Two former Maid-Rite owners are seeking more than $500,000 from the franchise for allegedly misrepresenting the viability of the chain restaurant.
Robert and Kimley Svendsen brought the suit Dec. 19 in Chicago’s federal court against Maid-Rite Corp. and Bradley and Tania Burt through their attorney Mark Belongia.
Maid-Rite is a fast food restaurant chain based out of Iowa. It specializes in “loose meat” sandwiches made out of ground beef or pulled pork.
The Svendsens, the suit states, opened the only Maid-Rite in the Chicagoland area in September 2012.
They claim it closed six months later because, unlike what was told to them by Maid-Rite officials, the restaurant was nowhere near profitable. They assert they are now deep in debt and paying rent on an empty building.
In their suit, the Svendsens allege that Maid-Rite President Bradley Burt and Maid-Rite Executive Vice President Tania Burt mislead them during initial discussions about opening the restaurant.
The Svendsens claim they would not have taken out the $375,000 loan to open the Maid-Rite franchise in Chicago if the Burts had presented accurate information about the viability the restaurant.
“From its opening, the restaurant struggled,” they assert in the suit. “In dramatic contrast to the projections provided by the Burts and Maid-Rite, the restaurant did not even remain open for more than six months and ... had revenues of $118,704, expenses of $604,668 and a loss of $485,964.”
In addition, the Svendsens point to two specific points of alleged fraud in their complaint.
The first centers on the Franchise Disclosure Document provided to them prior to opening the restaurant.
When purchasing a franchise, the buyers must be provided with a Franchise Disclosure Document, or FDD, under a Federal Trade Commission rule. The FDD, the suit states, must include, among other things, financial performance information like the average income of franchisees, geographic differences in franchisees earnings and other data.
The Svendsens claim the FDD they received “failed to disclose the accurate amount of closures in the prior year; failed to properly account for Maid-Rite’s net losses, which had ballooned; failed to indicate that per-customer sales were declining; failed to accurately reflect that franchisees who had left the system had done so for reasons other than those stated in the FDD; and that there were no reasonable basis for the financial projections that Plaintiffs made.”
The FDD provided to the Svendsens was also allegedly out of date, creating a false picture of the viability of a Maid-Rite restaurant.
The second point raised in the complaint involves conversations between the Burts and Svendsens.
The Burts allegedly claimed the restaurant would be a “real wealth creator” and would help the Svendsens “have a nice life,” both claims turned out to be false, according to the suit.
Additionally, the Svendsens contend the Burts told them there would be a Maid-Rite University that would provide “comprehensive training” for the restaurant and its employees, but that the university turned out to be nonexistent.
The complaint includes five counts alleging fraud, negligent misrepresentation, breach of oral contract, wrongful termination of a contract and violation of the Illinois Franchise Act.
The Svendsens are seeking $500,000 plus interest, costs and attorneys’ fees from Maid-Rite and the Burts. They are also asking that the FDD be rescinded.