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L.A. Franchisee Sues Shakey's Chain

March 30, 2001|Melinda Fulmer

Sterling Foods Inc., a Los Angeles-based franchisee of the Shakey's pizza chain, filed suit against Shakey's Inc. in Los Angeles County Superior Court, alleging breach of contract and accounting fraud and seeking more than $5 million in damages. Sterling, which owns five Shakey's pizza parlors in the Southland, claims the chain, now based in Singapore, has refused to renew its franchise contract as specified in its agreement and says it won't provide an accounting of how franchisee funds have been used, including how much of the dealer funds were spent on advertising. Sterling is seeking an order allowing it to leave the system as well as damages. Shakey's reached a peak of about 500 restaurants in the 1970s, but has since dwindled to just 73 in the United States, according to the complaint. The president of the Shakey's Franchised Dealers Assn. claims franchisees "have been abandoned" by Shakey's management. He expects other franchisees to file separate lawsuits. "In recent years, Shakey's corporate owner in Singapore has failed to provide even minimal franchise services to Shakey's dealers, resulting in large business losses," said Mick Clark, Sterling president. Shakey's officials in Singapore could not be reached immediately for comment.

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