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« Dermacare Laser & Skin Clinics... goes under? | Main | Physician Training Review: How to inject Juvederm Injectable Gel by Allergan »
Saturday
Jul122008

Dermacare Laser Clinics: Where in the world is Carl Mudd?

a94_w10.jpgIt seems as though Dermacare and Carl Mudd have attracted the attention of the local press in Arizona. Here's an email discussion I had with Angela Gonzales, a reporter for the Phoenix Business Journal.

You'll notice that Angela is asking to be commented by the physicians on the site who may have personal experience with Dermacare and Carl Mudd. Her contact information is below. Comments welcome.

 

Via the contact form on Medical Spa MD:

Subject: Dermacare and Carl Mudd
Message: I'm writing a story about Carl Mudd and Dermacare. Do you have a phone number or email I can use to reach him? Do you have an update on the DLC Dermacare LLC v. John and Jane Does (CV2008-090071) lawsuit. It looks like there was an intent to dismiss in April Any updates?

Angela Gonzales
Senior Reporter
Phoenix Business Journal
agonzales@bizjournals.com
602 308 6521

 _________________

My Response:
Hi Angela,
I'm afraid I don't have any information about where Carl Mudd is. However, I do know that there is a tremendous amount of discussion about where he is on my site at Medical Spa MD. There are plenty of people asking that exact question. If you'd like, I can get you in touch with some of those people. The only interaction I've had with Carl Mudd or Dermacare is a couple of cease and desist letters he's sent me and a threat to sopenia and sue me if I didn't hand over all of the names and IP addresses of people discussing Dermacare on my site.

Let me know if you'd like some of these physicians to contact you.
Yours,
Jeff Barson

 _________________

On Fri, Jul 11, 2008 at 2:37 PM, Angela Gonzales writes back:
Thanks for getting back to me so quickly, Jeff. Yes, I would really like to talk to these doctors.
It looks like that lawsuit is in limbo since Dermacare’s attorney withdrew as general counsel and because it doesn’t look like Dermacare has served anyone.
Thanks for your help!
Would you like to give me an official comment for my story regarding the immense dialogue on your site?

Angela Gonzales
Senior Reporter
602.308.6521

 _________________

I responded:
Hi again Angela,
I'll see if I can't get you some feedback from the physicians on the site. I'd also be happy to provide a comment.

MedicalSpaMD.com is an active community of thousands of plastic surgeons, dermatologists, and aesthetic physicians looking to enhance the free exchange of information about the treatments and business of cosmetic medicine. (With more than 50,000 unique visitors each month and thousands of members it's by far the leading site on the web in this area.)

Among the more active  discussion threads have to do with the practices, treatments, and leadership of medical spa franchises like Dermacare, American Laser Clinics, Sona, Solana, and others. The most active Dermacare discussion has almost 1000 comments from existing and former franchisees.

The site has become the focal point for these physicians to communicate to each other and hadn't gone over well with the medspa franchises looking to isolate these physicians. MedicalSpaMD.com has received numerous cease and desist letters, threats and demands, including copies of a lawsuit and threats against the site and myself personally if I didn't close down the discussion forums and identify all of the individuals who may have commented. (The lawsuit named all of these individuals by their 'screen name'.) I refused to comply and posted the letters and suit as well as the case law around anonymous comments on the web.
Happy to provide more if needed.
Yours,
Jeff Barson
Medical Spa MD


Reader Comments (111)

OOH! OOH! Pick me! Pick me!

07.12 | Unregistered CommenterDermaDoc

If Angela would like to know the most likely direction of the Dermacare disaster, she could do worse than looking at what happened to Radiance MedSpa. In what is apparently becoming a pattern among medspa franchises, they are legitimate businesses started by crooks like Chuck Englemann at Radiance and Carl Mudd at Dermacare, who build up the business with slick sales tactics, and then at some point decide that it is time to cut and run with lots and lots of the franchisees' and unhappy customer's money.

Radiance is about 6-8 months ahead of Dermacare in this progression, but Carl is giving Chuck a run for his money. It also appears from the posts here that the owners/managers of Solana and American Laser are no better and are not far behind in this race to bankruptcy.

We have won a judgment against Dermacare in our case alleging fraud, lack of consideration, intentional misrepresentation, and negligent misrepresentation by Dermacare in a contract dispute. This contract was executed at the Ahwatukee franchise during a corporate hosted open house. At the onset of our lawsuit, Carl Mudds attorney submitted evidence to the court showing that Carl had nothing to do with the Ahwatukee franchise and in fact gave the judge a copy of the Az Sec. of States file indicating that the Ahwatukee franchise was owned by Dr. Patel. Carls attorney did this despite the fact that he already admitted in another case that Carl had indeed purchased the Ahwatukee francise from Dr. Patel 2 years earlier. The judge did not have any issues with this blatant fraud on the court, nor did he allow us to "pierce the corporate veil" which would have allowed us to pursue Carl personally. Carl remained untouchable and we were forced to pursue the corporation. Carl retained new counsel who requested to be allowed to be dismissed by the court approx. 2 months later. Carl retained new counsel again who requested to be allowed to be dismissed by the court approx. 2 months later. When our mediation conference was scheduled, Carl was apparantly without an attorney because he was listed on the court documents as representing himself and Dermacare.Carl failed to appear and the hearing officer requested a default judgment. The judge, however, granted Mr. Mudd a formal pre-trial hearing, which Mr. Mudd failed to appear for. That was when we applied for, and received a judgment for the full amount in dispute. We have been trying to have Carl served with these garnishment papers for almost 4 weeks, but have not suceeded in locating him. When we went to the Ahwatukee franchise, SRP had disconnected the power, and the following day, the owner of the building had posted an official eviction notice. The Ahwatukee and corporate telephone numbers are both "no longer in service". As of todays date, July 13th, we cannot locate Carl, but we will, and he will pay us back our money.

derma soup,
Wish you the best of luck, but from the sounds of it, Carl may already be too far gone to have any assets left to get. You can't squeeze blood from a rock. Chuck E of Radiance had spent everything by the time the judgements started rolling in, so bankruptcy wiped away all his woes. But definitely go for it, at least there will be one less crook in the medspa business!

I found Carl.

Copy and post this link into your browser.

http://www.youtube.com/watch?v=meCcj-x_PCI

Enjoy

in the derma soup:

I am also in the same boat as you. I have a default judgement against Carl for not living up to his promissory note to repay my franchise fee. Perhaps we should share info. How would it be best to contact you?

Michigan Doc,

I feel you pain, but I believe your chances of getting anything out of Carl is very slim. I would only continue with your judgement if you don't have to rack up a great deal of dollars in legal fees.

Carl is scum and I am not saying you don't deserve to get your money back, but I wouldn't spend a large sum of money going after Carl.

Myself and others lost a great deal of money on the Dermacare System and are now having to spend more money just to distance ourselves from Dermacare and Carl's bad name. Best of luck

07.16 | Unregistered CommenterGhost D

Mich Doc: Glad you got the default judgement, and believe me, it isn't a surprise to anyone that he defaulted. If you ask any good attorney or accountant, they will tell you exactly what Ghost D said - is it worth the wild goose chase? It isn't fair that Carl would be freed of these obligations, but he is definitely getting Karma in some uncomfortable orifices. If only we could convince his mother to go states evidence and turn over the money he hid under her name, Could she be liable as an accessory???

Anywho - we are still looking for him under whatever rock may be willing to hide him.

And who is making changes to the website...? That one is driving me nuts!

07.16 | Unregistered CommenterDermaDoc

DermaDoc,

I know the last time I had changes made and that was some time ago since I have been out of Dermacare for a while, Brian Gillick made the changes. At that time he was not employeed by Dermacare and was just working as a contractor for Carl.

I guess you are needing your "Red Dot" removed, at this point hopefully you are not wanting changes made to your web page. I guess if you could find out who (Company) was hosting the site they would be able to remove your "Red Dot"

The Dermacare wedsite could be up for a while since the hosting fees are usually paid yearly and since the hosting fees are usually cheaper if paid by the year - $5.95 - $10.00/month.

I am just so happy my "Red Dot" is no longer on the Bigger than Life Dermacare Map.

07.16 | Unregistered CommenterSBJ

SBJ- I have been wanting to be 'off the map' for over a year. I guess the most likely path now is to just wait it out and continue to build our own site so when the corporate site goes down we aren't totally off-line. Part of my question about who is making changes was related to the question of " who is asking for them to be made: Carl or the franchisee? and if Carl has to approve all the changes, then he must be available somewhere. Or the web host is going renegade. I dunno, it just seemed a bit odd that the website was being tweaked to show all the clinics dropping off but nothing ever got changed in our own page thhat we asked for. We just stopped asking.

07.16 | Unregistered CommenterDermaDoc

DermaDoc,

Not sure if you ever speak to Sidney Smith or Les, but they seem to be better connected that anyone else. They may know who would be able to make changes.

I would say that Carl is making the changes or having the host make changes as additional clinics stop paying. Now if none of the clinics are paying I would say Carl wouldn't remove everyone so Dermacare would still have Map presence on the website. By leaving "Red Dots" on the map he may still be able to find some suckers to buy a franchise.

You may say this isn't possible, but the Michigan Doc bought a Franchise not very long ago, 6 months maybe 8 months ago. Nov 07' & Jan 08' wasn't very long ago and a the majority of the topics we discuss about Dermacare and Mudd were discussed on this blog site well before that time frame.

Hopefully you will be able to get off the website soon. Have you started the name change and the website building process yet. If not that is a expense you will find is well worth paying.

07.16 | Unregistered CommenterSBJ

DermaDoc,

You can check in anytime you want, but you can never leave . . .

07.16 | Unregistered CommenterBob

SBJ,

July 07 to be exact and at that time your blog did not pop up on my search. Talked to several active Dermacare clinic docs and no one told me anything was amiss.

My bad. But please get your facts straight before you turn on the flame!!

A Little Dermacare History:

Things got really bad all of a sudden in December 2007 when Carl, in his infinite wisdom, terminated 4 franchisees in one email. We affectionately call this "Black Friday". The next week he got arrested again from drunk driving (people in glass houses should not throw stones).

From January 2008 until present he has been hammered relentlessly by people he has wronged. The barrage continues to this day. It is fun to watch!

He made his bed and now he has to sleep in it.

MichiganMD got in a little before it all took a really bad turn.

Actually Carl probably made his biggest mistake back in January 2006 when he decided to get pissed off about a franchisee meeting and then he maliciouly terminated the group in Denver.

Michagan MD was acutally lucky that he ONLY lost $75,000. Others lost their life savings and their financial security after investing over 1 million dollars in their clinics and then failing because of inadequate support, inadequate training, over promises, etc.

Bob,

Is that you Carl ! ! ! ! ! ! ! !

07.17 | Unregistered CommenterGhost D

Michigan Doc,

My bad, I thought you purchased a franchise later. I have been out of the Dermacare loop since I have been out of the system for sometime.

It was bad in April/May 07' very bad for all us clinic owners. Only a little over half the clinic owners attended the convention in AZ. This convention was a complete joke as far as Dermacare's part. One good thing did come out of the convention and that was a chance to share ideas with other clinic owners.

Carl hated clinic owners sharing ideas and communicating with each other. It was shortly after the Joke Convention in May 07' that clinics started to exit and it has continued every since.

Not sure if you opened a clinic under Dermacare and have since changed names, if so good luck. Since our distance from Dermacare and our name change my clinic is growing. It has been a very positive decision to seperate from dermacare and Carl's bad name.

07.17 | Unregistered CommenterSBJ

Copy and paste this link into your browser to see what Jesse Jackson has to say about Carl!

http://www.geocities.com/dermacarespotlight/Jesse.html?1216314432781

07.17 | Unregistered CommenterBob

I would think that Carl would be monitoring this blog to build on his self-righteous bent that everyone is trying to ruin him for no good reason. If he is, I would suggest to him that he communicate with the leftover clinics at least to say 'I am here, not in jail!' Without any word from him, the fuel continues to be added to the fire of wild speculation and rumor. It keeps us a little off-guard, but it is really putting him and the company (and the good people who are still part of it) in an even worse light to be so reclusive. At this point I could care less if he hides assets and escapes so long as he JUST GOES AWAY! Realistically, no one with any sense would invest with him in a candy bar, let alone a business, so he is essentially off the board as far as establishing a new venture (thank you Internet searches!). Nevertheless, I would love to hear from someone who actually has solid information about where he is, just for relief of my own ponderings. I hate expending that much effort thinking about him!

Please - Carl, either show yourself or someone tell us definitively where he is!

07.17 | Unregistered CommenterDermaDoc

I heard that Dermacare is currently in receivership and that Carl's home has been abandoned.

07.18 | Unregistered CommenterGeorge

I found Carl!

Copy and paste this link into your browser:

http://www.geocities.com/dermacarespotlight/

Its early morning
The sun comes out
Last night was shaking
And pretty loud
My cat is purring
And scratches my skin
So what is wrong
With another sin
The bitch is hungry
She needs to tell
So give her inches
And feed her well
More days to come
New places to go
Ive got to leave
Its time for a show

Here I am, rocked you like a hurricane
Here I am, rocked you like a hurricane

To: All Dermacare Franchisees

From: Carl Mudd

Re: Wrongful actions.

Our franchise organization has been victimized, and damaged by a small group
of people motivated by hatred and greed. Worst of all, they did their "work"
under the auspices and charade of trying to "help" other franchises.

A group led by Maxwell Smart and Agent 99. Motivated by a personal
dislike / hatred of me, and / or a brazen astonishing greed and almost total
lack of morals and regard for completely innocent, and in the case of Mr. Smart
and partners, the only method by which to cover up outright criminal activity,
Maxwell Smart and Agent 99 and others set about to destroy (and in the
process steal) the Dermacare organization.

Together with F. Lee Bailey, an extremely unethical attorney, who was
interested only in advancing his career by bringing $40,000 retainer fees
(dozens of them he thought) into his firm (and creating trouble where it did
not exist) they set about in an organized, persistent campaign, contacting
almost every, if not every, franchisee in the system to join their cause.
Dissuading potential franchisees from joining the system, and poisoning the
attitude of new and existing franchisees that were perfectly happy with the
franchise they had acquired and were excited about their futures. Seizing upon
corporate imperfections, real and imagined, and utilizing spiteful ex
employees, under the guise of "helping" other franchisees, they organized
other (unknowing) franchisees to financially damage corporate.

Their zest to destroy corporate knew no bounds. They created a venomous,
poisonous atmosphere of hatred and contempt, not just of the founder, but the
successful franchisees, our real leaders, who recognize right and wrong when
they see it, would not join their disgusting cause, were viciously and
unconscionably turned upon, and had their reputations and character assaulted
by characterless, nameless, evil people. Again under the guise of a normal
industry blog, these people used disinformation and spewed the most malicious
of vile to be spewed.

If any of these postings is in fact made by Carl Mudd or if he is reading this, let me assure you/him:

Most of what is being said in these blogs *may* on the very extreme be disproportionately representing the vile individual that you are in my opinion.

Most of these situations where you may feel it's others' greed that has motivated this must be a psychologically irrationation response to the reflection of greed that you saw in yourself when you invented a great plausible idea, but were unable because of your tremendous ego to allow people who were trained in all walks of professional management to execute it properly, nourish it with sound knowledge, and cultivate the culture for everyone to prosper.

You do NOT have the knowledge, skills and abilities you ever claimed to have and no amount of money you ever had, nor your ability to lease a nice office space, nor your occupation in the corner of said palace ever qualified you to squander all these good doctors and business persons' assets in a misrepresented campaign.

To be sure, some of your ideas were revolutionary, and on a far reaching limb I will grant you clever. However, in your zeal to be king time and again, it went to your already (only in my opinion but I am sure supported by medical fact, pharmaceutical record and eyewitness testimony) overinflated headcase ego and you BLEW IT.

You acted (in an opinion formed by self-witness and in by testimony to me by victims!) unethically, morally irresponsible, criminally sexually assaultive, and without regard to the condition of your business or the consequences of your actions in said operation. This destroyed your credibility, not the commentary in these blogs.

The lashings that you receive here now are the logical reprecussion to an equal and opposite number of offenses you have committed upon good people of this world.

Logical and fitting consequences, Carl.

So you have sewn, reap the whirlwind and face the actions of the tiger. If not, hide in a cave in Brazil eating bugs and carcass and cower from the balance of scales.

There is no blame you can cast to asperse light away from your character. No wordsmithing in e-mailed warnings, self-righteous composition for which you pale to even me, one of the least educated of the legion of your enemies.

Come and get us Carl. We face you in open ground under the eyes of the people and the law and justice will prevail.

Your time is over.

Ghost of Dermacare Past.

Dang, that is some good reading!

There are a couple of reasons we know Carl is not solely responsible for the post above: the grammar is too appropriate and the content is too logically formed to have come from him. Possibly he forced, I mean encouraged, an underling to write it, but we all know he isn't capable of coherent thought at that level.

Of course, that is the simple opinion of a person who has spent years in education and observation of people and their skills.

07.19 | Unregistered CommenterDermaDoc

From: Carl Mudd CEO
Sent: Sat 1/12/2008 1:32 AM
To: jskiba@skibalaw.com; efleming@bcattorneys.com; Carl Mudd CEO
Subject: The Truth, The Future

Dear Franchisees:

As most of you know, there is a an unsavory individual(s) anonymously trying to damage the Dermacare system and several individuals in it. We are taking aggressive legal action to put an end to this, with multiple injunctions filed, including a recent one to close down the "blog". . . The lies*, the illegal and immoral acts being perpetrated by this small group will soon be adjudicated and the punishment will be harsh, and rightly so. . This highly illegal behavior, which will certainly be revealed in the multitude of upcoming depositions, will be prosecuted to the fullest extent of the law.

*They often state that Dermacare has an 80% failure rate....the inverse is true. The success rate is over 80%. Litigation is also mentioned. We have substantial litigation...as the PLAINTIFF.

** I still own 100% of Dermacare, but Equity and Venture capital calls every other week. We have NO institutional debt...Dermacare corporate isn't going anywhere but up!

Warm Regards,

Carl J. Mudd

07.19 | Unregistered CommenterCarl

Up in Smoke!!!

Derma Soup,

I have not seen a response. I am too trying to collect from Carl. Maybe we can share info and expenses.

Let me know how best to contact you

Just found this on the internet. Though you would all be interested.

http://phoenix.bizjournals.com/phoenix/stories/2008/07/21/story7.html?b=1216612800^1670302&surround=etf

Dermacare's future uncertain in wake of closure, lawsuits

Phoenix Business Journal - by Angela Gonzales Phoenix Business Journal

A Maricopa County Superior Court judge has appointed a receiver to handle the financial future of Dermacare Laser & Skin Care Clinics Inc., which at one time planned to sign on more than 120 franchisees nationwide.

The Scottsdale-based franchisor is embroiled in several arbitration cases and lawsuits. Its corporate offices have closed, and several franchisees have abandoned the Dermacare name.

At one point, Dermacare had six facilities throughout the Valley.

The company's founder, Carl Mudd, could not be reached for comment.

Four Valley franchisees no longer are affiliated with Dermacare. A facility in Litch­field Park is keeping the brand name, but operating independently.

A records search at Maricopa County Superior Court shows 10 lawsuits have been filed within the past several years against Dermacare Laser & Skin Care Clinics Inc.; its parent, DLC Dermacare LLC; and Mudd. The lawsuits were filed by vendors, franchisees and former Derma­care employees, claiming the company didn't pay its bills.

For example, WS Inc., formerly WGS Packaging Inc., was awarded a judgment of $384,000 against Dermacare Laser & Skin Care Clinics. According to the lawsuit, WS Inc. sued Dermacare in 2006 for not making payments on the clinic Mudd operated in Paradise Valley.

Richard Thomas, attorney for WS, said his client also has a pending claim through the American Arbitration Association for nonpayment of that note.

WS has received default judgments against Mudd, DLC Dermacare and Dermacare Laser Clinics, Thomas said.

"As to both of the entities, Dermacare has obtained the appointment of a formal receiver," he said.

Also named in the WS lawsuit was a Dermacare doctor, Abraham J. Sayegh, who was one of the first doctors to join Dermacare and later became its medical director.

Sayegh also is facing censure by the Ari­zona Medical Board. In March, the board cited him for drug and/or alcohol use after an anonymous complaint was filed in February. According to those filings, Sayegh said he would cease practicing medicine. It was Sayegh's second relapse, according to the medical board.

Meanwhile, Mudd filed a lawsuit in January against a blog on MedicalSpaMD.com, which features communications by former franchisees. Many of the blog entries criticized Mudd and Dermacare. In his lawsuit, filed in Maricopa County Superior Court, Mudd asked the site to reveal the bloggers' Internet service provider addresses so he could sue former Dermacare franchisees for defamation of character.

Mudd's attorney listed in that suit was John Skiba, but he filed a motion with the court Feb. 4 to withdraw as Dermacare's counsel.

Jeff Barson, founder of MedicalSpaMD.com, said the most active Dermacare discussion includes nearly 1,000 comments from existing and former franchisees.

"MedicalSpaMD.com has received numerous 'cease and desist' letters, threats and demands, including copies of a lawsuit and threats of suit against the site and myself personally if I didn't close down the discussion forums and identify all of the individuals who may have commented," Barson said.

"I refused to comply and posted the letters and suit, as well as the case law around anonymous comments on the Web," he said.

Superior Court records show Mudd's lawsuit might be dismissed. Under Arizona law, a plaintiff has 120 days after filing a complaint to serve the defendants. If that does not happen, the court can dismiss the case.

Court records do not show affidavits have been served, said Andre Merrett, an attorney with Quarles & Brady LLP who is representing six Dermacare franchisees in an arbitration dispute through the American Arbitration Association.

When franchisees signed on with the company, their contracts included a stipulation that they would settle disputes through arbitration in lieu of lawsuits, Merrett said.

Trish Gulbranson owned the Dermacare franchises in Mesa and Chandler until February. She recently started getting calls from customers of the nearby Ahwatukee facility, saying it had closed and they were left holding prepaid packages or gift certificates.

Gulbranson decided to honor any unfinished laser services or valid gift certificates that had been purchased from the Dermacare of Ahwatukee office if customers could show their receipts.

"In light of the complete deterioration of the franchise system, (franchisees) simply want to be free from Dermacare and be allowed to go out and operate their businesses on their own in an effort to try and save their investments," Merrett said.

He said he hopes to connect with the receiver to see if the disputes his clients have with the company can be resolved without further litigation.

Other local franchise owners were not willing to discuss the matter.

Get Connected
Dermacare Laser & Skin Care Clinics: www.dermacareusa.com

07.20 | Unregistered CommenterBob

Thank you mass media! woo-hoo!

07.20 | Unregistered Commenterdermadoc

I think a major battle has been won against Carl, but I also tend to agree
with DermaDoc. I don't think the war is over yet. Whatever money he has may be
going into a warchest to go after whatever franchisee breaches the contract
before there is officially a termination of corporate's existence. Rather
than sitting on our laurels (OK, we all deserve a couple of days of enjoyment
of this latest development), I might suggest we double-check the franchise
agreements to pinpoint the area(s) he has breached over the past few months so
to not only be ready with a response if he comes forward with a claim against
us, but to hopefully put the last couple of nails in the corporate coffin.

It's always when you think it is over that the monster pops up again with a
vengeance!

Otherwise, CONGRATULATIONS EVERYONE!

07.21 | Unregistered CommenterF. Lee

F. Lee,

Do you have any information on the state (money situation) of Dermacare as far as creditors. I know it has been mentioned that Dermacare has several judgements against them. I read Dermacare has been placed in receivership. Leagally what does that mean.

Do you have some information you could please share.

07.22 | Unregistered CommenterGhost D

Receiver
A person appointed by a bankruptcy court or secured creditor to run a company for a short period of time in a manner that will ensure as much debt is paid back to creditors as possible.

Notes:
The main purpose of a receiver is to use a company's assets in a way that will most effectively pay back creditors. Depending on where a receiver is appointed, there are numerous restrictions on how he or she runs a business. For instance, in many jurisdictions a receiver can run a company only for 14 days. In turn, a receiver's main function is often simply to liquidate all available assets. When a receiver is appointed, the company is said to be "in receivership."
financial-dictionary.thefreedictionary.com

Word to the Wise,

If Dermacare is placed in receivership is this the first phase of bankruptcy.

When you mention company assets do the fees (royalty & mass ad)the existing Dermacare Clinics pay monthly count as company assets.

07.22 | Unregistered CommenterGhost D

From wikipedia.org:
Current assets
Current assets are cash and other assets expected to be converted to cash, sold, or consumed either in a year or in the operating cycle. These assets are continually turned over in the course of a business during normal business activity. There are 5 major items included into current assets:

1. Cash and cash equivalents — it is the most liquid asset, which includes currency, deposit accounts, and negotiable instruments (e.g., money orders, cheque, bank drafts).
2. Short-term investments — include securities bought and held for sale in the near future to generate income on short-term price differences (trading securities).
3. Receivables — usually reported as net of allowance for uncollectable accounts.
4. Inventory — trading these assets is a normal business of a company. The inventory value reported on the balance sheet is usually the historical cost or fair market value, whichever is lower. This is known as the "lower of cost or market" rule.
5. Prepaid expenses — these are expenses paid in cash and recorded as assets before they are used or consumed (a common example is insurance).
The phrase net current assets (also called working capital) is often used and refers to the total of current assets less the total of current liabilities.


[Long-term investments
Often referred to simply as "investments". Long-term investments are to be held for many years and are not intended to be disposed in the near future. This group usually consists of four types of investments:

1. Investments in securities, such as bonds, common stock, or long-term notes.
2. Investments in fixed assets not used in operations (e.g., land held for sale).
3. Investments in special funds (e.g., sinking funds or pension funds).
4. Investments in subsidiaries or affiliated companies.
Different forms of insurance may also be treated as long term investments.


Fixed assets
Also referred to as PPE (property, plant, and equipment), or tangible assets, these are purchased for continued and long-term use in earning profit in a business. This group includes land, buildings, machinery, furniture, tools, and certain wasting resources e.g., timberland and minerals. They are written off against profits over their anticipated life by charging depreciation expenses (with exception of land). Accumulated depreciation is shown in the face of the balance sheet or in the notes.

These are also called capital assets in management accounting.

Intangible assets
Intangible assets lack physical substance and usually are very hard to evaluate. They include patents, copyrights, franchises, goodwill, trademarks, trade names, etc. These assets are (according to US GAAP) amortized to expense over 5 to 40 years with the exception of goodwill.

Current assets - These assets are continually turned over in the course of a business during normal business activity. Could the fees be determined current assets since Dermacare receives these monthly from the clinics.

07.22 | Unregistered CommenterGhost D

Absolutely. Franchise fees are receivables and by definition a current asset. One can anticipate a receiver would be expecting to control such assets and seek them out when they are not forthcoming.

True enough Word to the Wise - but when the franchise royalties are based on a contract which has been breached by the franchisor, there would have to be a ruling that they are still valid. I think that is the tactic most of the remaining franchisees will take. Now may be a very good time to combine forces with any remaining franchisees to develop a legal strategy.

07.22 | Unregistered CommenterDermaDoc

Not a good deal for the clinics that are still in the Dermacare System. If Dermacare files for bankruptcy (voluntary or involuntary) would that protect the existing clinics from having to pay the fees in any way.

07.22 | Unregistered CommenterGhost D

DermaDoc,

Not sure if you are a existing Franchisee, but if so do you have a clause in the agreement stating that the franchisee can terminate the franchise agreement if Dermacare files bankruptcy

07.22 | Unregistered CommenterSBJ

"The franchisee whose franchisor is heading toward Chapter 7 should consider exiting the system and "going private" under a different name. This should be accomplished by a formal termination notice. The franchisee may find that it fares better this way for a number of reasons. First of all, the nearly insolvent franchisor is unlikely to sue. Further, anyone who purchases the franchise assets is unlikely to pursue a disgruntled franchisee for money damages (which would likely just go to repay creditors). In addition, once a bankruptcy is filed, a termination might be a violation of the Bankruptcy COde's "automatic stay" provisions." Franchising: Realities and Remedies, by H. Brown, Michael Gardner, Michael Dady and J. Haff, Esq.

07.22 | Unregistered Commentermedspa guy

That sounds like a good plan for the clinics that still operate under the Dermacare name. I would say you are correct when the wheels are in motion as far as Chapter 7 franchisees couldn't make a move out of Dermacare until the Chapter 7 was settled.

Glad I made that move a long time ago. The question is how can you guys who still have "Red Dots" on the Dermacare Map get those removed. I bet now when you look at the map your "Red Dot" only gets BIGGER

07.22 | Unregistered CommenterSBJ

Thanks everyone for the dialogue about the legal ramifications. I am a bit confused now about whether a franchisee should wait until corporate files so to void the franchise agreement or do it before corporate does to not be subject to an automatic stay. It may be different in every state as well.

Thoughts?

07.22 | Unregistered CommenterDermaDoc

DermaDoc: The lawyers who wrote the book from which the above exerpt was lifted make it clear that franchisees wanting to opt out of the system must send their formal termination letters to the franchisor BEFORE the franchisor files. This will avoid the "autromatic stay" situation.

07.23 | Unregistered Commentermedspa guy

Derma Doc (and other 'zees): If you type "termination letter" into the search engine on this blog you will find scans of several termination letters that Jeff posted some time ago that may be helpful. You can also search the topic (franchise termination letters, etc.) on GOOGLE and find some helpful information.

07.23 | Unregistered Commentermedspa guy

Thanks MedpaGuy. What I was questioning is whether a formal termination letter is that simple of a way to 'disconnect' from the corporation. If there isn't a valid reason, the franchise could then be subject to sanction and possibly be sued by the franchisor for various reasons which, if the franchisee lost, would become a judgement that could be enforced by the receiver and any other creditors. I think there are valid reasons to withdraw from dermacare obviously, but that does not automatically make it easy to do. I'm not trying to make it complicated, I just know that franchise law is just one part of what needs to be considered in this situation. Bankruptcy law, interstate commerce law, general contract law, etc all have bits and pieces wrapped up in this.

I would also assume that the franchisees remaining would be hearing from the receiver sometime soon about their plans for the company.

07.23 | Unregistered CommenterDermaDoc

DermaDoc: All franchise agreements are contracts which impose duties and obligations on both parties. The franchisees' obligation to pay a franchise fee to the franchisor is the "quid pro quo" for the franchisor's ongoing support and other duties imposed by the agreement. If you take a look at the duties and obligations of the franchisor in YOUR agreement, you will quickly be able to answer your own question (i.e., do you have a valid reason for terminating your agreement). You can contact a franchise law expert such as Michael Garner in Minneapolis if you want a second opinion. He is with the firm Dady & Garner and he has represented hundreds of franchisees over the years. He is a co-author of the book I quoted above and he is a tiger.

07.23 | Unregistered Commentermedspa guy

For all of you who want to know what Carl is up to, you can visit the Az. Corp. Commissions web site and type in the name Carl Mudd as owner or member or statutory agent of existing Corporations.It looks like there are 2 newly formed corporations in Az. as recently as mid July, formed by a person named Carl Mudd with the same corporate address as the Carl Mudd from Dermacare Hint: Is someone "blowing in the wind" again? Someone needs to follow the money trail so assets from one corporation dont accidentally become intermingled with another.

DermaDoc,

Above you mention "If there isn't a valid reason". What more reason do you need, Dermacare doesn't even have a corporate office or any type of office for that matter. The training facility has been shut down and Dermacare has no way to offer support.

Hopefully you haven't been sending the franchise fees to a black hole, if so I have another franchise opportunity I would like to sell to you.

Call the man that Medspa guy mentions before you have no other choice but to stay in and keep paying the franchise fees to help pay off the creditors. Get moving on this please.

I would hate to see you be obligated to keep throwing money away because of Dermacare. Please call the man.

07.23 | Unregistered CommenterSBJ

Thanks for the concern guys. I am already throwing the deal to my attorney (more money to spend, grumble, grumble). I had identified the breaches previously and was just waiting for a good time to terminate for cause once Carl was weak enough to not fight it. I don't know of any franchisees that have been paying royalties lately, or where they would even be sending them if they were. I couldn't pay if I wanted to because there is no company to pay it to and no address to send it to!

I agree time is of the essence right now, so this should definitely be on everyones priority list!

TWO NEW CORPORATIONS!?!? Scary! Somebody stop this guy before he screws over more people! Hopefully the article in the Phoenix business journal will supress any interest in business partners giving him more money to run away with.

07.23 | Unregistered CommenterDermaDoc

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