AMERICAN ARBITRATION ASSOCIATION

CHARLOTTE, NORTH CAROLINA

AAA CASE NO.: ________

CHARLESTON JUICING LLC

Claimants,

v.

CLEAN JUICE FRANCHISING, LLC,

CLEAN JUICE DISTRIBUTION, LLC,
LANDON ECKLES,
DAVID CUFF, and DAVID KERR

Respondents.
______________________________________/

DEMAND FOR ARBITRATION

Claimants, CHARLESTON JUICING LLC, by and through undersigned

counsel, hereby brings this action against Respondents, CLEAN JUICE

FRANCHISING, LLC, CLEAN JUICE DISTRIBUTION, LLC, LANDON ECKLES

and DAVID CUFF. In support thereof, Claimant states as follows:

PARTIES, JURISDICTION AND VENUE

1) Claimant, CHARLESTON JUICING LLC and its subsidiary operating

entities (hereinafter, the “Franchisee” or “Claimant”), is a franchisee of Clean Juice

Franchising, LLC.

2) Respondent, CLEAN JUICE FRANCHISING, LLC (hereinafter “Clean

Juice Franchisor” or “Franchisor”), is a North Carolina limited liability company

with its headquarters located in Charlotte, North Carolina. Clean Juice Franchisor

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 is engaged in the business of offering and selling business opportunities, including

franchises, to individuals and entities for the operation of a “Clean Juice” franchise.

3) Respondent, CLEAN JUICE DISTRIBUTION, LLC (“CJD”), is a North

Carolina limited liability company. CJD is an affiliate of Clean Juice Franchisor and

serves as a distributor of bottled juices and other products to Clean Juice franchisees

pursuant to distribution-chain relationships with other distributors, such as Sysco

and Kinexo.

4) Respondent, LANDON ECKLES (“Mr. Eckles”), was at all relevant times,

the Chief Executive Officer of Clean Juice Franchisor. Acting alone or in concert with

others, he has formulated, directed, controlled, or had the authority to control, or

participated in the acts and practices of Franchisor, including the acts and practices

set forth in this Demand. Mr. Eckles has advertised, marketed, distributed, and/or

sold Clean Juices franchises to consumers throughout the United States, including

Claimant who is located and operates a Clean Juice franchise in Texas. At all times

material to this Demand, Mr. Eckles formulated, directed, controlled, or had the

authority to control, or participated in the acts and practices of Franchisor. Mr.

Eckles has communicated with prospective and existing franchisees, including

Claimant, about the Clean Juice franchise opportunity, entered into agreements, and

negotiated contracts with Clean Juice franchisees, including Claimant. Mr. Eckles is

a resident of North Carolina.

5) Respondent, DAVID CUFF (“Mr. Cuff”) was at all relevant times, the Chief

Development Officer of Clean Juice Franchisor. Acting alone or in concert with

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 others, he has formulated, directed, controlled, or had authority to control, or

participated in the acts and practices of Franchisor, including the acts and practices

set forth in this Demand. Mr. Cuff has advertised, marketed, distributed, and/or sold

Clean Juices franchises to consumers throughout the United States, including

Claimant who is located and operates its Clean Juice franchise in Texas. At all times

material to this Demand, Mr. Cuff formulated, directed, controlled, had the authority

to control, or participated in the acts and practices of Franchisor. Mr. Cuff has

communicated with prospective and existing franchisees, including Claimant, about

the Clean Juice franchise opportunity, entered into agreements, and negotiated

contracts with Clean Juice franchisees, including Claimant. Mr. Cuff is a resident of

North Carolina.

6) Respondent, DAVID KERR (“Mr. Kerr”) was at all relevant times, the

Senior Vice President of Corporate Development of Clean Juice Franchisor. Acting

alone or in concert with others, he has formulated, directed, controlled, or had

authority to control, or participated in the acts and practices of Franchisor, including

the acts and practices set forth in this Demand. Mr. Kerr has advertised, marketed,

distributed, and/or sold Clean Juices franchises to consumers throughout the United

States, including Claimant who is located and operates its Clean Juice franchise in

Texas. At all times material to this Demand, Mr. Kerr formulated, directed,

controlled, had the authority to control, or participated in the acts and practices of

Franchisor. Mr. Kerr has communicated with prospective and existing franchisees,

including Claimant, about the Clean Juice franchise opportunity, entered into

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 agreements, and negotiated contracts with Clean Juice franchisees, including

Claimant. Mr. Kerr is a resident of North Carolina.

7) The American Arbitration Association has jurisdiction over this dispute by

reason of the arbitration provisions contained in Section 25.4 of the Franchise

Agreements entered into between Claimant and Clean Juice Franchisor on January

5, 2017 and December 23, 2017, , annexed hereto as Exhibit “A.” Such arbitration

provision requires that Claimant and Clean Juice Franchisor resolve their disputes

through the American Arbitration Association.

STATEMENT OF CLAIM

8) This action is brought by Claimant, a franchisee of Clean Juice Franchising,

LLC (“Clean Juice Franchisor”) and arises from an illegal, fraudulent, and deceptive

business scheme orchestrated by Clean Juice Franchisor and its affiliated entities

and individuals who control and operate the Clean Juice franchise System (the

“System”).

9) Clean Juice Franchisor, along with its Chief Executive Officer, Chief

Development Officer, and SVP of Corporate Development, Landon Eckles, David

Cuff, and David Kerr, respectively, have leveraged their power to induce Claimant to

purchase and operate a Clean Juice franchise and extracted exorbitant and

unjustified fees while unilaterally imposing material changes to the Clean Juice

supply chain and business model.

10) As a result, Respondents have reaped inflated sales and profits while

causing substantial harm to Claimant, including without limitation, a decline in store

sales, customer dissatisfaction, distribution chain shortfalls, and increased costs.

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 11) Claimant has suffered, and continues to suffer, extensive financial losses

caused by the misrepresentations, deceptive trade practices, and violations of law

committed by Respondents.

12) Clean Juice Franchisor has abused its economic power and control over the

Clean Juice franchise System to compel franchisees, such as Claimant, to purchase

unneeded goods and services, to work with mandated suppliers at exorbitant prices,

and to pay marketing and advertising fees that are misused for purposes other than

what was contractually defined.

13) Clean Juice Franchisor preyed upon ordinary consumers, like Claimant,

who had limited or no prior experience operating a business.

14) Using manipulative marketing tactics that promised the “American Dream”

of owning a rapidly expanding franchise, Clean Juice Franchisor knowingly made

deceptive and misleading statements to Claimant in order to build unwarranted trust

and confidence the Clean Juice brand. Franchisor’s sales pitch included statements

such as: “Welcome to our family”; “Our success is based on your success”; “We are a

Christian organization”; and “Transparency is one of our core values”.

15) In addition, Franchisor’s description of the Clean Juice business

opportunity provided under Item 1 of Franchisor’s Franchise Disclosure Document

(the “FDD”), that was disclosed to Claimant prior to the franchise sale, touted that

its business model was focused on “100% USDA certified organic vegetable and fruit

products” prepared “fresh daily”.1

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 16) However, after Claimant was lured to purchase a Clean Juice franchise,

Clean Juice Franchisor engaged in a bait and switch sales tactic and abandoned the

Clean Juice business concept that was represented to Claimant.

17) The crux of Franchisor’s fraudulent business scheme includes a series of

misrepresentations and omissions presented in Franchisor’s FDD.

18) For example, Franchisor represented in Item 8 of the FDD that Franchisor

would negotiate purchase arrangements with suppliers and that revenues from

franchisee purchases, largely composed of rebates and referral fees, would be

deposited back into the Brand Fund.

19) In 2022, and all years prior, Franchisor represented that its affiliates “do

not derive revenues from required purchases or leases. We have chosen to use 100% of

these rebates/referral fees for Juice Jam, our annual convention, and/or the Brand

Fund”.

20) In all years prior to 2023, Clean Juice Franchisor promoted its franchised

business as follows:

The Franchised Business is a retail store (most of which are located in

shopping centers) that is in the business of selling made-to-order,
blended vegetable and fruit juices, cold pressed juices, juice cleanses,
acai bowls, and smoothies using mostly 100% USDA certified organic
vegetable and fruit products. If we are unable to obtain an organic
material, we notify the consumer of the product’s unavailability and
allow the customer to choose whether or not to use the non-organic
product in their juice or smoothie. The Franchised Business also
sells a cleanse system which consists of freshly made, cold-
pressed vegetable and fruit juices using a hydraulic press to
extract juice from fruits and vegetables. The Franchised Business
also sells organic seasonal products. All menu items are prepared fresh
daily according to the System. The system applied to the Franchise

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 Business permits customers to place orders at the in-store counter. Most
products are made to order while the customer waits. Orders may also
be placed over the phone or through use of electronic devices with a
pickup time specified. For phone-in or electronic orders, products are
made to order and waiting for the Customer when the customer arrives
at the store. A guest may enjoy the product purchase from the
Franchised Business by utilizing the in-store dining area or taking the
product to go.

See Clean Juice’s 2022 FDD, Item 1, p. 2.

21) Notwithstanding, there have been several glaring inconsistencies between

Item 8 disclosures and Franchisor’s financial statements, as well as a complete lack

of transparency as to whether these revenues have been used for the betterment of

the Clean Juice brand and franchise System.2

22) Moreover, in stark contrast to its representations, Clean Juice Franchisor

has circumvented its disclosed business practices of contributing its earnings from

the supply chain back into the Clean Juice brand for the benefit of the Clean Juice

system.

23) It did so by establishing an affiliate, Clean Juice Distribution, LLC (CJD),

through which it accrued revenues totaling $1,172,279 within a short period at the

end of 2022.

24) It is especially telling that in 2023, Clean Juice’s changed its ITEM 8

disclosure to state:

2 Notably, “as of December 31, 2022, and 2021 the Company has advanced to its parent

$4,946,458, $4,538,598, and $2,952,824, net of expenses paid by the parent of $3,915,332, $3,108,731,
and $2,798,974 for the years ended December 31, 2022, 2021 and 2020, respectively.” 2023 FDD, p. 213.
In Item 8, quoted above, Clean Juice Franchisor represents that it generated total revenues of
$2,867,748.43 as of December 31, 2022. This is inconsistent with its profit and loss statement on page
203 of the 2023 FDD showing revenue in excess of $7 million.

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 We and our affiliates have the right to receive rebates or other payments
from distributors, suppliers and other service providers, based (directly
or indirectly) on sales to franchisees and company-owned stores.3 We
received rebates/referral fees from two vendors. For Vendor 1, as of
December 31, 2022, we received $69,292.50 in rebates/referral fees,
which represents 2.40% of our total revenues of $2,867,748.43 as of
December 31, 2022, from required purchases or leases, and other
revenue from franchisee purchases during our previous fiscal year. For
Vendor 2, as of December 31, 2022, we received $34,275.12 in
rebates/referral fees, which represents 0.30% of our total Sysco
purchases of $11,930,892.85 as of December 31, 2022, from required
purchases or leases, and other revenue from franchisee purchases
during our previous fiscal year. We have chosen to use 100% of these
rebates/referral fees for Juice Jam, our annual convention, and/or the
Brand Fund. During our fiscal year ended December 31, 2022, we
did not derive any revenue from required franchisee purchases
or leases. During its fiscal year ended December 31, 2022, our
affiliate, CJD, derived revenues of $1,172,279 from required
franchisee purchases or leases.”

25) Clean Juice Franchisor has created a captive and artificial market in which

franchisees, such as Claimant, are obligated to purchase essential goods and services

at inflated prices through Franchisor’s network of affiliated entities and preferred

vendors, including Clean Juice Distribution LLC.

26) When exercising its discretion to change its business model, Franchisor had

an obligation of good faith and fair dealing. Franchisor did not have carte blanche to

drastically change the essence of the franchise system.

27) Notwithstanding, Franchisor breached its contractual obligations, along

with its obligation of good faith and fair dealing, by imposing a drastic and material

3 Item 8 no longer says “which will be deposited back into the Fund”.

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 change to its business model, by introducing High-Pressure Processing (HPP), also

known as HIPPO, in October 2022.

28) This change enabled the Franchisor to profit directly from Franchisees’

purchases of bottled juices, in violation of Clean Juice’s own FDD Item 8 disclosures.

29) Such material changes to the business model, which Clean Juice has forced

upon its franchisees, created a myriad of issues, including but not limited to, customer

dissatisfaction, distribution chain shortfalls that fail to properly account for customer

supply and demand, increased costs, decline in store sales, decline in profit margins,

all of which have negatively impacted the franchisees’ ability to run a successful and

profitable business. Franchisor’s unilateral decision to transition to a “farm-to-bottle

approach”, which was announced at Juice Jam, resulted in multiple operational and

financial challenges for Claimant, including outdated inventory and increased costs.

30) To that end, at Juice Jam 2022, David Kerr suggested that the new cold

press system would result in increased product profit margins from approximately

40% to over 45%. This statement has proven to be false. Rather, the shift from in-

house cold-pressed juices to bottled products precipitated a series of adverse

outcomes, including declining sales, eroding profit margins, and customer

dissatisfaction.

31) Consistent with Item 7 of the FDD, a significant portion of Claimant’s

initial investment was spent on equipment, including a cold press machine, and other

products that were necessary to offer and sell “made to order products”. Further,

pursuant to these same underlying assumptions, Franchisor issued impressive

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 financial performance representations in Item 19 of the FDD, which reflected an

average profit margin in excess of 60% for the past four years.

32) Franchisor’s unilateral decision to transition from in-house cold pressed

vegetable and fruit juices to pre-packaged juice product constitutes a non-

performance under the terms of the Franchise Agreement.

33) This material change in its business model, which enabled Franchisor to

profit directly from Franchisees’ purchases of bottled juices, is in violation of Clean

Juice Franchisor’s Item 8 disclosures.

34) Franchisor has been enriched at Claimant’s expense, and such actions

constitute a breach of contract, breach of the implied covenant of good faith and fair

dealing, unfair and deceptive trade practices, and fraud.

35) Separately Clean Juice Franchisor has failed to deliver substantial

marketing or advertising support in a manner that aligns with the stipulations

outlined in Section 12 of the Franchise Agreement, and despite the fact that Clean

Juice franchisees have contributed an impressive total of $2,956,282.41 to the Brand

Fund from 2017 through 2022, Franchisor’s administration of the Brand Fund

remains largely opaque and lacks transparency.

36) In short, there is a complete lack of direction and transparency with respect

to its marketing strategy and Franchisor’s use of the franchisees’ advertising

contributions to the Brand Fund.

37) Clean Juice Franchisor claims that the Brand Fund will be used for “local,

regional or national marketing, advertising, sales promotion and promotional

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 materials”; however, the reality is far from this stated objective. Moreover, Clean

Juice Franchisor has been wholly negligent in providing the requisite financial

disclosures concerning its administration of the Brand Fund. Cumulatively, Clean

Juice Franchisor’s course of conduct, in this regard, has revealed a pattern of

misleading disclosures, material omissions, and a flagrant absence of accountability.

38) There has been a complete lack of transparency and accountability by

Franchisor regarding how Franchisor utilizes Brand Fund contributions for the

benefit of the Clean Juice brand and franchise System.

39) In this regard, Clean Juice Franchisor has failed to comply with the Federal

Trade Commission’s Franchise Rule, 16 CFR §436.5, which mandates that

franchisors disclose in the FDD how funds from the Brand Fund are utilized each

year, including a granular breakdown of expenditures by category.

40) For example, the 2017 FDD issued by Clean Juice Franchisor explicitly

stated that “no advertising funds were collected or spent by Franchisor”. In contrast,

the Franchisor’s 2018 FDD noted that “the majority of the funds were collected or

spent by the Franchisor for the benefit of the system-wide brand”; hence failing to

provide the granular breakdown of expenditures by category.

41) In the following years, Franchisor’s disclosures with regard to its

administration of the Brand Fund are nothing short of bewildering, leading

franchisees, such as Claimant, to express concerns over Franchisor’s misallocation of

Brand Fund monies and unauthorized expenditures.

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 42) For example, the category, “Administrative Expenses,” surged from a non-

existent category in 2019 to accounting for 29% of the Brand Fund in 2020, only to

plummet to 5.2% in 2021. Moreover, Clean Juice Franchisor’s 2021 FDD disclosed

that 29% of the Brand Fund in 2020, or $122,423.18, was spent on “Administrative

Expenses” in 2020.

43) This seemingly excessive amount raises questions about Franchisor’s

representation that all sums paid to Fund will not be used to defray its expenses,

except for “reasonable costs and overhead”4.

44) In addition, Clean Juice Franchisor exhibits a complete lack of financial

prudence, that is indicative of potential mismanagement and abuse of franchisee

contributions, with respect to the Brand Fund, as Franchisor has consistently

outspent the contributions made to the Brand Fund. For example, in 2021, Brand

Fund contributions equaled $904,213.27, while expenditures equaled $931,791.03,

leaving a deficit of $27,577.76. In 2022, the Brand Fund collected $1,305,393, and

expenditures reached 1605,616, resulting in a deficit of $300,223.

45) In light of Clean Juice Franchising’s inadequate disclosures, its failure to

provide meaningful advertising support, and the absence of actual media placements

or marketing initiatives, Claimant made a formal request for an accounting of the

4Notably, Section 12.2.2 of the Franchise Agreement provides that “All sums paid to the Fund will be
maintained in an account separate from the other monies of ours and will not be used to defray our
expenses, except for such reasonable costs and overhead, if any, as may be incurred in activities
reasonably related to the administration or direction of the advertising programs and Fund, including,
among other things, costs of personnel for planning and managing Fund activities, creating and
implementing local, regional and national advertising, promotional, and marketing programs”.

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 Brand Fund in July 2023. Clean Juice Franchisor has refused to comply with

Claimant’s demand for an accounting of the Brand Fund.

46) Clean Juice Franchisor improperly charged royalty fees on third-party

delivery fees, such as those from Uber Eats, and Clean Juice Franchisor has

acknowledged the impropriety of doing so. During a Town Hall webinar held on June

15, 2023, Collin Eckles conceded that “Clean Juice should not be making a royalty on

the third-party delivery platform fee.” However, Franchisor has refrained from

rectifying this issue or providing any form of accounting to Clean Juice franchisees,

including Claimant. Contrary to its own core value (#7) of “transparency,” Clean Juice

Franchisor has refused to provide an accounting and has directed the franchisees to

undertake this complex accounting task themselves, thereby shifting the burden and

expense unfairly onto them, as Clean Juice Franchisor claims that it would be

“cumbersome” to correct these overcharges, requiring the full-time attention of 3-4

staff members.

47) Claimant has been damaged by Clean Juice Franchisor’s mandated use of

Clean Juice Accounting Services LLC for bookkeeping and accounting services.

48) Pursuant to Section 8.3.2 of the Franchise Agreement, Clean Juice

Franchisor provides that this requirement allows the System to “maintain uniformity

and consistency in Franchised Business technology, support, accounting, reporting,

and management information services”. Notwithstanding, the performance of Clean

Juice Accounting Services LLC poses a threat to the financial stability and credibility

of Claimant, as Clean Juice Accounting Services LLC improperly classifies

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 transactions by intentionally misclassifying operating expenses as balance sheet

items.

49) This scheme is part of Franchisor’s calculated strategy to manipulate the

financial performance of Clean Juice franchised businesses in order to present

inflated financial performance representations in Item 19 of the FDD. This not only

misleads potential franchisees but constitutes a fraudulent misrepresentation. The

FDD reports an average profit margin in excess of 60% for the past four years, without

any form of disclaimer or indication that these figures would materially differ for new

outlets. In reality, Clean Juice locations that are in the top 5% in sales nationwide

are suffering financial losses.

50) Clean Juice franchisees, such as Claimant, have been shackled to the

System due to deterrents like the threat of liquidated damages, considerable lease

obligations, and SBA loans that come with personal guarantees. Many franchisees

find themselves in a position where they cannot even transfer ownership for zero

dollars, leaving them stuck in a cycle of financial drain. When a franchisee can no

longer bear the financial losses imposed by Clean Juice Franchisor’s manipulation,

they go out of business—only to be threatened by Clean Juice Franchisor with a

lawsuit to enforce franchise agreement provisions that seek liquidated damages with

personal guarantees. In order to stop the recurring losses and shut down the

business, Clean Juice Franchisor demands an unconditional waiver of all legal rights

from the beleaguered franchisee, precluding them from any form of redress, together

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 with non-disclosure and non-disparagement clauses designed to gag franchisees from

sharing their experience with others.

51) Clean Juice’s predatory practices extend to those franchisees fortunate

enough to find a buyer for their failing businesses. It places these owners between a

rock and a hard place: either keep their failing stores open and retain their legal

rights or sell and sign a “Termination Agreement” that eliminates any rights to sue

Clean Juice Franchisor for such misconduct. Further, Clean Juice Franchisor exploits

closed locations to churn unwitting franchisees into these failed spots. These new

entrants acquire defunct stores’ equipment at substantially lower prices, facilitated

by Clean Juice Franchisor, ensuring the company itself suffers no losses while

keeping up a flow of royalties and other fees. Once established, Clean Juice

Franchisor then subjects these franchisees to the same ruinous financial scheme,

thereby perpetuating the cycle of exploitation. Clean Juice Franchisor classifies these

businesses as “transfer” locations that are excluded from its ITEM 19 financial

performance representation calculations as a further means to artificially inflate the

system-wide financial performance it misleadingly represents.

52) Based upon Franchisor’s non-compliance with the terms of the Franchise

Agreement, misleading disclosures, and lack of transparency, Claimant brings this

arbitration demand alleging claims for:

a) Civil Rico (18 U.S.C. § 1962(C)) Fraudulent Scheme To Sell Essential

Goods At Inflated Prices

b) Intentional Misrepresentation (“Fraud In The Inducement”)

c) Promissory Fraud

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 d) Conspiracy to Commit Fraud;

e) Violation of the North Carolina Unfair and Deceptive Trade Practices

Act;

f) Breach of Contract and the Implied Covenant of Good Faith and Fair
Dealing;

g) Unjust Enrichment; and

i) Accounting

Dated: September 23, 2023 Respectfully submitted,

HIRZEL DREYFUSS & DEMPSEY, PLLC

Counsel for Claimant
1200 Anastasia Ave., Suite 240
Coral Gables, Florida 33134
Telephone: (305) 615-1617

By: /s/ Leon F. Hirzel

LEON F. HIRZEL (Fla Bar #85966)
hirzel@hddlawfirm.com
ANDRE L. DREYFUSS (Fla Bar #94868)
dreyfuss@hddlawfirm.com

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