Founder, New Owners in Battle for Control of Pioneer Take-Out

Less than a month after ownership of troubled Pioneer Take-Out Corp. changed hands, a controversy has erupted over control of the Southern California fried-chicken chain.

Pioneer founder H. R. (Rick) Kaufman, who sold the 270-store fried-chicken chain to an investment group, is seeking to regain the company and has locked the new owners out of company headquarters, company officials said Tuesday.

Kaufman said he moved to take control after the new owners failed to make a required payment.

Terrence B. Goggin, head of the investment group that took over the chain, said he withheld a $100,000 payment as part of a dispute over how Kaufman handled rent money from Pioneer franchises. The dispute came to a head Monday when Goggin and other officials were prevented by a security guard from entering the executives offices at Pioneer’s mid-Wilshire office building. The building is owned by Kaufman, according to Goggin.

“He got into the building over New Year’s weekend,” said Goggin, a former California legislator. “When I showed up with my staff Monday morning, we couldn’t get access. He had a security guard denying me access to the third floor. This is silly.”

Goggin, in a letter mailed to franchisees and employees Monday, said Kaufman collected rent checks from franchisees but failed to make payments to store landlords. Kaufman’s default on rent payments was more than $1 million greater than what had been disclosed during negotiations for the sale, Goggin said.

As a result, Goggin said, he had a right to withhold a $100,000 payment to Kaufman.

Kaufman disputes that account and says it is Goggin’s group that has failed to make rent payments to landlords.

Kaufman contends that Goggin’s group failed to meet the terms of the purchase agreements and failed to make payment to vendors and landlords. “A substantial number of stores are in default of their rents,” said Alexander Auerbach, spokesman for Kaufman.

Meanwhile, both sides are fighting for the loyalty of franchisees and employees.

Goggin has ordered corporate employees to report to temporary new office space and instructed franchisees to mail royalty, rent and advertising expense checks to the investor group’s lawyer.

“We have asserted control over the company stores today,” said Goggin, who sent security guards to the 30 company-owned units to instruct store managers to make cash deposits to the company’s regular banking accounts. Store managers would be “discharged” if they disobeyed the order, Goggin said.

Decline in Sales

Goggin said he will go to court Thursday to seek a restraining order to block Kaufman’s actions. He also plans to hold a meeting with Pioneer franchisees tonight.

However, Auerbach said, “none of the employees have reported to the new office. People are paying their bills to the corporate office.”

The sale of the chain last month came after recent declines in sales, intense competition among fast-food chains and turmoil among franchisees.

A group of franchisees that owns 44 stores has sued the company, claiming that it bought the franchises based on fraudulent information.

The group also alleged that Pioneer funds were inappropriately loaned to some of Kaufman’s other businesses. Kaufman denied the charges and Pioneer countersued.

Many of the franchisees said at the time they were pleased to see Kaufman sell the company in December. Franchisees said Goggin had plans to pump $1 million into the chain’s advertising campaign.