Karcher, Wendy’s Settle Sites Suit
Carl Karcher Enterprises has settled a year-old lawsuit filed by Wendy’s International over the Anaheim-based firm’s purchase of 10 Wendy’s locations in Arizona, the companies said Friday.
Wendy’s, a fast-food chain based in Dublin, Ohio, last June sued Karcher Enterprises and a Wendy’s franchisee, Ronald Brown, after Brown sold his Wendy’s locations to Karcher in March, 1989. The locations are in Tucson, Flagstaff and Prescott.
Wendy’s accused Karcher Enterprises of unlawfully interfering with Wendy’s contractual relationships by buying the restaurants without Wendy’s approval. Wendy’s suit sought $79 million in damages from Karcher Enterprises and $40 million from Brown.
Karcher Enterprises contended the transaction was legal because it purchased the restaurants only after Wendy’s turned down an opportunity to buy them from Brown.
As part of the settlement, Wendy’s agreed not to contest the sale and Karcher Enterprises agreed not to purchase other Wendy’s franchises without prior written consent of the parent company.
Other terms of the settlement were not disclosed.
“The resolution did not affect us materially from a financial or operational standpoint,” said Loren Pannier, chief financial officer of Karcher Enterprises. “After all the commotion, we’re back at square one.”
With the suit settled, Karcher Enterprises is now free to resell the former Wendy’s locations as part of its effort to scale down its Arizona operations. The company has said its Carl’s Jr. restaurants in Arizona are losing $5 million a year. In May, the company announced plans to close or sell all 40 of its Arizona units.
In the fourth fiscal quarter, the company lost $8.9 million, largely because of problems at the Arizona operations. For its fiscal first quarter ended May 21, the company reported net income of $5.3 million, down 7.4% from a year earlier.
Karcher Enterprises earlier this month agreed to sell 19 Carl’s Jr. restaurants in Arizona to a franchisee in Phoenix and closed nine other locations. Pannier said the company plans to sell the 10 converted Wendy’s units and two other Carl’s Jr. restaurants to an undisclosed franchisee.
