Auto care franchise, franchisee spar after investigation

By Steve Green (contact)

Saturday, June 27, 2009 | 1:55 a.m.

The Las Vegas company that franchises the Purrfect Auto name is in the news again, this time because of a dispute with a franchisee.

Last week, local media outlets reported Internal Revenue Service agents had served search warrants at multiple Purrfect Auto locations as part of a tax investigation. An attorney for Purrfect Auto franchisor Francare Inc. on Friday could not be reached for comment on that investigation.

And the Nevada Attorney General's Bureau of Consumer Protection sued operators of 11 Purrfect Auto locations after an investigation in 2006, claiming they were running misleading ads and deceiving customers regarding services that were paid for but allegedly not performed. Discovery is under way in that case and a trial is set for October.

In the latest twist, Francare and a businessman who has owned three Purrfect Auto shops are in a dispute over advertising and royalty fees and whether the franchisee has the right to use the "Purrfect Auto" name.

Arif Virani filed suit in April in Clark County District Court against Francare, charging breach of contract and deceptive trade practices. He said he has three "mom and pop" Purrfect Auto shops and that they were hurt by the state investigation of other Purrfect Auto locations.

"As a result of this, plaintiffs' franchises suffered great economic loss and damage to their reputation to be associated with Purrfect Auto Service. Because of defendant's actions and/or omissions, plaintiffs ran free oil service promotions and otherwise incurred economic damages as a result of the defendant's actions," the suit charged.

The lawsuit went on to complain that since 1998, Virani had been successfully conducting his own advertising -- but that after the state investigation Francare demanded from each franchisee an extra $200 per month "to combat such negative publicity and to do 'advertising.'"

Francare's demand for advertising payments increased to $1,000 per week per franchise, and Virani initially made payments to an advertising fund touted as benefiting all franchisees, the suit says. But later he started questioning the benefit of the fund.

"Defendant usurps such advertising fund to its benefit and to plaintiffs' detriment," the lawsuit charges. "Defendant directs such advertising monies unevenly and to directly benefit defendant's franchises and defendant."

Francare moved against Virani this week in a different court.

It alleges trademark infringement and breach of contract in a suit filed in U.S. District Court in Las Vegas on Thursday against Virani and his companies, First Prime Enterprises LLC and SSAV Enterprises Inc.

Francare said it has franchised more than 70 units in Nevada.

It claims Virani and his companies are now wrongly operating shops at 693 N. Valle Verde Drive in Henderson and at 6000 W. Windmill Lane in Las Vegas. Not mentioned in the complaint is a third Virani shop at 180 N. Nellis Blvd.

Francare said the defendants have failed to vacate the space they lease from Francare and have failed to stop using the Purrfect Auto trademark, even though it says it terminated its franchise relationship with Virani and his companies allegedly for nonpayment of royalties and advertising fees.

Besides alleging trademark infringement, Francare alleges breach of contract and deceptive trade practices.

"Defendants are misrepresenting to the public the origin or source of the trademarked goods and services they are offering, in that they are falsely suggesting to the public that they are a franchisee of the Purrfect Auto Service System, when in truth and fact they are not," the suit charged.

As for the IRS investigation, Virani said his three shops were not among those searched by the IRS.

Christian Gabroy, Virani's attorney, said he believes the federal suit was filed in retaliation for the state suit and that he'll move to have the case against his client dismissed.