State Attorney General Bob Ferguson has filed a consumer protection lawsuit against janitorial services company National Maintenance Contractors, which has 17 affiliate franchisees in the Tri-Cities.
National took advantage of immigrants with limited English proficiency and promised them the independence of business ownership, Ferguson said in a news release. But instead, National, a Delaware-based limited liability corporation, locked its franchisees into contracts that often left them earning less than minimum wage, paying exorbitant fees and with little ability to advocate for themselves.
“These hardworking immigrants thought they were signing up for the American dream,” Ferguson said. “Instead, National Maintenance Contractors deceived them into signing contracts that prevented them from ever realizing that dream.”
National provides cleaning services contracts. It then enters into franchise agreements with janitors – largely non-English-speaking immigrants – to do the work. Many of these franchisees are native Spanish and Russian speakers.
National tells these franchisees that they will be independent business owners and earn a certain amount each month depending on the amount of money they invest up front. For example, to earn $1,000 per month, franchisees would buy one $5,000 “business unit.”
Court documents include a list of current affiliate franchisees and affiliate franchisees – including 17 from the Tri-Cities – who have had a business terminated, cancelled, not renewed or otherwise voluntarily or involuntarily ceased to do business under a franchise agreement (including failures, sales, resales to unaffiliated predecessors and transfers) during its most recently completed fiscal year or who have not communicated with franchisor within 10 weeks of the application date.
The Tri-City franchisees are:
The lawsuit, filed April 6 in King County Superior Court, asserts National violated the law in multiple ways:
The lawsuit seeks restitution for National’s approximately 250 Washington franchisees and civil penalties against National.
Many franchisees were unaware that the work required to earn their desired gross revenue would mean that, in many instances, they would be earning less than the hourly minimum wage.
For example, National offered an account to franchisees to clean a 1,700-square-foot office space six times a week. After National took its fees, the franchisee earned about $6.59 per cleaning. At that time, Washington’s minimum wage was $9.32 per hour.
National’s practice of underbidding for contracts created unrealistic demands on franchisees, court documents said.
National’s agents persuaded prospective franchisees to invest thousands of dollars to enroll in its system. National knew these franchisees spoke little to no English, had limited formal education, and no prior franchise experience, according to court documents. National promised that they would be their own boss and could build their own profitable franchise business.
The reality was very different, according to Ferguson’s office.
Many National clients require that cleaning work be performed during specific hours, sometimes in a specific two- to four-hour window, and on call and available to National and its clients every day, including their days off and holidays.
National also allegedly conceals from franchisees the amount of money it actually receives from clients. National essentially pays itself twice. It pockets as much as 30% of the amount it receives from a client for a contract. Then, it deducts fees and royalties from the portion of the contract that actually goes to franchisees. It does not disclose this practice to franchisees, violating the Franchise Investment Protection Act, said the AG.
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