Nine owners of Rapid Realty franchises want to tear up their agreements with the company, claiming founder Anthony Lolli is a con artist pushing a deceptive business model on people lured in by the firm’s rags-to-riches promises.
Rapid, which Lolli launched in 1998, is selling franchises despite the fact that his company’s registration with the New York State Attorney General’s office expired nearly two years ago, according to a lawsuit nine franchisees plan to file with AG Eric Schneiderman’s office.
The business owners also claim that Lolli recently launched a program that provides franchisees high-interest loans to finance the pricey franchise agreements. The lender, according to the franchisees, is from out-of-state and is not properly registered with New York regulators as required by law. The owners also claim they never see a dime of the borrowed money, which they allege Lolli pockets and uses to promote his mogul lifestyle.
“Anthony Lolli and his machine, which is a small cohort of guys, all preyed on a very vulnerable population of people who are in impoverished urban neighborhoods who want to better themselves,” attorney Kendrick Harris, who is representing the franchisees, told The Real Deal.
The plaintiffs are seeking class-action status with the lawsuit.
A spokesperson for the AG’s office, which regulates the sale of franchises in the state, confirmed that Rapid Realty’s registration expired in April 2016. Lolli’s company is in the process of obtaining a new registration, the AG’s office said. But in the meantime, it’s barred from selling the businesses.
A representative for Rapid Realty sent a statement to TRD acknowledging its registration had lapsed and that certain franchises did not receive disclosure documents, but said those who bought franchises during that time were given the opportunity to walk away “without any loss from the operation of their Rapid Realty business.”
“A cornerstone in Rapid Realty’s success has been attracting qualified and talented franchisees and then providing them with extensive training and support,” the statement read. “Of course, with any franchise system, there are always franchisees who become dissatisfied for one reason or another.”
Rapid also acknowledged that it helped some franchisees obtain financing, but “vehemently denies” allegations that it forced them to go to the lender.
“Those franchisees who complain about their financing arrangement now do so simply because they no longer like the terms of the loan,” the company said in its statement. “It is critical to note that while reaping the benefits of operating Rapid Realty businesses, these franchisees have not made payments on their loans nor have they made royalty payments to Rapid Realty.”
Rapid sells franchises for $50,000, and says the total investment could cost roughly $100,000 to more than $300,000, according to an offer document Harris provided to TRD. That compares to the $35,000 that brokerages Keller Williams and Engel & Völkers North America charge. Berkshire Hathaway HomeServices, Century 21 Real Estate and Coldwell Banker Real Estate, meanwhile, each charge $25,000 for the first office and $10,000 for each additional branch. Flat Rate Realty charges $1,995.
Franchisee Lou Briones Jr. said he bought two franchises from Rapid: one in Astoria that he would build out himself from the ground up, and another in Bedford-Stuyvesant that had already been established by a former owner.
But he said he never received franchise disclosure documents for the Bed-Stuy office that Rapid is required to get approved by the AG’s office and provide to franchisees, and then decided to scuttle plans for the Astoria location.
“Unfortunately, we decided not to move forward with that because of the concerns we [had] with Rapid after a few months,” he said.
Harris said that in addition to his nine clients, he believes there are at least six more franchisees who could fit into the class, for a total of 15. Their lawsuit seeks to rescind the franchise and loan agreements and win interest and attorneys fees.
Lolli, known for such publicity stunts as offering his brokers a 15 percent commission hike if they tattoo the firm’s logo on their bodies, launched Rapid Realty in 1998 at the age of 21 out of a single office in Park Slope. He started the franchise model in 2008 and launched a sales division in 2015.
The company now has 800 agents with offices in five states, and Lolli claims to be worth $75 million. This also isn’t his firm’s first run-in with regulators.
The AG’s office in 2016 fined Rapid Realty’s Bed-Stuy office, owned by Raymond “Ricco” Ruiz, for refusing to help New Yorkers on housing vouchers find apartments.