No wonder people don’t trust auto mechanics. The franchise owner of 22 Midas Auto Centers was sued by the California Attorney General’s office for ripping off customers. The Attorney General sought $222 million in penalties and customer reimbursements from owner Maurice Glad, but last week settled for $1.8 million. The repair shops lured in customers with $79 to $99 brake specials, and then jacked up the price for unnecessary services, according the California suit. Undercover agents conducted about 30 sting operations, and found that, on average, the shops charged almost $300 in unnecessary work. The best piece of news from the settlement is that Mr. Glad must give up his shops and is never again allowed to operate an auto-repair outlet in California. Of course, that still leaves 49 others states for him to spread his brand of poison. And what about his existing shops? Midas bought back all 22 for $5.8 million.
McDigging for dirt. McDonald’s has admitted to hiring detectives to snoop on at least one franchisee in Germany. Why would it want to do that? A group of German franchise owners claims that the burger chain is trying to force them out of their contracts and reclaim the stores, reports the Wall Street Journal. The franchisees say that McDonald’s is employing other hardball tactics, like offering corporate jobs to franchise employees who snitch on the owners. McDonald’s counters that it just wants to get rid of rogue franchisees who are violating their contracts. In one instance, a team of detectives followed a franchise owner to Switzerland to prove he was a silent partner in a pizza joint based in Zurich. The franchisee in question, who plans to return his restaurants to McDonald’s, said he was just sharing ideas with a friend.
Royally screwed? Things have been rocky at best between Burger King and its franchisees since the controversial launch of the $1 double cheeseburger promotion. Now, trouble is boiling over once again. The company recently launched a fresh lawsuit against seven franchisees for failing to upgrade their point-of-sale systems. “This is about getting even because we did not roll over on the dollar double cheeseburger,” said one franchisee quoted by Dow Jones. “This is about showing who the big boss is.” Burger King claims the POS systems are “a critical piece of restaurant equipment,” and that franchisees are contractually obligated to keep pace with upgrades. The POS systems cost between $18,000 and $35,000 per store, which is a steep investment for franchisees experiencing a dramatic sales slump. One analyst predicted that BK sales will drop a staggering 6 percent during the January to March quarter, much worse than the 2.5 percent decline he previously estimated.