A large franchisee in Chicago has sued Sizzler Restaurants International for $25 million, charging that the Los Angeles-based company defrauded the franchisee and tried to force it out of business in an attempt to take over the market at a low price.
A spokesman for Sizzler Restaurants International said the company is studying the suit but has a policy of refusing to comment on pending litigation.
FBN Food Services and Midwest Restaurant Concepts, sister companies that operate 21 of 24 Sizzler restaurants in Chicago, said Sizzler required FBN to agree to certain advertising expenditures when it bought its first eight Sizzlers in 1987. But Sizzler did not require the same of another Chicago franchisee, according to the lawsuit filed Feb. 21 in federal court in Chicago.
Because the other franchisee failed to contribute to an advertising fund, business at all Chicago Sizzlers suffered, the suit contended. The other franchisee pressured FBN to buy its 12 restaurants, but Sizzler Restaurants International would not assist with financing or buy the restaurants itself, the suit stated.
FBN's affiliate, Midwest Restaurant Concepts, was forced to buy the 12 restaurants in May, 1989, to protect the investment of the two companies' common owners, the suit said.
Sizzler refused to help its franchisee in a variety of ways, the suit charged, "so that Sizzler could then acquire those restaurants by default or at a reduced price and so that Sizzler could otherwise gain control of the market for Sizzler restaurants in the Chicago metropolitan area."
For example, the suit stated, Sizzler tried to hire away a key employee, arranged a meat supplier that sold poor-quality products and would not allow the franchisee to make "reasonable changes and modifications in products, menus and services in their restaurants" that other franchisees were able to make.
Anthony Basile, president of FBN and Midwest, said the restaurants have lost more than $3 million during the past two years. In addition to $15 million in actual damages, the suit seeks $10 million in punitive damages.