What are some examples of actions that could constitute fraud in the context of the Crave Franchising, LLC audit?
Crave Franchise · 2025 FDDAnswer from 2025 FDD Document
- The following is added at the end of Item 3:
Except as provided above, regarding the franchisor, its predecessor, a person identified in Item 2, or an affiliate offering franchises under the franchisor's principal trademark:
- A. No such party has an administrative, criminal, or civil action pending against that person alleging: a felony, a violation of a franchise, antitrust, or securities law, fraud, embezzlement, fraudulent conversion, misappropriation of property, unfair or deceptive practices, or comparable civil or misdemeanor allegations.
- B. No such party has pending actions, other than routine litigation incidental to the business, which are significant in the context of the number of franchisees and the size, nature or financial condition of the franchise system or its business operations.
- C. No such party has been convicted of a felony or pleaded nolo contendere to a felony charge or, within the 10-year period immediately preceding the application for registration, has been convicted of or pleaded nolo contendere to a misdemeanor charge or has been the subject of a civil action alleging: violation of a franchise, antifraud, or securities law; fraud; embezzlement; fraudulent conversion or misappropriation of property; or unfair or deceptive practices or comparable allegations.
- D. No such party is subject to a currently effective injunctive or restrictive order or decree relating to the franchise, or under a Federal, State, or Canadian franchise, securities, antitrust, trade regulation or trade practice law, resulting from a concluded or pending action or proceeding brought by a public agency; or is subject to any currently effective order of any national securities association or national securities exchange, as defined in the Securities and Exchange Act of 1934, suspending or expelling such person from membership in such association or exchange; or is subject to a currently effective injunctive or restrictive order relating to any other business activity as a result of an action brought by a public agency or department, including, without limitation, actions affecting a license as a real estate broker or sales agent.
Source: Item 23 — RECEIPTS (FDD pages 63–253)
What This Means (2025 FDD)
The 2025 Crave Franchise Disclosure Document states that management is responsible for ensuring financial statements are free from material misstatement, whether due to fraud or error. While the FDD does not provide specific examples of what actions would constitute fraud, it does mention several types of legal actions that have been brought against the franchisor.
Specifically, Item 3 of the Crave FDD states that no party has an administrative, criminal, or civil action pending against them alleging fraud, embezzlement, fraudulent conversion, misappropriation of property, unfair or deceptive practices, or comparable civil or misdemeanor allegations. Additionally, no party has been convicted of a felony or pleaded nolo contendere to a felony charge or, within the 10-year period immediately preceding the application for registration, has been convicted of or pleaded nolo contendere to a misdemeanor charge or has been the subject of a civil action alleging fraud, embezzlement, fraudulent conversion or misappropriation of property, or unfair or deceptive practices or comparable allegations.
Prospective franchisees should note that while these are examples of allegations, they are not necessarily indicative of actual fraudulent activity. It is important to conduct thorough due diligence and consult with legal and financial professionals to fully understand the potential risks and implications before investing in a Crave franchise.