NY Bagel Café publishes an ad on Craig’s list that says one could get a franchise of the famous NY Bagel café by paying a very low upfront fee of $19,500- $29,500. The lucrative ad doesn’t just end here! It says that the company will get rest of the funding done through the finance schemes and would look for the additional $100,000 – $200,000 (approximate amount). Also, if the credit score of the franchisee doesn’t prove too good to get the financial help from the ‘lenders’, the NY Bagel Café would swiftly return the upfront fee. Amazing offer, too hard to resist if one holds a dream to open a café. But then, none of the single statement stated above are true.
Yes, you read it write. The NY Bagel Café Franchise is not a scheme BUT A SCAM. Hundreds
of people have been scammed by the brand and despite of being provided proof of numerous violations of franchise and business opportunity laws and anti-fraud statutes, the Federal Trade Commission (FTC), state franchise regulators, state attorney generals and the FBI seem incapable of protecting the citizen from falling into the trap of this scam.
The ‘disclosure documents’ provided by NY Bagel Café have shown that they started franchising in the year 2012 and since then, they have been running successfully, which means, they have had no closures and revoked services. But, the story is entirely different. There have been the proofs that mark the closures of at least 40 stores of NY Bagel Café.
One of the victims Janet Conlon, had dreamt about opening a café in the year 2009. The lady filled out an application to get a franchise of NY Bagel Café and Deli, and later she was told that she had got an excellent credit and she was pretty much qualified to get a franchise of the brand.
Further in the row, she was told that she had to pay an upfront investment amount of $25,000 (which was said to be the franchise fee). Not to mention, the lady was convinced by the same story that she would be connected with the lenders to get funded for opening a franchise, and because she had got a good credit score, she needn’t to be worried. All the expenses would be taken care by the brand.
The deal sounded good enough and Janet Conlon was compelled to fall prey. Though, her son Eric wanted to be sure, and so he contacted the franchise salesman Dennis Mason. Eric wrote an email asking whether $25,000 was refundable in case they couldn’t get the funding from the lenders, to which Dennis Mason had written “Absoulutely”.
The Graveyard of the Franchise
Though, the NY Bagel Café and Deli claims that the chain is running successfully but the truth is really harsh and is being hidden by the company. The official website of NY Bagel Café hides the truth to the core. If you are planning to invest in getting a franchise of the same, you must hold your step and know that the NY Bagel Café franchise has got 87% of the failure rate. Yes, you read it write! It means, most of the cafes were not even opened and were unable to get the funding or got de-branded and rest of them had to shut down because of the losses.
What we have got, by 5/17/17, only six NY Bagel Café & Delis were operational and were to open as the part of the chain. Astonishingly, 40 NY Bagel Café & Delis have been closed or might have been de-branded, or have left the chain because of the losses.
Even the official website shows the false addresses of the cafes. Interestingly, the enterprise claims to have 20 running cafes. The researches showed
- Only 6 were open and operating
- 7 cafes had been shut down (Newark, DE, Middletown, PA, Doral, FL, Alexandria, VA, Riverdale, NJ, Chery Hill, NJ, Newark, NJ)
- 2 had to rebrand themselves even before opening (Little Egg Harbor, Gastonia, NC)
- 3 cafes are still in the development phase (Lancaster, PA, Burlington, NC, Ashland, NH)
- And interestingly, 2 cafes don’t even exist (Fayetteville, NC, Harrisburg, PA)
If you have got the updated list of opened and closed café of Ny Bagel enterprises, or you want to share some other information on the issue, please contact us on <email-id>
The key scammers: Dennis Mason and Joe Smith
Dennis K. Mason is the Franchise salesman of NY Bagel Café who uses various aliases like Denis Mason, Denis Maason, Ken Mason, Keith Samuels and many more. Victims say that, he charms with the words, convinces to the core, offers the lucrative ideas and sometimes, even bullies the people to get them aboard. This doesn’t just end here, once a person pays him the initial capital, he would trap to suck more money in the name of business. The reality of providing fund through the lender firms is just a perennial myth.
On the other hand, CEO Joseph Smith (who sometimes goes by the name Bagels online), partners with the franchise salesperson Dennis to fool the people and get them aboard the web of this scam. The researches show that these two, initially, offer the people to be the part of the brand by owning a franchise by paying the upfront investment of just $19,500 (Sometimes, $25,00 and $29,500). In addition to this, they say that the company would get the person to the funding firms so that they could get the funding of approximately $200,000, of course, for setting up the business and the café in the vicinity the person desires. The researches further indicate that a majority of the charter of victims haven’t ever received any fund to take the process ahead. Means, signing the agreements with NY Bagel Café has been just a hoax. Nail on the coffin for the victims is, they are not refunded the initial capital of $19,500-$29,500.
These scammers simply take the advantage of the people that might not able to afford a lawyer and collecting a judgement, even if they might be awarded one, would not be possible for them. These two men simply drain the money in their accounts. Also, NY Bagel Café franchise has got 87% failure rate. Even if someone happens to be the lucky one, to get the initial funding, he/she would find himself in a bigger trap and might lose more money than what others might have lost in the name of upfront fee investment.
Eric Conlons, one of the victims, confronted the CEO Joe Smith on Twitter after six years of not getting their initial investment refunded.
On March 17, 2015, Janet wrote “Joe Smith scammed me out of $25,000” as a reply to NY Bagel Café and Deli’s “Happy St. Patrick’s Day. We will see you soon” tweet. What we believe that Joe Smith replied from the handle and wrote,
“Nobody scammed you you paid a franchise fee and you couldn’t obtain financing because of your credit.”
Clearly, the CEO was not in the mood to accept the scam that he’s a part of!
To back up this story of scam, the email of Eric Conlon to Dennis Mason is the evident that screams out loud about the loot.
Eric Conlon wrote,
“Hi Dennis, my mother was wondering if she does not get the loan from the SBA, is the $25,000 refundable?”
To which, Dennis Mason replied,
The screenshot of the email is the proof, here it is
There are many people who have been the victim of the NY Bagel Café Franchise scheme. The name ‘Dennis Mason’ is not new with the scams, he has been named in various scames. This man has been into the controversies of the franchising schemes since more than twenty years. He, reportedly, has sold the franchises of Mike Schmidt’s Philadelphia Hoagies, Petrucci’s Dairy Barn, Morrone’s Italian Ice, Frozen Dessert Systems LLC, Amazon Café, Planet Hoagie, Laser Lube, The Brake Shop, and others.
The man typically partners himself with the small franchisors in the Northeast, like NY Bagel Vafe and Deli. It has been alleged that Mason, along with the help of franchisors, hide the high failure rates of the franchises and make them appear as the super successful businesses to be a part of!
He has also been accused of trying to hide his bankruptcy. This could be the possible reason why he uses several aliases. Else, who would like to invest in the name of man who has filed for bankruptcy, that too, TWICE.
Dennis Mason was about to be sued in the year 1997 for misleading information to invest in the failed Mike Schmidt’s Philadelphia Hoagies franchise. Though, it is believed that Mason has got the negative articles (most of the articles) removed from Google.
In the year 2011, Northjersey.com had published a story that had depicted the fraud of Mason and NY Bagel Café. A couple had filed a suit in U.S District Court in Newark, against the company and Dennis Mason. The couple had accused NY Bagel of giving them misleading information in its sales pitch. The couple was told that the café would yield them $10,000-$15,000 but the café was unable to earn more than $4,200-$4,900. Also, the couple was told that the setup of the café would cost around $22,000-$38,000, but they had to invest $230,000. The couple had sought $1 million for the loss.
One of the victims, the New Jersey resident Mohamed Elsaid told that he had got the hold of NY Bagel Franchise in the year 2011, which was sold to him Dannis Mason and Joe Smith. The contract between the two parties had read that if he failed to get the funding, the initial upfront fee would be refunded to him. But he was refused to get the refund. Though, Mohamed dragged them to the court and did win the judgement but he couldn’t succeed in collecting the refund.
The list of victims even includes a widowed mother who served for the country in Afghanistan, a legally blind man, and a man who has to take care of his eight children and it goes long!
The Complaints Against NY Bagel Franchise
The victims rose the complaints against the scammer enterprises as it was bound to happen. The scammers CEO Joe Smith and Dennis Mason had compromised most of the factual steps to fill their own pockets. Here is the list of the allegations (Settled outside of the court) made against NY Bagel Café & Deli
- NY Bagel Café & Deli was alleged of misinterpreting sales
The FTC Franchise Rule states that if it is required to make financial performance representations, they should all be included in item 19 of Franchise Disclosure Document (FDD) including the required information of the representations.
The PA Franchisees had alleged that Dennis Mason had claimed that the store would yield $10,000-$15,000 a week but the fact was, the stores were unable to earn the franchise that much amount. Instead, the stores couldn’t make more than $4,900 a week.
- NY Bagel Café was alleged of misinterpreting Costs
One of the lawsuits had alleged that “NY Bagel had also provided the documents to Cunningham that the food cost would roughly be around 30% of the retail price.” But instead, the food costs were roughly around 60-70% of the suggested retail price. Thus, it was concluded that the franchisee would have not purchased the franchise had they been informed correctly about the actual food costs.
Also, the lawsuit alleged that the franchisees were told that the cost of building the café would cost around $22,000- $38,000. Instead, it cost around $108,000 on buildout and another whooping $55,000 on the equipment required for the set-up.
- NY Bagel Café withheld the required information
As per the Federal Trade Commission, the franchisors are required to disclose 23 categories of information to the potential franchisees before they take any further decision of purchasing the franchise. It is done to help them taking the right decision according to their capabilities.
But according to the franchisees’ lawsuit, NY Bagel Café & Deli provided the FDD that had the false and misleading information and the key disclosures were left at the bay, and the franchisees were misinformed.
The Federal Trade Commission requires franchisors to disclose 23 categories of information to prospective franchisees to help them make more informed decisions regarding the franchise purchase. The FDD never showed that Dennis Mason was charged for the fraud cases in the past and it also never showed the rate of failed franchises of the NY Bagel Café & Deli. Clearly, the franchisees were kept in the dark, and the motive was to bag their hard-earned money to fill their pockets.
- NY Bagel Café & Deli had allegedly lost $380,000
Plaintiffs lost $230,000 in building the cafes and fitting the equipment properly in them while Cunningham had lost around $130,000 in leasing out the properties. In total, the franchise owners had lost around $380,00 till the lawsuit was filed.
Fraud Investigation by the Office of Attorney General of Maryland
In the year 2015, Dennis Mason was found guilty of violating Maryland Franchise Laws. He was hit with permanent cease and desist.
The Office of the Attorney General of Maryland had issued a final order that said to cease the matter with NY Bagel Enterprises, Joseph Smith and Dennis Kenneth Mason. The investigation done by the Maryland Attorney General affirmed the elements of fraud in the sale of NY Bagel franchises, the list goes by:
- It found that the enterprise used fraudulent, non-compliant FDD-like document to mislead the victims which misinterpreted about the opened and failed franchises
- They used a “Franchise Disclosure Document (FDD) which was hastily changed to read “license” instead of “franchise”
- They used to make the fraudulent comments of earning $1500 per day which already was documented in a franchisee lawsuit years ago
- NY Bagel Café used an outdated address which is still on the official website of the company, so that the lawsuits and official inquiries should get returned to the sender.
The Office of the Attorney General of Maryland had made it clear that the NY Bagel Café, Joe Smith and Dennis Mason had failed to respond to the order within the allowed period of fifteen days.
According to the Maryland Attorney General’s office, NY Bagel Café, Joe Smith and Dennis Mason had failed to respond to the Order within the 15 days allowed.
The claims of the NY Bagel Scam validated by VA Corporations Commission
The CEO of NY Bagel Café & Deli Joe Smith, along with the franchise salesman Dennis Mason had faced the penalties that could have fetched the victims of Virginia the payment of full restitution, also they had to fulfil the civil penalties and repayments of the costs of investigation. The penalty was subjected to revoke their future violations.
The commission’s investigation had calculated that Dennis Mason and Joe Smith had collected $61,000 as upfront fess from three residents of Virginia despite of the fact that they were not entitled to sell franchise in the state of Virginia. Also, during the investigation, the commission found that ‘the scammer’ duo had provided the documents to the franchisees that were highly misleading and had not depicted a bit about the failures and the failure rate of NY Bagel Café stores. The crux of the investigation reads
“The Defendants violated: (1) 13.1-560 of the Act by offering and/or selling unregistered franchises in Virginia; (2) 13.1-563(4) of the Act by failing to provide franchisees a disclosure document that had been cleared by the Division; and (3) 13.1-563(2) of the Act by making false statements or material omissions to franchisees in connection with an offer or sale of a franchise.”
The Keynotes of the NY Bagel Franchise Scam
Before you plan to invest in the franchise scheme of NY Bagel Café & Deli, just remember these points.
- The NY Bagel Café has got the failure rate of about 90%
- The ‘scammer duo’ CEO Joe Smith and Dennis Mason have been sued collectively for more than ten times
- The ad of the NY Bagel franchise says that it would bear the capital requirement and would have the budget financed if the cost goes beyond the upfront fee, which is a pure lie
- The company has not even got a protected trademark
- The key factors in FDD are always hidden so that the potential franchisee could fall in their trap and lose money in the run
So, this can be concluded that it’s a trap one should not fall into. If you have been one of the victims of NY Bagel Franchise scheme, do tell us about it. It would be confidential if you don’t want your name to be shown. Write to us on <email-id>
alleges that New York Bagel Enterprises Inc. gave misleading, fraudulent and incomplete information in its sales pitch. The couple seeks more than $1 million in damages…
The suit says that Dennis Mason told them that “franchised locations were earning $10,000 to $15,000 a week,” but their store earned only $4,200 to $4,900 a week.
New York Bagel provided a franchise disclosure document that said the cost of building a store would be $27,500 to $60,000, and the equipment would cost $22,000 to $38,000, the suit says. But it says the couple has so far spent $230,000 on the business, including $108,000 to build the store, and $55,000 on equipment…
“After opening, plaintiffs learned that many of the oral and written communications and documents upon which they relied were false and deceptive,” the suit says.