The founder of Roll Em Up Taquitos on Monday vehemently denied allegations of fraud raised in a lawsuit by a group of franchisees.
Five former and current franchise operators filed a lawsuit last year in which they described the operation as like a Ponzi scheme. The lawsuit, filed in Superior Court of California, Riverside County, targets founder Ryan Usrey, former Chief Development Officer Chris Wyland and Director of IT Cody Soscia.
The franchisees contend the franchisor misrepresented the business and its viability, among other charges. They also detail their own experiences, saying they collectively lost millions to failed businesses, according to court documents.
Usrey last week declined to comment directly, saying he was not aware of the lawsuit because he has not yet been served with court documents, despite repeated attempts by the court to reach him, according to court filings.
But on Monday, Amy Levy, a public relations representative for the 11-unit chain countered issues raised in the lawsuit point by point, calling most of the charges “falsehoods.”
She also said the franchisees who filed the lawsuit were poor operators and did not meet contractual obligations. She said all of them had been sent cease-and-desist letters.
“Roll Em Up Taquitos is a legitimate restaurant brand,” she said. “It is not a Ponzi scheme. It has real operating locations, customers and revenue, and expanded into franchising only after there was strong demand and interest from prospective operators.”
Roll Em Up was founded in 2019 by Usrey as a family restaurant featuring his “mama Karen’s” taquito recipes. The brand began franchising in 2021, developing training systems, recipes and food-prep processes, supply chain and distribution, branded materials and an operational support infrastructure, Levy said.
“At no point was their intent to deceive or harm franchisees, and what these people are now doing to the owners really desecrates the spirit of this family business,” said Levy.
Currently, the chain has one company-owned restaurant and nine franchised locations, which are operated by seven franchisees. The company has not offered new franchises for two years, Levy said.
In the lawsuit, the franchisees alleged the Roll Em Up executives misappropriated funds. But Levy said all fees and royalties were used for the operation of the business and processes were in place to support franchisee success.
The franchisees also said unit performance numbers were inflated. But Roll Em Up said profitability was impacted by macroeconomic challenges in recent years, including COVID-19, and rising operational costs in general.
Roll Em Up has consistently provided support for franchisees, Levy said, including training, operational systems, store opening assistance and guidance.
Franchisees, however, are responsible for implementing those systems, she added.
“It is true the company has faced challenges affecting capacity at times, but it has restructured operations to support and continue to invest in the franchisees,” she said.
The franchisee lawsuit also said they were supplied with poor-quality frozen taquitos, though Roll Em Up was founded on the promise of hand-rolled taquitos made in-house.
Levy said the move to a frozen product was at the request of franchisees, who said they didn’t have the labor to make taquitos in house. It was also an effort to lower costs and improve consistency, she said.
But the move wasn’t well received by guests, she conceded. Roll Em Up has since returned to hand rolling and cooking taquitos in restaurants, as was the original intent of the concept, Levy said.
In the lawsuit, the franchisees also alleged that Roll Em Up omitted past litigation from its franchise disclosure documents, including lawsuits involving Wyland, Roll Em Up’s former CDO, who was previously owner of a vending-machine company.
Levy said Roll Em Up also was not aware of Wyland’s history, and that he had signed a disclosure document stating he had no prior litigation. After discovering the history and investigating, Roll Em Up took action to remove him from the company.
Wyland told Restaurant Business last year that he served as a consultant for Roll Em Up and that he divested a minority stake in the company in 2022. He did not respond to requests for comment on the franchisee lawsuit.
Levy also clarified the role of former professional football player DeSean Jackson, who the franchisees said was presented as a “celebrity investor” in the franchisor’s Brand Book.
Jackson “purchased a small number of shares directly from the founder,” Levy said. “He has no contractual obligations to Roll Em Up franchise group and is not required to promote, endorse or participate in the business in any way.”
Levy also said Usrey would respond to the allegations in court—if and when he is served with court documents.
Sergio Castaneda, an attorney with Castaneda Law APC representing the five franchisees, said Monday the franchisees stand by the original complaint.
UPDATE: This article has been updated to correct the total unit count.