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Franchise Fracas at GNC

A lawsuit seeking compensatory and punitive damages was filed today against GNC Franchising, Inc., a subsidiary of General Nutrition Companies, Inc., by New Jersey GNC franchisees and the nationwide GNC Franchisee Association. The primary allegations in the 12-count complaint allege that the franchisees were fraudulently harmed by the company’s misappropriation of the franchisee-advertising fund, imposition of unreasonable and arbitrary "reset fees," and other improprieties.

The plaintiffs commenced the action in the New Jersey Superior Court in New Brunswick, claiming that the money they paid into a GNC-administered advertising fund was misappropriated and used by GNC for corporate purposes instead of paying for additional advertising for GNC franchisees, their stores and their products. The plaintiffs also asserted that so-called "reset fees," which are charged by GNC for the rearrangement of signage, displays and merchandise within the store, are unreasonable given the amount and type of work performed.

The suit was brought on behalf of New Jersey residents Richard Sullivan, who lives in Middletown and has franchises in Milltown, Bridgewater, Watchung and Manville; Leslie Quadrel, who has a franchised store in New Brunswick; Scott Tull, Somers Point; and Ronald Miller, whose franchises are in Clinton and Hacketstown. The other plaintiff, the GNC Franchisee Association, Inc., is a national organization that represents more than 350 franchisees throughout the continental United States.

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