Jared Caplan, a Dallas real estate executive, has filed a lawsuit against Home Care Assistance (HCA), claiming he was misled into investing millions into the franchise under false pretenses.
Caplan alleges that the then-CEO of HCA, Lily Sarafan, made critical promises that lured him into the business, which he asserts turned out to be a bait-and-switch scheme designed to defraud him.
The lawsuit, filed on July 17 in Dallas County, contends that Sarafan’s personal success over the years has come at the expense of smaller investors like Caplan.
“Sarafan systemically misrepresented or obfuscated key facts to lure potential franchisees such as Mr. Caplan into investing their time, money, and reputation into expanding HCA’s international network of revenue-generating offices,” the lawsuit claims.
Robert Hernquist, a representative for Sarafan, expressed confidence that the court will dismiss Caplan’s lawsuit.
Hernquist indicated that Caplan has been threatening legal action for over a year, describing the allegations as baseless and an attempt to blackmail HCA.
“We are disappointed that Mr. Caplan has followed through on those threats and filed this vexatious lawsuit based on events that occurred more than a decade ago,” Hernquist stated.
According to the lawsuit, Caplan initially invested $49,950 to acquire an HCA franchise in 2015, followed by a further $64,950 for a second franchise in 2016.
Since the establishment of these franchises, Caplan has reportedly dedicated the past decade to developing what he claims to be one of the most successful in-home care businesses in the Dallas area.
In the pursuit of building this business, Caplan has taken out over $4 million in loans, relying on the assurances made by Sarafan and other franchise representatives.
Court documents reveal that Caplan’s franchises generated $4.88 million in revenue in 2023 alone.
The lawsuit further alleges that Sarafan was secretly working to undermine the HCA brand and franchise system by creating a competing corporate model, attempting to drive down the value of existing HCA franchises.
Caplan’s legal team argues that Sarafan engaged in fraudulent inducement, negligent misrepresentation, and acted with unjust enrichment by compelling franchise owners to sell their operations back to HCA at significantly devalued prices, later rebranded as TheKey.
Additionally, the lawsuit claims that Sarafan failed to disclose an existing plan with private equity firm Summit Partners to acquire an extensive network of offices at greatly reduced prices.
According to the lawsuits, HCA induced franchisees into making significant investments and, once they had absorbed the associated risks and costs, attempted to pressure them into selling their franchises back at artificially depreciated values.
As the situation unfolds, how HCA responds in court, as well as the impact on Sarafan’s substantial public profile, remains to be seen.
The claims made by Caplan constitute a significant challenge not only to HCA’s business practices but also to the broader franchise model that relies on attracting individual investors.
The outcome of this lawsuit could potentially have wider implications for franchise relationships across the industry.
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