California Car Wash Franchiser Violated Franchise Disclosure Law, FTC Charges

A federal district court has issued a temporary restraining order against The Car Wash Guys International, Inc., based in Agoura Hills, California, at the request of the Federal Trade Commission. The Car Wash Guys and its principals have been charged by the FTC with making false earnings claims to market and sell mobile car washing franchises throughout the United States. In addition, the FTC alleges that the defendants violated the Commission's Franchise Rule when they failed to provide prospective franchisees with written substantiation for their earnings representations. The court's order prohibits the defendants from engaging in these practices and freezes the defendants' assets.

The Franchise Rule requires a franchiser to provide prospective franchisees with a complete and accurate basic disclosure document containing 20 categories of information. The Rule also requires that a franchiser have a reasonable basis for any oral, written, or visual earnings or profit representations, and that it provide prospective franchisees with an earnings claim document containing certain substantiating information.

In addition to The Car Wash Guys International, Inc., the FTC's complaint names Washguy.com, Inc., based in Tempe, Arizona; president of both companies, Lance Winslow, III, and Michelle Portney.

According to the complaint, franchisees use mobile car wash trucks to clean cars, trucks, and other motor vehicles and perform other washing work, in a specified territory. The FTC alleges that the defendants, in video promotions, Internet advertising, and in their own marketing materials, made earnings claims that vastly overstated the amount franchisees could reasonably expect to earn from their car wash franchise. According to the FTC, the defendants falsely represented that buyers could purchase a "turnkey business" that will earn $125,000 in its first year of operation. Defendants told prospective franchisees, who paid from $52,380 to $65,380 for the "turnkey" business, that they would receive a car washing truck and necessary equipment; a customer base; an in-depth marketing blitz; other startup services; payment of certain business expenses; and ongoing assistance. In fact, the FTC alleges, the defendants do not sell a "turnkey" business. The defendants did not provide franchisees with an existing base of clients, nor did they provide other forms of the promised support.

The Commission vote to authorize staff to file a complaint was 5-0 The complaint was filed in the U.S. District Court, Central District of California, Western Division, in Los Angeles, on July 31, 2000 under seal. The seal was lifted on August 7, 2000.

NOTE: The Commission files a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law. The case will be decided by the court.

Copies of the complaint will be available shortly from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 877-FTC-HELP (877-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(FTC Matter No. 0023186)
(Civil Action No. 00-8197 abc (RNBx))