Kelly's Violated Franchise Rules, State Says

Beverly Hills-based Kelly's Enterprises Inc., which oversees the Kelly's Coffee and Fudge Factory chain, sold 50 franchises without having the mandatory state registration, the Department of Corporations said. The outlets were sold between 1995 and 1997, leaving buyers without legal protection, department spokeswoman Julie Stewart said. Buyers, for instance, were not given required disclosure documents, one of which detailed the bankruptcy of prior businesses of Kelly's then-president Stuart Benson. In January, Superior Court Judge Arnold Gold issued an injunction against Kelly's, barring the company from committing any further violations of the state Franchise Investment Law. Control of the company changed hands six months ago, and current Kelly's president Shlomi Michaels said the company is now in full compliance with state law.

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