Bagel company owner convicted of franchise scam


PHILADELPHIA, Pa. (WHTM) – The owner of New York Bagel was sentenced to 3 years and six months in prison, followed by three years of supervised release, and ordered to pay $2,100,450 in restitution for his scheme to defraud the potential franchises.

According to a press release, in February 2022, Joseph Smith, 57, of Fishkill, New York, owner of New York Bagel which operated in Pennsylvania and other states, pleaded guilty to charges of conspiracy to commit electronic and tax fraud. escape related to this scheme.


Smith and another individual named Dennis Mason were charged separately with making false statements to people interested in buying a New York Bagel franchise. These misrepresentations included a guarantee that New York Bagel could obtain financing for the potential franchisee, the actual costs of opening a franchise, the number of franchises already open or opening, and the profitability of existing franchises.

Both Mason and Smith charged potential franchisees fees ranging from $7,500 to $44,500 to obtain the right to open stores. When some potential franchisees learned of the misrepresentations and demanded reimbursement, Smith refused to reimburse those fees.

“People looking to own and operate business franchises are looking for opportunity and financial stability for themselves and their families; they deserve honesty and candor in their business dealings so they can make informed decisions,” U.S. Attorney Romero said. “Mr. Smith used his position to defraud people seeking legitimate business opportunities out of millions of dollars, and for this crime he will now spend years in prison.

The case was investigated by the FBI and the IRS Criminal Investigation Department investigated the matter.


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