GEEKS ON CALL: A Geek Tragedy in the Making
December 23, 2008 by Sean Kelly
Filed under Business
10 Geek warriors have donned legal armor and challenged their franchisor to engage them on the battlefield of the Norfolk Circuit Court. These bold Geeks on Call franchisees claim their franchisor, Geeks On Call Holdings, has impuned the integrity of their noble 
brand. They claim GOCH is competing with its own franchises via its remote CalltheGeeks.com service. They accuse Geeks On Call Holdings of overall mismanagement, and implementing a call routing system that negatively affects their sales.
These bold 10 are suing for $1M to $5M each.
Geeks On Call Holdings is striking back. The company denies these claims and contends it is the treasonous plaintiffs who seek to build a competing business model. GOCH points out that many of these franchisee’s sales are, in fact, up over last year. Instead of working constructively with the franchisor to help seize opportunities, the plaintiffs are waging a campaign of disparagement that is harming the entire Geeks on Call franchise community.
Will these franchisees topple the Geek Empire?
There’s no doubt that the Geek Empire is on shaky ground. A Geeks on Call franchisee website estimates that the number of franchise locations has declined from 350 in 2005 to approximately 260 in 2008. As we pointed out in yesterday’s post (GEEKS ON CALL: Beware of Geeks Baring Rifts), Geeks On Call Holdings Inc. reported a net loss of $4.96 million on revenue of $5.24 million for the fiscal year ended Aug. 31. Part of the financial strain was the cost of the Geeks On Call reverse merger earlier this year to become a publicly traded company (GOCH). Its financial report contains the ominous caveat: “These factors among others may indicate that the Company will be unable to continue as a going concern for a reasonable period of time.”
The franchisee lawsuits put additional strain on the already troubled company. So why would a group of franchisees sue at this vulnerable moment and risk toppling their own chain? The answer may lie in the franchisor’s contention that some of the plaintiffs, on behalf of the group, “approached a former employee to assist them in building a competitive business model in violation of the franchise agreement.”
At least Greek tragedies had a hero
Could it be that these plaintiff franchisees true motives are to get out of their franchise and non-compete agreements, with a mil or two seed money, so that they can compete with their ailing former chain with their own concept?
Are they leading the charge and championing accountability on behalf of their fellow Geek franchisees, or are they intentionally sabotaging the system from within?
It’s hard to tell, at this point. But two things are clear:
This is franchising at its ugliest.
Like many tragedies, the stage will be strewn with bodies when the final curtain goes down.
WHAT DO YOU THINK? SHARE A COMMENT BELOW.
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Just a few corrections. The former employee referred to in the article is Chris Chenowith, not Vanderslice as was stated. See below.
Also, 888.905.GEEK is a number owned by Geeks On Call not Tech Herd. A simple call to the number is all it takes to confirm that.
Quoted from Inside Business – Norfolk Business Journal:
In a separate suit filed in late October in Norfolk Circuit Court, GOCH claimed that the former employee, Chris Chenowith, violated a non-compete agreement after resigning in October by disclosing proprietary information to help others compete against the company. The court on Wednesday, according to Baumgartner, granted an injunction to prevent Chenowith from disclosing any information that could cause harm to the company.
Chenowith’s lawyer, Frank Driscoll, would not comment on the case without first discussing it with his client and did not return a call at press time.
Corrections:
Thanks for the corrections. Heads are gonna roll in our research department.
How did Geeks on Call get the 888905GEEK from Vanderslice? Did they meet his price or threaten it out of him? The Geek-Zees had just posted this in October:
http://www.unitedwegeek.com/2008/10/14/ex%C2%ADgeeks-employee-starts-competing-company-posted-on-4252008/
What happened to the “Tech Herd” name? Why is the site rebranded to the generic “Computer Repairs Fast”?
The 888905GEEK number was part of a business agreement between Cole and Vanderslice after Vanderslice left the company in 2006. Tech Herd (owned by Vanderslice) was to be the remote support service arm of Geeks On Call. When Cole backed out of the agreement, Vanderslice retained ownership of the number and the Tech Herd brand. Geeks On Call then purchased the number from Tech Herd.
The Tech Herd business is being converted to a computer repair directory and will promote all types of IT related companies on the site even promoting Geeks On Call.
FYI, Michael Vanderslice was one of the founding members of the Geeks On Call executive team. In early 2006 the entire founding executive team left the company concerned about the direction that Richard Cole was taking the company.
Recent, related posts:
GEEKS ON CALL: Beware of Geeks Baring Rifts
GEEKS ON CALL: A Geek Tragedy in the Making
GEEKS ON CALL: Franchisee Geeks Squeal on Papa Geek
Geeks On Call Franchisees Allege Their Franchisor is Breaking Law
As the former employee that they refer to, I can tell you that they have that statement completely wrong.
I am not involved in any software development with these zees, so there must be something else that is true.
I am however, quite flattered that they think I can replace a 50+ employee company with over 8+ years of experience all by myself.
Now I see my name popping up on news. This company has absolutely no evidence against me. And they will continue to fail in court against me since their is truly no evidence.
And lastly, after Geeks on Call sued me they put out the following 10k. It states that they have nothing that could have a material adverse effect.
According to their last SEC filing:
http://www.sec.gov/Archives/edgar/data/1403283/000114420408067967/v133773_10k.htm
ITEM 3. LEGAL PROCEEDINGS
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company, threatened against or affecting us our officers or directors, which would have an adverse decision could have a material adverse effect.
It does seem a bit novel to accuse someone outside the company for allegedly leaking secrets back into the company… or at least back into the franchise system… to people who are already bound by confidentiality agreements via their franchise agreements.
Sounds normal. The franchisors know that they can use the Franchise Disclosure Document as a red herring to deter any actual investigation of the franchise and its profitability and success for any new buyers.
Did you mean to say SEC filing? Wasn’t this an FTC filing under the FTC Rule that governs franchising and protects franchisors from non-disclosure of material risk factors that should be disclosed to new buyers of franchises?
Were you the victim of a SLAPP suit by this franchisor? The franchisors use these lawsuits to silence their victims but Anti-SLAPP legislation has been passed in many states. I hope your attorney slaps them good.
When I started with GOC years ago, there was frequent advertising, marketing materials, help with getting established and sense of finding an opportunity. Since that time, GOC has stopped all advertising as well as all other services and yet still collects hefty ad fees from each franchised area each week. The royalty rates are exceptionally high at 11% or 14%.
More: A fact disclosed by Cole at an franchisee meeting in April 2006 – GOC actually spent 4X more $$ on advertising then collected from the franchisees. This increased the cost of new customer acquisition to 4X what GOC had stated. This meant that the cost of acquiring new customers exceeded the revenue that could be realized in 5 or more service calls – not a viable business model.
GOC has favored larger franchisees owners over the owner/operator. GOC helped larger franchisees take a large amounts of business from my franchise areas. When I caught them, I was told to ‘go away’ then laughed. Many of my phone calls and email were never answered or found to be ‘deleted – not read’.
The internal dispatch system mis-assigns service calls away from my areas even today.
GOC opened ‘Call The Geeks’ which diverted service calls away from franchisees. This failed as a business and was replaced by an alliance with a competitor – OnForce. Now services calls go to OnForce instead.
We could go on describing GOC’s deliberate business diversion practices, incompetence, failed business initiatives, forced franchisee expenses, branding failures, branding lapses, and so on. These are documented in the market.
In summary, when considering the entire GOC franchise, with less than 5% of franchisees actually being successful, the problem is not the franchisees. The problem is the franchisor.
2 of the largest and most successful Geeks on Call owners filed for Chapter 11 protection and a lawsuit in federal court on May 15. see the following link to one of them:
http://dockets.justia.com/docket/court-vaedce/case_no-1:2009cv00555/case_id-242486/
According to the docket they named 3 corporate individuals; Richard Cole; CEO; Rich Artese; COO and Keith Wesp; CFO, personally along with the corporation they own stock and work for Geeks on Call America and Geeks on Call Holdings.
For more information or to join suit with other current or former franchise owners the lawyer handling the cases is below.
Patrick R. Blasz
Law Offices of Patrick R. Blasz, LLC
11490 Commerce Park Drive
Suite 240
Reston, Virginia 20191
(703) 964-3180 office
(703) 964-3183 fax
pblasz@blaszlaw.com
If anyone has any of these actual complaints, please email to unhappyfranchisee[at]gmail.com and I will post them.
Thanks.
After a couple members of the board for Geeks on Call Holdings (GOCH) resigned we checked to find that GOCH (stock symbol GOCHE) has not filed their quarterly reports with the SEC and could be delisted any day as more than 30 days has past since what appears to be the required filing date.
When we looked a bit deeper we found that it appears that Geeks on Call America is being sued my their landlord in Norfolk, VA who is asking for immediate possession of the full floor of office space. The case has been continued to its 3rd and possibly last date.
How will Geeks on Call America run a national call center without offices? Will they file reports in time or be removed from the stock exchange and will millions be wasted going public? Stockholders of Geeks on Call Holdings want to know.
Below is the info located on the lawsuit against GOCA in Norfolk. If you have anything to share with us and other stockholders please post your comments.
Norfolk General District / Civil ***
Civil Case Details Page : GV09027472-00
Case Number:
GV09027472-00
File Date:
07/01/2009
Case Type:
Unlawful Detainer
Debt Type:
Number of Plaintiffs:
01
Number of Defendants:
01
Plaintiff # 1 Information:
Name:
ICC NORFOLK FLEXXOFFICE LLC
Judgment:
Attorneys:
Plaintiff Attorney:
WOLCOTT RIVERS
Defendant Attorney:
Defendant # 1 Information:
Name:
GEEKS ON CALL AMERICA INC.
Judgment:
Defendant # 2 Information:
Name:
Judgment:
Appeal Information
Appealed Date:
Appealed By:
Hearings
Number Date Time Result Hearing Type
01 07/29/2009 09:00 AM Continued
02 08/05/2009 09:00 AM Continued
03 11/04/2009 09:00 AM
Judgment:
Judgment Amount:
Other Amount:
Interest Award:
Cost:
Attorney Fees:
Possession:
Immediate
Writ Issued:
Is Judgment Satisfied:
Date Satisfied:
Homstead Exemption Waived:
Other: