GEEKS ON CALL: Beware of Geeks Baring Rifts
December 21, 2008 by Sean Kelly
Filed under Business
Hell hath no fury like a geek scorned. According to a post on Unhappy Franchisee (Geeks on Call Franchisees Sue Struggling Franchisor), 10 Geeks on Call franchisees have launched a salvo of lawsuits against their franchisor in federal court.
7 Geek plaintiffs are suing for $1 million for damages and the other three want $1.4 million, $4 million and $5 million, plus, assumedly, new tape for their glasses.
The franchisee Geeks allege that franchisor Geeks On Call America Inc. company breached its contracts and engaged in fraud.
Geeks Prepare for Battle
A news report by The Virginian-Pilot states the suits contends that “Geeks On Call took business away from franchisees by operating a competing online repair service. Meanwhile, the installation of a new system for routing customers to specific franchisees has hampered their customer service and ability to communicate with Geeks On Call, the plaintiffs said.”
Geeks Suing to Protect Their Brand Image. Seriously.
The Geeks On Call franchisees also contend that the company abandoned its Geeks On Call trademark for the brand 1 800 905 GEEK, creating brand confusion and deflating the value of their franchises.
Yes, it’s true. The Geeks are suing protect their ultra-cool image as Geeks on Call.
It’s all Geek to Me.
General counsel for defendant Geeks On Call Holdings Inc., Mark Baumgartner, denied the allegations and claimed the franchisees were blaming their own financial troubles on the franchisor. He claims:
- Some of those who have filed suit are in financial trouble & owe money to the franchisor
- The company didn’t abandon the Geeks On Call brand, just expanded it
- The company-owned repair service is only offered where there’re no franchisees, so is not a competitor
- Concerns about call center cutbacks are unfounded, as there has been no reduction in the staff
A Classic Geek Tragedy in the Making?
Earlier this month, 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. The company has reported it has enough working capital to sustain itself for another six months. The question is: Can it survive this attack from within?
What do you think about the Revenge of the Geeks? Share a comment below.
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Great stuff, Sean.
Sounds like quite the Odyssey for these Geeks. But, only seven plaintiffs?! Thought there were supposed be 300….
Mark, I knew the bad puns would lure you here like the siren’s song.
If anyone could find a way to make “The face that launched a thousand PT Cruisers” work it would be you.
This APPEARS to be a concept that would appear to have a growing market because of the number of computers in this country, etc.. —but appearances are so often deceiving. .
Apparently, government regulation that permits franchisors to OVERSEED and OVERSELL their concept at the introductory phase will mean great grief for both the franchisor and the franchisees —–unless the franchisees can go independent and keep the customers that they have now —-and depending upon whether or not enough of the geeks remain standing to kieep the franchisor afloat and out of bankruptcy.
Thanks to Franchise Pick for helping to warn NEW prospects of the danger reflected in this litigation against the franchisor.
It would be good if prospective franchisees truly understood that the government merely licenses franchisors to sell franchises and doesn’t make them disclose the actual risk in terms of the performance of any prototype of the franchise or any unit historical performance statistics that may be available to the franchisor. Franchisors don’t reveal their market research, if and when they do any, to prospective buyers of their franchises.
Maybe the concept is fated to fail because most computer owners have a “geek in the family” who can help them out at no cost, and most Internet Providers provide assistance at no cost if the problem is in delivery of mail service or Internet Service, etc… Of course, if it is an actual computer problem, you may have to talk with someone in India or China and you do have to pay for the help unless the seller of the computer sells a service contract for specific problems under a warranty.
This appears to be a “service” that an independent could start part time and grow if business grew to full time work.
What is the franchisor actually providing a franchisee?
Just more disgusting rip off of the public.
I don’t know where these guys went wrong or how they could manage to lose that much money. How does a service-based business that basically sells their time (no inventory, etc.) lose $4.96 million on revenue of $5.24 million? Even geeks should have better business savvy than that. But, like I said, I haven’t read up on them.
I will tell you this: the concept itself has great potential. We recently did a branding project for a small start-up focused on small business computer services (not residential) and they instantly have more business than they can handle. The independent nerds need back office support, standardized pricing and service systems, professional identity and branding, and centralized marketing… all the things that a good franchise system can provide.
Geeks on Call might not be in a position to do it – and they obviously made some huge mistakes – but I think the idea is sound. Somebody should be making this work.
The leadership of 1800905geeks is proving to be a slippery eel and willing to sock it to their major franchise participants.
Beware this company and go for it all who are being hurt by underhanded business practices.
What goes around comes around.
Sometimes what goes around comes around but in franchising, the franchisors have been given “fraud” protection through the package of the government disclosure document and the binding and non-negotiable “uniform” franchise agreement in which the buyer franchisee (in order to buy the franchise) must acknowledge that she/he/they have not been promised any profits or success by the franchisor.
I imagine this franchuisor is on the SBA Franchise Registry and eligible for a government guaranteed loan to a Veteran or his family.
Apparently under government regulatory policy, franchisors have no duty of competence and only the duty of disclosing in compliance with federal law.
Strangely! This has never been litigated in the courts.
Sean Barker wrote: The leadership of 1800905geeks is proving to be a slippery eel and willing to sock it to their major franchise participants.
Unfortunately, Sean, if you sue a franchisor you shouldn’t be surprised when they sock it to you. You’re declaring war, of sorts, and the fat franchise documents those ten signed were not written to create an even battlefield. The franchisor’s viewpoint is that they are not just defending themselves, but the entire chain. Don’t expect it to be pretty.
Frankly, I’m not clear on what they did that was underhanded. The “damage to the brand” argument seems bogus, as does the competing concept – which is only serving non-franchised markets. The call center cutbacks appear to be out of concern about what might happen, not what’s already happened. Even if the franchisees win, do they really expect to collect millions from a company on its financial deathbed?
I’m just an outsider, but it seems that if the franchisees and the franchisor can’t get together outside the courtroom, get on the same page and work together in crisis mode, everybody’s gonna lose. What a shame.
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
This is an unfortunate situation where there were many warning signs but somehow the Chairman and CEO of the franchisor always felt that “Father Knows Best” (the paternalistic reference is both intentional and appropriate). They’ve had – and have – some well-intentioned people on the executive team, most notably the current COO. As franchisees expressed growing concerns about failed advertising campaigns, weak systems that improved slowly if at all, and an overall air of indifference to their needs and concerns, the response from the top was generally dismissive. There have been some positive moves recently, but too little and too late to avoid the confrontation that occurred. Can things be fixed? Perhaps. I believe that to do so the current management team must make an earnest and honest effort to address the major concerns of those who sued them, as well as all franchisees as a group. Furthermore, I sincerely believe that the current CEO should consider stepping into a pure Chairman’s role and focus on fund-raising and investor relations while leaving ALL operational decisions to more capable, qualified and objective people. To do that in a formal way would send a strong signal to current and prospective franchisees that real change was at hand.
- Shep Bostin, Geeks On Call franchisee, member of the United We Geek association of Geeks On Call franchisees, and current member of the Geeks On Call Franchise Advisory Council (notably NOT a plaintiff in the recent lawsuits)
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.