Financing

Indiana files an administrative complaint against I Heart Mac and Cheese

The state, which has already told the company to stop selling franchises, is accusing the fast-casual chain of violating state franchise law.
I Heart Mac and Cheese
Indiana is accusing I Heart Mac and Cheese of misleading franchise investors. | Photo courtesy of I Heart Mac and Cheese.

Indiana filed a complaint against I Heart Mac and Cheese on Tuesday, accusing the company of violating franchise regulations as it sold locations to investors across the state.

The Indiana Securities Division said in its complaint that Mac and Cheese Franchise Operations (MACFO) sold I Heart Mac and Cheese (IHMC) franchises for 16 locations to seven different investors. All of the stores either closed or have failed to open.

The state also said that many franchisees of the brand “lost significant amounts of money trying to keep their locations open.”

MACFO claimed IHMC had “low startup costs that required little prior business experience and a handful of employees to sell pre-made, frozen food.”

But franchisees faced challenges because the franchise misrepresented the cost of starting and operating the business. Indiana also said that the franchise provided a lack of support for a “lossmaking business model” that made it difficult for operators to attract and retain employees.

MACFO also threatened struggling franchisees with lawsuits, the state said. And its complaint also accused the company of filing franchise disclosure documents that didn’t properly detail some of the risks associated with the franchise—such as lawsuits against company executives, as well as their prior business experience.

Indiana also said that MACFO “misrepresented the profitability of the franchise and demand for locations.”

“Business owners across our state work hard to keep their doors open and have enough challenges to overcome,” Indiana Secretary of State Diego Morales said in a statement. “They should not have to deal with misleading methods.”

Indiana last year banned I Heart Mac and Cheese from selling franchises in the state. More recently, California cited the company for a variety of similar violations.

Restaurant Business initially reported the chain’s problems with many of its early franchisees in 2020. Many of the brand’s operators failed to open and those that did encountered numerous struggles.

IHMC’s website lists 35 open locations across the country and many more as “coming soon.”

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