What was 360 Painting required to do with the initial franchise fees paid by California franchisees?
360_Painting Franchise · 2025 FDDAnswer from 2025 FDD Document
nt Order dated November 19, 2021. In early 2021, the Commissioner of Financial Protection and Innovation ("Commissioner") opened an informal inquiry regarding alleged failures by defendants to disclose certain litigation, administrative, or material civil actions involving defendants in their Franchise Disclosure Documents ("FDD's") as well as related allegations of misrepresentations and omissions in connection with defendant 360 Painting, LLC's 2017 FDD and related sales activities in California. Defendants contested the Commissioner's allegations, but on November 19, 2021, the defendants elected to enter into a Consent Order with the Commissioner, in which they agreed, without admitting or denying any of the Commissioner's statements of fact or conclusions of law, (1) to immediately and permanently cease and desist from the offer and sale of franchises in violation of the California Franchise Investment Law; (2) to pay penalties of $72,500 and costs of $10,500 to the Commissioner; (3) to disgorge all initial franchise fees paid by California franchisees to defendant 360 Painting, LLC and refrain from enforcing or collecting judgments against California franchisees; (4) to disclose to the Commissioner pending and concluded governmental agency matters, pending and concluded administrative, criminal and civil actions against defendants and bankruptcies and debt discharges filed by defendants; (5) to a stop order related to the effectiveness of defendant's 2021 California applications; and (5) to a bar order against defendant Paul Flick from offering or selling franchises or filing franchise registra
Source: Item 3 — LITIGATION (FDD pages 13–18)
What This Means (2025 FDD)
According to the 2025 FDD, 360 Painting was involved in an administrative proceeding with the California Department of Financial Protection and Innovation. As part of a Consent Order dated November 19, 2021, 360 Painting agreed, without admitting or denying any allegations, to several stipulations. One of these stipulations directly concerned initial franchise fees paid by California franchisees.
Specifically, 360 Painting was required to disgorge all initial franchise fees it had received from franchisees located in California. This means 360 Painting had to return the full amount of the initial franchise fees to those franchisees. Additionally, 360 Painting was prohibited from enforcing or collecting any judgments against these California-based franchisees.
This requirement to disgorge fees and refrain from collecting judgments suggests that 360 Painting had faced regulatory issues related to its franchise sales practices in California. For a prospective franchisee, this indicates a potential risk associated with investing in a 360 Painting franchise in California, as the company's past practices had led to regulatory action and financial repercussions. It would be prudent for potential franchisees to investigate the reasons behind the Consent Order and understand any ongoing implications for franchisees in California.