Deal

The state of California has issued an order that franchisor Play N Trade cannot sell franchises in California anymore. The firm has been delisted from the state for making false claims, misstatements and omissions in its disclosure document, an official circular that buyers rely on to understand the worthiness of a franchise investment.

Play N Trade is a 130-store retail chain that offers consumers the opportunity to try a game before purchasing it, but franchise owners complain that they have not been able to make money with such a retail model.

California’s Department of Corporations acting deputy commissioner Alan Weinger writes on April 14 (see 14 pg pdf file of the official order) that he “finds that Play N Trade Franchise, Inc. has violated multiple provisions of the California Franchise Investment Law.” Weinger writes that not only can the firm not sell franchises, but also $132,500 will be paid in law-breaking citations and that franchisees will receive restitution of their franchise fees. “Based on the foregoing facts establishing multiple violations of the California Franchise Investment Law by Play N Trade Franchise, Yuvi Shmul, and Thomas C. Bozarth," he concludes in the order, "the issuance of the aforementioned citations and orders, and provision of ancillary relief, is necessary, in the public interest, for the protection of investors, and consistent with the purposes, policies, and provisions of the California Franchise Investment Law.”

Michael Webster, a blogger who writes about fraud at The BizOp News, points out that the mass media, through programs such as Donny Deutsch’s The Big Idea, excite entrepreneurs to a business dream and create a buzz about buying a particular franchise. Author Troy Dunn of Young Bucks: How to Raise a Future Millionaire was positively glowing about the Play N Trade business because the concept purportedly started from the children of the founder, Ron Simpson.

Webster, a Canadian franchise attorney, observes that there is even a hint of illegal implied earnings claims in the short video. The clip states that Play N Trade has $20 million in system-wide revenues with 130 stores. When Play N Trade decides that it doesn't want to disclose its store earnings in its written Franchise Disclosure Document, the law says it cannot give winks, hints and indirect earnings statements elsewhere about how rich buyers can get in their chain. It's a big deal and the CEOs of franchising firms know supplying implied earnings information on national television is dicey.

While the mass media was clueless to the nuances and potential frauds of this franchise brand, social media websites were able to tap into observations of front line operators. Franchise marketer Sean Kelly asked in January on his blog Franchise Pick, “Is Play N Trade a great franchise opportunity?” Some 119 comments were a resounding “No!”

Here’s another example from a year earlier:

“The stores keep closing -- the one in Blaine, MN just closed in September and there are other posts about the several other closings. It appears this thing's a bit of a Ponzi Scheme to sell franchises but they don't make money.” – Franchise Pundit

An exasperated franchise seller replied to the negative comments about Play N Trade:

“If you are going to let negative blogs affect your decision about Quiznos, Play N Trade or any other franchise out there, stay in your dead end job! You’re too weak minded to make it anyway. Owning a franchise is for the strong minded, not the weak and pathetic."

Concerning the many responses from franchisees, competitors and franchise sellers that are now available on the Internet through forums, blogs and interactive websites, Webster comments, “The internet allows fact checking to become social - more people can respond and provide clues as to the big picture in franchising.”