Texas franchisee’s lawsuit cites scheme to gain inflated profits from company-owned business model

Lily Sarafan, founder and executive chair of the private equity-funded home care company TheKey, is facing a lawsuit filed in a Texas court seeking millions in damages based on an alleged scheme to acquire and rebrand a captive network of owner-operated home care agency businesses at below-market prices.

According to the lawsuit, the Silicon Valley entrepreneur leveraged her relationship with Stanford University to lure individuals to invest significant time and money. The investment was marketed as a supposed long-term opportunity to enjoy the benefits of owning and operating a small business under an internationally recognized, premium-branded company, Home Care Assistance (HCA.)

The lawsuit alleges that Ms. Sarafan—now chair of Stanford’s board of trustees—secretly built a competing corporate model to replace the HCA brand and franchise system, enriching herself and other equity holders. In 2022, she completed the scheme by rebranding HCA as TheKey, while blocking franchisees from investing in a protectable brand.

The lawsuit, filed in Dallas County by HCA franchisee Jared Caplan, states:

Sarafan’s business strategy was to induce investors into opening franchise offices that paid a 5% royalty to her company, then once the franchises were operational, buying out the franchisees’ businesses for below market prices to create a network of corporate-owned offices yielding 20–25% profit margins, without facing the start-up risks associated with each office.

“Ms. Sarafan has engaged in a bait-and-switch business model,” says Mr. Caplan’s attorney Kodie Bennion of Johnston Clem Gifford in Dallas. “She has gone behind the backs of loyal HCA franchisees to create a corporately owned and controlled business for her personal financial gain and that of her equity partners. Mr. Caplan is left with an isolated franchise that is being choked by the corporate offices obligated to support it.”

The case is Caplan v. Sarafan, No. DC-25-11447, filed in the 192^nd Judicial District Court in Dallas County.

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The lawsuit alleges that Ms. Sarafan—now chair of Stanford’s board of trustees—secretly built a competing corporate model to replace the HCA brand and franchise system, enriching herself and other equity holders.