Franchisees Say Sizzler Abandoned Them

Date AddedJune 22, 2009 10:26:35 PM

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LOS ANGELES (CN) - Sizzler franchisees claim that corporate headquarters unfairly abandoned what's left of its New York market since the restaurant chain filed for bankruptcy in 1996, and allowed its New York stores to deteriorate, "significantly damaging the brand image." In a two-count federal contract suit, New York and New Jersey franchise owners claim that Sizzler USA has not honored the terms of franchise agreements: that it failed to provide training and assistance to its East Coast franchises, and it has "completely fail(ed) to provide any operational support." The franchisees claim that headquarters failed to push for consistency in all Sizzler restaurants' décor, to adhere to the standards of authorized products as demanded in the franchise agreements, and that it allowed "its franchisees to purchase whatever product they wish ... resulting in a lack of continuity of product and ... dilution of the Sizzler brand." Nor has Sizzler USA enforced its "regional purchase and distribution program" with its distributor, Reinhart Foodservice, which affected "competitive pricing," preventing some franchisees to participate in Sizzler's seasonal promotions, according to the complaint. As a result, the franchisees say, "the New York market's food cost is consistently 3-5% higher than the West Coast's food costs due to the lack of purchasing power." The franchisees also complain that Sizzler USA "eliminated the New York advertising co-op, leaving plaintiffs to fend for themselves with respect to advertising," even though they contribute to Sizzler's national advertising fund, which they claim is used on the California market. The initial franchise fee is $35,000 according to Sizzler's Web site, according to the complaint. Sizzler USA also extracts 4 percent of gross sales in royalties from its franchisees. The franchisees claim that in "an attempt to avoid liability ... Sizzler has recently engaged in a campaign to manufacture unsubstantiated and baseless defaults against the plaintiffs, threatening to terminate their franchise agreements for spurious reasons." Plaintiffs include Carnegie Management Group, N.Y. Sizzler Restaurant Corp., Waroge Met Ltd., Sunrise Quality Food, Hillside Restaurant Corp., and Harpaul Restaurant Corp. They are represented by Robert Einhorn with Zarco Einhorn Salkowski in Miami, and by Nicole Whyte with Bremer Whyte Brown in Newport Beach, Calif. They plaintiffs seek actual, compensatory and consequential damages for breach of the franchise agreements and California franchise laws. Sizzler closed 161 outlets between 1996 and 2001; it still has 281 restaurants worldwide and lists a total of six stores in its directory for New York and New Jersey.

By BRIDGET FREELAND

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