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Cell Phone Repair Owners Sue Assurant Alleging Deceitful Practices

When insurance giant Assurant Inc. bought CPR Cell Phone Repair in 2019, many operators in the 825-unit mobile device repair franchise were hoping for more business from their new parent. But CPR’s Independent Owners Association is now suing Assurant, claiming “it changed the deal” and imposed “onerous new burdens on its franchisees, wholly to benefit itself at their expense,” the lawsuit claims.

The “culminating factor” in their complaint, said outside attorney Dan Klein of Johnston Clem Gifford, is when Assurant started “directly competing with CPR franchisees,” including for employees that in some cases were hired away from franchisees at higher wages to operate repair kiosks within T-Mobile device stores, the lawsuit claims.

Assurant insures nearly 50 million mobile devices, including phones, tablets and laptops, along with offering many other types of insurance. By 2020, CPR operators were told Assurant would send T-Mobile customers to franchisee stores for repairs covered by Assurant insurance, according to the lawsuit filed in September.

“Franchisees opened stores, renovated stores, and hired employees” based on the representations. “They then learned Assurant would be directly servicing the T-Mobile customers itself,” the lawsuit says.

“Since then, Assurant has opened hundreds of repair kiosks in T-Mobile stores—many located within CPR franchisees’ territory and staffed with employees CPR had franchisees train for T-Mobile repairs,” the lawsuit continues.

An about-face by Assurant

Confusing matters further, franchisees learned in late September that Assurant reversed course, closing some 500 kiosks in T-Mobile stoers and returning the business to Cell Phone Repair franchisees, after their lawsuit was filed, according to Klein.

“On Monday we learned this at our conference, and I think it was a mixed reaction” to what Klein called the about-face by Assurant, said Eric Farr, board president of the CPR owners association. “We’re excited to finally get claims. We’re excited to service T-Mobile customers. But at the same time, it doesn’t undo some of the heartache and the pain and financial distress that we’ve been subjected to.”

Farr was new to the industry when he became a franchisee in 2018. “With that, we’re still trying to understand what this means for our business. Additional traffic to the store is very good. Does it positively or negatively impact our business model? Me personally, I’m waiting to see,” he said.

Another complaint by the owners group was the new requirement by Assurant that franchisees buy parts only from Mobile Defenders, a company partially owned by Assurant. “All of the owners when we first signed our franchise agreements… the FDD explained there would be a cost-plus model, so we would have a group purchasing model for all of our parts. Pretty soon after we realized, we were paying anywhere from 5 to 10 percent more, compared to other suppliers that have a great reputation. Owners were losing several thousand dollars a year” on the parts including batteries.

In September, Assurant said it sold its ownership stake in Mobile Defenders, welcome news to franchisees but again a perplexing turnabout, said Farr.

Assurant declines to comment

Blair Frock, vice president of retail, connected living for Assurant, did not reply to a request for comment. Andy Mus, director of external communications for Assurant, said via email the company does not comment on pending litigation. Frank Burt, a partner with Faegre Drinker and outside attorney for Assurant, declined to comment citing the company’s prohibition against it.

In September 2021, Burt responded to an earlier complaint by Cell Phone Repair franchisees, in that instance filed by franchisee attorneys Dady & Gardner, seeking to negotiate a nationwide no-hire agreement with the association.

Assurant has “deep respect for the association’s larger mission of supporting independent CPR franchisees, which are an important component of the franchise system,” but was “unable to participate in the negotiations the association proposes. In fact, they may be legally prohibited from doing so” because doing otherwise may “violate state and federal antitrust laws,” the letter said.

The letter also refuted the association’s series of “possible legal claims and theories against Assurant,” including breach of contract and breach of the implied covenant of good faith and fair dealing, among others. “There is no merit to the claims posited,” the letter said.

Other mobile device repair chains were bought by new insurance owners in 2019. Allstate-owned SquareTrade purchased mobile repair company iCracked, and global insurance provider Asurion purchased uBreakiFix, a franchise, later replacing its founder and CEO and rebranding uBreakiFix stores to the Asurion name.

Association wants ‘seat at table’

Despite big changes in the industry at large and confusing times with Assurant in specific, the CPR association’s goal is simple. “We want to be able to have a seat at the table, and to come to a healthy, profitable network,” said Farr, the group’s president.

“We began to try to engage CPR on all of these issues, and they didn’t want to discuss it with us, even with over half the owners being a part” of the association. “That was really challenging, and as we approached this year, the repairs within the industry are becoming more and more expensive,” he said.

“That relates to Apple batteries, and the right to repair. You sign an agreement that you can’t use aftermarket batteries, and Apple batteries are three times” the cost of aftermarket batteries. “Our revenue and profit from Apple batteries has declined substantially, over 50 percent in some cases,” he said.

“We believe they’ve heard us, indirectly I should say, because of the things that have transpired here within the last week or two: the supplier being purchased, and us receiving T-Mobile claims,” Farr said.

“What we see is this business is constantly evolving. We have to be prepared to defend the health of our owners, that’s our primary charge,” Farr said. “We’re fortunate that we have so many motivated owners by our side, very unique and talented people. That’s the health of our network, is our owners. We hope that encourages more dialogue between us and Assurant.”

Source : Franchise Times

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