Carola Hagenau of Castle Rock, Colorado, was out of work but not out of hope. Her corporate employer eliminated her job during the COVID pandemic and offered to find her something else within the organization. But Hagenau, who was 56 at the time, didn’t welcome a lateral move. “I said, ‘Goodness, I’m of the age where I really feel I can do something great!” she told me with a bubbly confidence that seemed like her permanent attitude.
Both of Hagenau’s kids were electricians and she had been a realtor; she put all that in a blender and started to explore a home remodeling franchise called Bath Tune-Up. The recruiters pitched a fairly complex business as just a matter of finding the right words. “They said, ‘You don’t have to know about construction, you just have to know how to talk to people,’” she told me. “And wow, you’re in Colorado, that’s a prime opportunity! … You’re going to make so much money.’”
Hagenau described her reaction as like a cartoon character with stars in her eyes. She cashed in her 401(k) retirement plan, took out a Small Business Administration loan, hired an assistant, went to Dallas for a training session, and went all-in, hoping to leave a legacy for her children and grandchildren.
Within a few years, her children and grandchildren weren’t speaking to her. “They thought I was nuts, and I was,” she said. “I literally lost my mind.”
Despite a top-five sales position at Bath Tune-Up, with nearly a million dollars in annual revenues and multiple awards, Hagenau never saw a dime in profit. In a federal complaint filed this year, she reported losses of over $550,000, exhausted retirement savings, and a slide into bankruptcy. The money all flowed up to Home Franchise Concepts, the parent company of Bath Tune-Up, she said.
“I got to the point where I almost killed myself,” Hagenau said. “Because I couldn’t do it. I was completely on my own, with no one to hold me at night.”
She blames Home Franchise Concepts for her mental state. “These people gaslighted me, they told me I was a winner, and I am. But this model was a lie … what they told me was a lie.”
Hagenau is one of 54 disappointed franchisees who have filed complaints with the Federal Trade Commission over Bath Tune-Up and its sister franchise Kitchen Tune-Up. According to a summary document of the complaints, the franchisees calculated losses of $26.4 million, and alleged wide discrepancies between what they were told about the business and the harsh realities, including inaccurate information in the franchise disclosure documents that lay out the ground rules.
A half-dozen franchisees told the Prospect in interviews that Home Franchise Concepts took greater shares of supplies and materials than were disclosed, required payments into a national advertising fund that yielded few customers, made dubious customer service products mandatory, and generally made it impossible for franchisees to succeed. These testimonies were consistent with the FTC filings, franchise disclosures, videos, and legal claims made in demand letters to the company.
“The business model for the franchisor is to extract money from people.”
“The business model for the franchisor is to extract money from people,” said Kay Sharaf, a Kitchen Tune-Up and Bath Tune-Up franchisee from Bloomington, Minnesota who has produced a 29-part YouTube series called Inside the Franchise Experience. The series details not just struggles with the business but the franchisor’s efforts to silence her.
Sharaf and her husband Khaled Sharafuddin spent four futile years trying to make their franchise work after buying in in 2021. As it failed, the couple sought out other franchisees’ stories. “We talked to at least 80 franchisees,” she said, “some making millions in sales and not making any profit … We never talked to anyone who didn’t agree [with us], who said this system works.”
In response to a series of questions from the Prospect, a spokesperson for the JM Family Enterprises, which owns Home Franchise Concepts, said: “As this matter is currently the subject of ongoing litigation, we are unable to comment.”
Researchers, regulators, and franchisee advocates say that this experience is more common than most people realize. “Everything you described is typical of what we’ve observed,” said Marshall Steinbaum, a labor economist at the University of Utah who has surveyed hundreds of franchisees across multiple industries.
Yet franchisees have little recourse to contest their situations. Since the 1970s, franchise trade groups have worked hard to inoculate their industry against federal antitrust laws and regulations, as the recent book Chains of Command by Brian Callaci recounted. State enforcers have been more aggressive on occasion, but it can be difficult to get relief; in 2021, California cited a fast-food franchise called Burgerim with numerous violations, but franchisees haven’t seen any money. And most franchise contracts include arbitration clauses, which force disputes out of the courts. This has facilitated tactics that shatter dreams of financial freedom and leave franchisees wrung out and broke.
The FTC’s Franchise Rule primarily enforces proper disclosure of business operations; as long as franchisees are told precisely how they can be screwed over in advance, it’s mostly legal. But Kay Sharaf and her colleagues allege that Home Franchise Concepts didn’t even manage that, and they’re demanding restitution.
“I Will Be Your First Client”
Home Franchise Concepts is owned by the JM Family Enterprises, one of the largest privately held companies in the U.S. It was founded by the late Jim Moran, a Florida-based automotive dealer who invented the now-ubiquitous “Toyota-Thon” sales promotion. Starting with a group of Toyota and Lexus dealerships, JM diversified into processing facilities, a finance arm, and an insurance product for dealers. It stepped outside the automotive business when it bought Home Franchise Concepts in 2019.
Armed with JM’s resources, Home Franchise Concepts rapidly grew. In December 2020, it bought Kitchen Tune-Up, a small franchise founded by a South Dakota couple in 1988, and Bath Tune-Up, which was just created weeks before the sale. It then bought Two Maids and a Mop (now Two Maids) and Aussie Pet Mobile, a dog and cat groomer (now Bark & Mane). Currently, Home Franchise Concepts has eight franchise brands, mostly in home improvement.
Franchisees told the Prospect that they expected the JM Family purchase to bring in new resources and stronger reach. But if anything, they said, it became even harder to turn a profit.
Jenny Gonzalez had 20 years of experience in health care administration, but her job was eliminated after a corporate merger. She got a cold call from a “career ownership coach” who she would later realize was a broker for franchises; his encouragement eventually led her to Kitchen Tune-Up. “It seemed all great—it was painted as a strong family organization,” Gonzalez said.
Recruiters described the business to Gonzalez and others as a turnkey operation, with no experience needed and limited effort required. “[The recruiter] said, ‘I live so close to you I will be your first client,’” said Amy Perez, who owned a general contractor construction company with her husband before getting involved with Bath Tune-Up.
Opening a Kitchen or Bath Tune-Up franchise costs approximately $80,000, according to the company website, with a total startup investment (including training expenses, office space, vehicles, credit card processing, certifications, insurance, initial marketing fees, and other costs) ranging as high as $200,000. Perez used an inheritance from her recently deceased mother to buy the franchise. Others take out Small Business Administration loans; Hagenau told the FTC that Home Franchise Concepts submitted financial claims to the SBA claiming that she could achieve $2 million in sales and $900,000 in net profit within three years. This led to the loan being approved, she alleged.
Gonzalez told the Prospect she was encouraged to use a Rollover as Business Start-up (ROBS) transaction, which allows new franchise owners to use retirement savings tax-free to fund the purchase. “It’s called ROBS, because you can’t make this shit up,” said Keith Miller of the American Association of Franchisees and Dealers, a nonprofit that represents franchisee rights. The Internal Revenue Service has found that most ROBS transactions end with business failures and correlate with high bankruptcy rates, though it still allows the procedure. “More and more shitty franchisors are pushing this—it’s easy money to tap into,” Miller added. “People who push that program should be in prison.”
Franchisees for Kitchen or Bath Tune-Up get a one-week, in-person training program that is surprisingly not focused on how to execute kitchen and bath remodels. “Throughout the whole week, we had a couple hours learning hands-on techniques to provide the services,” said Gonzalez. The emphasis was on the customer relationship management (CRM) software, called Service Minder, as well as teaching franchisees how to make sales, reinforced with role-playing exercises.
Recruits were also put in touch with other owners who had positive things to say. “One family, one of the longest owners, said, ‘I raised five kids on this, took two-week vacations in Europe,’” said Toni Amenrud, a Kitchen Tune-Up franchisee based in St. Paul, Minnesota. “Was I looking to become a millionaire? No. I was looking to own my life and to have added flexibilities. That’s not what happened.”
Rebates and Discounts and Royalties
After training, franchisees are given a “launch coach” to assist them in getting the business started. They were told they could pawn the actual work onto subcontractors, focus on sales, and earn what amounted to passive income. “In reality, success required extensive construction knowledge, subcontractor oversight, product expertise, pricing strategy, and advanced sales experience—all undisclosed,” Hagenau told the FTC.
One problem Hagenau immediately encountered was that she was running a Bath Tune-Up franchise, when most of the materials and practices were based on the more established Kitchen Tune-Up model. “They said it’s the same business—no it isn’t,” she told the Prospect. “Kitchen Tune-Up is, you take the cabinet doors off, sand them, put them back up. Bath Tune-Up involves every trade. You have to gut the room, [do] electrical, plumbing, waterproofing. Everything that can go wrong in a house.”
The franchisor also stressed the importance of its purchasing power. A 2022 training video features Heidi Morrissey, daughter of the founders of Kitchen Tune-Up and at the time president of the brands, distinguishing franchisees from who she called “Chuck in a truck,” the independent remodelers who put a sign on their pickups and start selling. “They don’t have any buying power—they don’t have suppliers to buy from,” Morrissey said. A legal letter from franchisees states that they were repeatedly told that purchasing power gave them a major advantage.
But franchisees told the Prospect that this didn’t work out in practice.
For example, during recruiting, Gonzalez was given the February 2021 Franchise Disclosure Document (FDD), a mandatory declaration of fee structures and other aspects of the business. But the FDD changed three months later, which wasn’t disclosed to Gonzalez prior to signing her franchise agreement, according to her legal letter.
In the new FDD, minimum royalty payments to the franchisor, due whether there were any sales that month or not, rose from $950 per territory to $1,500, a 58 percent increase. Contributions to the National Advertising Fund, which was intended to help find customers, increased 25 percent. The fee increases made testimonials from other owners less relevant. “Everyone we were talking to was operating on a completely different fee structure than we were,” Gonzalez said.
Franchisees were required to buy most of their supplies from approved partners and vendors. Back in 2018, the FDD listed a 5 percent “discount” on the purchase price of materials from the vendor. Though a discount might sound like a lower price, franchisees bought through the franchisor, not the supplier. The franchisor got the discount and didn’t pass it on. “As a new franchisee, you don’t know how it will affect you,” said Kay Sharaf.
In 2021 that number had increased to a 10 percent discount, and a 1-10 percent “rebate” was added. So these rebates and discounts, paid to the franchisor and not the franchisee, jumped as much as fourfold in three years. The legal letter states that suppliers “would reasonably need to increase prices to franchisees to recover those costs, which would directly raise franchisee pricing and reduce margins.” Discounts and rebates were also applied to marketing spend and other required services, not just supplies.
As money flowed to the franchisor, owners found that the touted purchasing power didn’t make materials cheaper. “With some of the suppliers, if you’re just an individual person ordering from them, the prices end up being the same,” Gonzalez said.
Several franchisees saw this with paint supplier Sherwin-Williams. “I was in there one day thinking I had the greatest pricing in the world, and someone else came in with the same order, and he got it significantly cheaper,” Amenrud said. She added that little emphasis is placed on project management. “They want you to make mistakes. Every time you reorder, their cash register is going up.”
In its 2021 and 2022 FDDs, Home Franchise Concepts states: “As of the date of this disclosure document, we have not received any discounts or rebates based on purchases by franchisees.” But the company’s financial disclosures for 2021, as stated in future FDDs, include a “gross sales rebate” of $2.03 million, and in 2022 that increased to $2.6 million. The line about not receiving discounts or rebates was removed from the 2023 FDD. By 2025, Home Franchise Concepts stopped breaking out revenues for Kitchen Tune-Up and Bath Tune-Up specifically.
As Kay Sharaf explained in her YouTube series, between rebates, discounts, and the royalty rate of 7 percent on the first $25,000 in gross sales, franchisees were seeing up to 27 percent of every sale flow to the franchisor in 2021, before overhead and other costs. Royalty rates have now changed; in the 2026 FDD, they are 6 percent on the first $83,300 in monthly sales and five percent thereafter. But other costs include a technology fee (up 67 percent from 2021), an “encroachment payment” for selling in another franchisee’s territory, a late payment fee, a late reporting fee, a fee for attending the national convention, a separate meeting fee, and a fee for any additional training.
All these fees make it nearly impossible to profit even with a lot of sales, franchisees told the Prospect. “It’s really a pattern,” said Sharaf, who was a dentist in her native Yemen and a real estate agent in Minnesota before buying into Kitchen Tune-Up with her husband Khaled, a software engineer. “One franchisee in Arizona told us, ‘We got an award,’ and then they got out of the business because they had no money.”
$25,000 Per Customer
Home Franchise Concepts touts that their brands give franchisees access to customers through name recognition and national advertising. But when I talked to franchisees, and told them that I was unaware of Kitchen or Bath Tune-Up, most of them chuckled. “In most places, you start from zero,” Amenrud said. “Nobody knows who Kitchen Tune-Up is.”
The National Advertising Fund (NAF), a required payment, is supposed to generate customer leads, but Kay Sharaf and Khaled Sharafuddin estimate that they paid approximately $100,000 into the fund over four years of operation and received exactly four customers. Another franchisee said she never got a lead from the NAF in two years.
When Kay requested documentation on NAF Fund expenditures, she was told that between 48 and 60 percent of the money went to media placement. There was no reporting on what the ad campaigns focused on. But the only advertising Kay observed involved promotions for selling new franchises, rather than local lead generation. “The business model from the franchisor’s perspective is actually selling franchises,” said Marshall Steinbaum, the labor economist.
Other franchisees said that Kitchen and Bath Tune-Up leads were unusable; one said she got a resident in a nursing home.
The costs multiplied because the NAF was applied to each territory, another way the franchisor extracted revenues for itself. An exclusive territory was supposed to boost sales possibilities, but it only covered 133,000 homes. Franchisees told me they were encouraged to buy multiple territories, only to learn that all charges are applied on a per-territory basis. The Sharafuddin family has four territories, two for Kitchen Tune-Up and two for Bath Tune-Up; their $500 monthly NAF fee costs a total of $2,000. This was not disclosed as a per-territory fee until a revision in the 2025 FDD.
Despite the NAF, franchisees were told to spend on their own on local advertising. They were also required to use vendors that offered little value to the businesses, franchisees said. Listen360 is an online reviewing site, funded by franchisees out of NAF payments. After a job, customers are solicited for a review. But it’s an internal reviewer with limited reach online; if customers fill out a review there, they are less likely to review the business on more open platforms. “People come to us because of Google reviews—if we’re only in Listen360, we get no new reviews,” said Kay Sharaf.
There’s also a mandatory call center service called Perceptionist, though it is not disclosed in the FDD as required. The service routes any calls not picked up after a certain number of rings to a human operator, and calls back customers who inquire about remodeling. Perceptionist gets billed to franchisees, despite not appearing in the FDD fee table; one franchisee says she was billed twice, once by the franchise and once by Perceptionist directly.
The service had bugs, too, Gonzalez said. “I had an instance not long ago, someone is supposed to make contact with the customer after 24 hours,” she explained. “It’s supposed to make three phone calls. Sometimes it makes three phone calls in 20 minutes and customers refuse to work with you because you’re pushy and call at an odd time.”
Work Harder
Not all franchisees reported disaster. Amenrud had a tough first six months, but she hired the right installers, distanced herself from franchise recommendations, and even blocked Perceptionist from calling her clients. She lucked out by getting a 400-unit apartment building early on, and later hooked up with insurers that brought homes back to good condition after natural disasters or other events.
“I’m one of the few profitable ones,” Amenrud told me. “If I went by the manual and the processes they tell me, no there’s no way to be successful.” But even her triumph came with a cost. “This becomes your identity,” she said. “I work 70-80 hours a week. I did a trip to Europe, and I was in Amsterdam in a train station trying to find a plumber, because my plumber went MIA.”
Everyone else I talked to consistently lost money with Kitchen and Bath Tune-Up. For those not as fortunate as Amenrud, they appealed to the franchisor for help. By and large, they were told to work harder and follow the example of their fellow franchisees. “When you’re not doing well, you’re told that everyone else has done well, you need to buy more marketing,” Gonzalez said. Franchisees also noticed that everything in the marketing materials talks about gross revenue, not net profit.
One franchisee with seven Kitchen Tune-Up and five Bath Tune-Up locations, Jeff Toren, was touted as a top seller. But when he appeared on the Inspired or Acquired podcast last year, Toren acknowledged severe hardship. After the post-COVID remodeling boom, 2022 “wiped out all the positive we had from the year before,” Toren told the hosts. He spent the next two years paying off debts—and working harder.
“Revenue is for vanity and profit is for sanity,” Toren said on the podcast. “It’s been a long road personally for my wife and I and the impact on our family and our relationship… She supported me on this journey of my dream that’s now at times become a nightmare.” Toren declined to comment to the Prospect.
Other franchisees reported similar problems. Gonzalez said her franchise has never turned a profit. She had to take out a second mortgage and rely on her parents for support, while applying for other jobs. Perez booked three jobs in two years, all of them from a home show that cost thousands of dollars to set up. She also took out a second mortgage on her home, which was inherited from her mother. Eventually the family had to sell it. Fights with her husband escalated and put the couple on the verge of separation. When she reached out to the franchisor, Perez said they gave her advice like “move to Nashville, things are hot there.”
Perez’s son came down with an illness and was hospitalized, and Perez begged Bath Tune-Up to let her delay required monthly payments and exit the franchise. When they did, she said they lowballed the cost of termination—an initial $6,000 estimate turned into $80,000—and included a waiver preventing Perez from suing the company. Asked what she would tell Home Franchise Concepts executives, Perez replied: “You ruined my life. You took the only thing that my mom left me.”
Hagenau’s life savings went into buying the franchise and maintaining operating costs. The numbers that Bath Tune-Up used to calculate costs were all wrong. Suppliers were all located on the East Coast, which meant high shipping rates to reach Colorado. Hagenau’s subcontractors walked off jobs and she would have to scramble.
Through it all, Hagenau kept booking, her gregarious personality shining through. She won best project, sales revenue, and customer service in the same month, and was highlighted on Home Franchise Concepts’ inaugural podcast. “I was top five in the organization,” she said. “I’m dynamic, people trust me.” But she never turned a profit or took a paycheck. As she put it, “All of the profit went to them.”
When Hagenau asked for help, she was given the same speech about working harder, doing a little bit more. “So guess what I did? I bought another territory,” Hagenau said. She was told she would be “boxed in” by other franchisees if she didn’t add on. That doubled several fees overnight.
Things came to a head over the holidays last year. Hagenau, working 75 hours a week, didn’t do Thanksgiving or Christmas. Her children, whose future was the reason for her buying the franchise, had stopped talking to her. “I’m starting to lose my family, I lost all my money, my health was going down,” she said. “I call the franchise and I’m in tears … I tell them I am on the verge of killing myself.” The franchisor said they were there for her, but nothing changed.
Finally, at her lowest moment, someone in Hagenau’s training class told her a group of franchisees was fighting back.
Turning to Each Other
The FTC requires franchisors to list contacts for all current and former franchisees on the FDD, so prospective owners can be informed about the business. But as Kay Sharaf told the Prospect and wrote in her FTC complaint, before anyone exits, their business phone number is transferred to Home Franchise Concepts’ main office. So there’s almost no way to find former franchisees.
The FDDs were required to provide lists of franchise closures and transfers. According to the 2026 FDD, of the 57 Bath Tune-Up owners who signed onto the brand since it began in late 2020, 26 have shut down, eight transferred territories to other owners, and only 23 are still with their original owner. That’s a turnover rate of 60 percent in five years. It’s difficult to find comprehensive turnover statistics, but for context, a coalition of 7-Eleven franchisees recently cited annual turnover rates from 2020-2022 at around 5 percent or less.
Kitchen Tune-Up, which has been around longer, still has 250 open outlets, but that’s down from 274 two years ago. Overall, 33 franchises were terminated, eight were not renewed, 25 ceased operations for other reasons, and 44 were transferred between 2023 and 2025.
After four years of struggles and what they told the FTC was $600,000 in losses, Kay Sharaf and Khaled Sharafuddin were one of those franchisees who decided to quit. But their curiosity led them to contact other owners, to see where they went wrong. “We started trying to call people who are out, people we met at conventions and had personal connections,” Kay said. “There was a couple in California we met. They said ‘we’re out.’” I asked how, and they said, ‘We signed an NDA,’” which stands for non-disclosure agreement.
It became a kind of sleuthing to gather as much information as possible. The couple would eventually track down over 80 franchisees. “When we started talking to franchisees, they say it’s doing great, because they don’t want to say they’re the only ones losing money,” Kay said. But eventually they would break, and patterns became apparent: lost savings, no profits, a treadmill of hard work for nothing.
It was almost a liberating feeling; people who thought they were bad at business, that they were making bad decisions, realized they stumbled into a rigged game where success was virtually impossible. They were not crazy, they were not bad people, and they were not alone. “It was like 1,000 pounds lifted off my shoulders,” said Carola Hagenau.
In 2025, Kay and Khaled approached Kitchen and Bath Tune-Up President Heidi Morrissey and asked to terminate their four territories. Morrissey, they said, defended the system and asked why the owners waited so long to tell them. The Sharafuddins replied that they were required to deliver monthly profit and loss statements, and the franchisor could plainly see that it was a money-losing business. Then Morrissey cited other successful franchisees: “Right next door you’ve got Chris who’s doing $200,000 a month in sales.” The Sharafuddins called Chris; that $200,000 figure was for only one month, due to a home show. In fact, Chris eventually joined their group and filed a complaint with the FTC.
Finally, Morrissey warned the couple: shutting down would be treated as abandonment, and Kitchen Tune-Up would be forced to sue for their rights under the contract. When Kay and Khaled offered $5,000 to terminate, all the money they had left, Morrissey said they would be liable for fees on the remaining six years of their contract, plus termination fees on all territories; Kay estimated this at $720,000. This becomes a trap, she explained: You can’t keep trying to revive the franchise and bleed out money, but you also can’t shut down. (Morrissey did not respond to a request for comment.)
The Sharafuddins stayed in the business but tried to cut expenses, starting with Perceptionist, the call center service. But Perceptionist said that Home Franchise Concepts refused the request to cancel, even though at training it was called an optional vendor. Kay then threatened to file a complaint with the attorney general of Ohio, where Perceptionist was based, alleging that the company wouldn’t let them leave their service. A week later, a Home Franchise Concepts “senior director of operations” emailed them, saying that while Perceptionist is a requirement, it would “make an exception” for the terminating business. Within days, the franchisor reduced the termination offer to $25,000, right after Kay threatened to contact law enforcement. But at this point, they were uncovering evidence and justice was a bigger priority.
On a separate call, Kay asked Morrissey about Listen360, the customer review service. Morrissey called it a JM Family initiative, because they cared about brand reputation. Kay sent a recording of this to the CEO and general counsel of JM Family, asking why they were involved in operations and not just a parent company. Within a month, Morrissey had stepped down as head of Kitchen and Bath Tune-Up.
This January, Kay started the YouTube series, broadcasting her findings. Weeks into the series, a lawyer for Home Franchise Concepts sent them a formal notice of breach of contract, saying that the series and its “false, misleading, and disparaging comments” harmed the goodwill of the brand. The letter demanded that they take down the YouTube channel or the franchise will be terminated. “We were paying $10,000 a month regardless of booking jobs, so that was a blessing,” Kay said.
She didn’t delete the channel, and the franchise was terminated in early February. But this termination wasn’t by mutual agreement, so the $25,000 offer didn’t apply. The legal fight had begun.
“I Can Be a Normal Person”
Later in February, 14 franchisees sent Home Franchise Concepts a demand letter, a prelude to litigation. The letter included claims about misleading recruiting, rising rebates and discounts, misuse of the NAF, mandatory Perceptionist service, and the inability to contact former franchisees. The number of litigants has since increased to 21. Home Franchise Concepts responded with individual letters to each franchisee denying the allegations.
After months of negotiations, both sides agreed to mediation to try to resolve the dispute. Two mediation sessions, one involving Jenny Gonzalez, were held in mid-June without resolution. The attorney for the franchisees, Doug Luther, canceled the third mediation, as franchisees felt it was not conducted in good faith. “Why waste the time and money?” Kay said. But the next day, Home Franchise Concepts filed nine arbitration demands as is their right under the franchise agreement, including for Kay and Khaled’s case. If successful, franchisees would be liable for hundreds of thousands of dollars in termination fees.
Not a single franchisee withdrew from the fight. Luther hopes to consolidate all the arbitration cases into one so evidence can be shared.
Separately, 54 individual franchisees sent the FTC formal complaints about violations of its Franchise Rule. Eight months after the first complaints were filed, the FTC has yet to respond. The agency would not confirm or deny to the Prospect that an investigation has been initiated.
Under Lina Khan, the FTC warned franchisors about undisclosed fees and efforts to shield bad experiences and advised franchisees that they could report abuses. There have been a couple enforcement actions recently, including a record $17 million penalty against Xponential Fitness for misleading claims. But Keith Miller, the advocate and himself a Subway franchisee, is pessimistic about real accountability, because the rules aren’t rigorously monitored. “The FTC doesn’t collect FDDs, much less review them,” Miller told me. “By the time the FTC does react, it’s too late.”
Even if enforcement was strong, in the end the FTC rule is entirely about disclosure. “I wanted to do a rigorous update of the rule,” said Alvaro Bedoya, a former FTC commissioner. “The disclosure regime is totally broken.”
Kay Sharaf escalated her complaints to the chief operating officer of Home Franchise Concepts, the CEO of JM Family Enterprises, Dan Chait, and its general counsel, Janet Link. The responses all came from the company’s outside law firm. She also reached out to Minnesota Attorney General Keith Ellison, and in the spring went to D.C., meeting with several members of Congress and Keith Miller, who is working on several bills to update the Franchise Rule, including one that gives franchisees a private right of action to enforce violations.
Miller admitted that the Trump regime and its allies in Congress were unlikely to pay much attention to regulating business. But he noticed an irony. “The reality of it is if you asked me to get 20 franchisees, 19 of them would be Republicans,” Miller, who is also a Republican, said.
Kay Sharaf’s YouTube series has filled with more stories of desperate franchisees and bait-and-switch tactics, even questioning other Home Franchise Concepts brands. “At what point does this stop?” she asked in one episode. “How many failing franchisees? How many bankruptcies? How many destroyed marriages? How many destroyed families?”
As for Carola Hagenau, she walked away from the franchise, stopped answering their phone calls, never responded to termination letters or default notices, and shut down the bank account the franchisor previously withdrew from. She filed for Chapter 13 bankruptcy, which is still in progress. Because she hadn’t signed a legal waiver, she was in a good position to join the group seeking justice.
In the meantime, Hagenau created an independent renovation business through an LLC, a proverbial “Chuck in a truck.” “I’ve sold $500,000 in the first three months and made income,” she said. “I don’t have my grandchildren back, but I will … I feel like I can be a normal person again.”
