Lawsuits and labor claims: How the operators of the now-shuttered Curry House chain do business

Curry House employees were shocked to learn last week that — with no warning, several said — they had all lost their jobs amid the abrupt closure of the popular Japanese-American restaurant chain.

But perhaps they wouldn’t have been surprised had they known the track record of the Texas investment company that took over the restaurants in June.

Lawsuits filed in recent years by former employees of several eateries owned by Food Management Partners subsidiaries or affiliates center on alleged labor law violations — including the flouting of state and federal regulations designed to protect workers from unexpected mass layoffs.

The cases point to a pattern: Food Management Partners acquires troubled restaurant groups, then quickly shuts many locations down. No notice is given to customers or employees, with some learning of their fate when they arrive at work to find the front door locked. Food industry experts and attorneys who’ve dealt with Food Management Partners told The Times that the company’s business model appears to be focused on extracting value from struggling restaurants — not on their long-term viability.

“I don’t think they are in the business of operating restaurants — I think they are in the business of trying to make money, but doing so in ways that are probably less than scrupulous and doing so in ways that take advantage of employees and loopholes,” said lawyer Jeff Dingwall, who unsuccessfully tried a case against Food Management Partners over allegedly improper layoffs in 2015. “They do it in ways that are very calculated. They aren’t open with the employees when they come and take over.”

Food Management Partners declined to make executives available for interviews but provided The Times with a two-page statement from Chief Executive Larry F. Harris that described the company as a longtime restaurant owner and franchisee that has also acted as a “managing operator” brought in by others “to help salvage troubled brands.” He said that the company does not enter a business relationship unless it believes it “can accomplish the primary goals of saving jobs and returning the brand to health.”

“In some instances, the situations are more dire than expected, and the damage too severe for an effective turnaround,” Harris said. “These severe cases call for immediate action to preserve any tangible value and save jobs that are important for the communities in which we operate.”

Many industries — print media and mall retail among them — have seen the effects of so-called vulture investors that seek out distressed assets and dramatically cut costs or liquidate.

In the restaurant space, Barington Capital Group has built a reputation as an activist investor, acquiring stakes in the parent companies of Red Lobster and Outback Steakhouse and pushing for management shakeups and spinoffs. But its efforts have involved publicly traded firms, ensuring a measure of regulatory oversight.

According to legal documents, in addition to nine Curry House locations in California, Food Management Partners has, over the last five years, closed more than 200 restaurants shortly after acquiring them:

In 2015, the company closed about 75 locations of Carrows Restaurants and Coco’s Bakery Restaurant the day after it bought their parent. A year later, the company shuttered 166 related eateries, including outposts of HomeTown Buffet and Ryan’s, about six months after purchase.

Industry experts said that Food Management Partners might see more value in a distressed chain’s real estate, cooking equipment, leases and intellectual property than in its restaurant operations, a notoriously low-margin business.

Alex Susskind, professor of food and beverage management at Cornell University, was unfamiliar with Food Management Partners, but noted he’d heard of other firms that appeared to use similar business models. These companies typically “operate [restaurants] as long as they need to in order to extract all of the value and then they move on.”

“Their intention is almost never to let the chain operate or to resell the chain — it is to basically take it apart,” he said.

Longtime restaurant industry executive Frank Guidara said that chains such as Coco’s and HomeTown Buffet have struggled for some time, making them attractive buyout targets.

“There are a lot of concepts that are virtually dead — they’ve been around for a long time and they’ve had a strong run, [but] it’s on life support,” he said. “Finally, it gets to the point where you have some — call them marauders — who see it and figure out how to make some money out of it. The landlord gets hurt, the employees get hurt, and the customers, it’s part of their life, they get hurt.”

With Curry House, the company’s actions have struck a nerve. As word of the Feb. 24 closure rippled across social media, fans lamented the loss of a chain that was founded in Little Tokyo in 1983 and served inexpensive Western-influenced Japanese food.

And the unexpected job losses have left workers with few options. Tyus Hotta, 23, a former server at the company’s Torrance location, found out he’d been laid off the morning after working a Sunday evening shift.

“Nobody had any warning,” said Hotta, who is studying journalism at El Camino College. “I have fears and anxieties, I have credit card bills — I have to cut back on a lot. I have been applying to [jobs] and looking around, but without a car, even getting around hurts my funds since I don’t have a paycheck.”

Harris, the CEO, blamed Curry House’s closure on an “unimaginable employment situation” discovered after the purchase of the chain from House Foods America. He said that the “workforce [was] comprised of nearly 75% undocumented workers,” and the restaurants were shuttered for several weeks last year so that “legal workers could be hired and trained.”

“Guests went elsewhere, and the brand lost its momentum, making it impossible for the restaurants to remain open,” he said.

In the days since the closure, Hotta and other former employees have questioned whether Food Management Partners violated labor laws. In California, under the state’s Worker Adjustment and Retraining Notification Act, a business with 75 or more employees must give 60 days’ notice to workers and file paperwork with the state if it is going to lay off 50 or more workers at a single establishment within a 30-day period. A federal law of the same name offers similar protections nationwide.

It’s not clear how many workers lost their jobs and the California Employment Development Department has no record of a layoff notice filed under the state’s WARN Act, according to a spokesman.

‘A sophisticated company’

Food Management Partners’ executives rarely give interviews, and the company generally only appears in newspaper stories about its acquisitions, closures or lawsuits.

The Hollywood Park, Texas, company’s Facebook page says that its portfolio includes about 500 restaurants generating more than $1 billion in annual sales.

And an archived version of the company’s website from 2019 lists the company’s divisions, including 35 HomeTown Buffet eateries in four states, 20 Old Country Buffet restaurants in 10 states and 18 Furr’s Fresh Buffet locations in four states.

In recent years — as the company has bought and closed restaurants — it’s been hit with several labor-related lawsuits seeking class-action status, most of which it has successfully fended off.

Following the closure of 166 eateries that Food Management Partners acquired via its purchase of Ovation Brands, four employees at an Old Country Buffet in Chicago brought a lawsuit over the alleged violation of the federal WARN Act. Similar to the California law, it requires that employees at companies of 100 people or more be given 60 days’ notice before a layoff involving at least 50 jobs at a single site.

The 2016 complaint alleged the restaurant had more than 50 employees who lost their jobs “without any prior notice.” Food Management Partners denied the claims, and the case was later dismissed.

After Food Management Partners shuttered about 75 of the 149 Carrows and Coco’s it acquired when it bought Catalina Restaurant Group, ex-restaurant workers filed three separate lawsuits over the company’s alleged violation of the state and federal WARN acts. They were ultimately consolidated into one case.

Food Management Partners argued that the eateries were operated separately and none had more than 41 employees. The company also said that its turnaround plan dictated it “close half the restaurants,” and that the operation was being “restructured for a sale,” which later occurred.

In the end, a judge ruled in part that the number of employees in each restaurant could not be aggregated, and therefore the company did not violate the federal or state WARN acts.

In a related matter, an employee at Catalina’s corporate headquarters in Carlsbad sued Food Management Partners in 2015 for allegedly laying off more than 50 people there without proper notice. Dingwall, one of the attorneys representing the plaintiff, said that he repeatedly tried to depose executives, but they “refused to show up.”

Food Management Partners contended it only laid off 47 people in the corporate office — below the WARN act threshold — and a federal judge sided with the company.

Dingwall’s co-counsel in the matter, Trang Tran, called Food Management Partners a “very sophisticated company.”

“They know the status of these assets before they even purchase them,” he said.

Guidara, the industry executive, has experience turning around restaurant companies — he resuscitated the Au Bon Pain chain in the early 2000s — and said that Food Management Partners’ move to close half of its Coco’s and Carrows restaurants before selling the brand seemed like an acceptable strategy. But owners should be transparent, he said.

“If they are going to buy a company, they have to be square with employees,” Guidara said. If not, “eventually their reputation catches up with them.”

For its part, Food Management Partners considers its ownership of Catalina Restaurant Group a success story. Harris said the company acquired the Carrows and Coco’s parent “while it was dealing with severe financial and operational struggles.” Although restaurants were closed and people were put out of work, Harris said that “countless other jobs were saved” and the company was “positioned for the growth it is experiencing today.”

What happened at Curry House

In the aftermath of the controversial Curry House closure, Food Management Partners has tried to distance itself from the chain.

Last week, the company’s spokeswoman sent The Times an email saying it “does not, and has never, owned or operated” Curry House, noting that it did, however, provide “back-office functions like accounting and IT support.” The same day, a company called CH Acquisitions issued a news release saying it owned the chain.

But corporate filings and online records databases show that CH Acquisitions has the same address, registered agent and executives as Food Management Partners. And five former Curry House employees also said they were told by their bosses that Food Management Partners owned Curry House.

During its three decades in operation, the chain developed a following for its affordable and filling set meals, which included Japanese curry rice or spaghetti with creamy corn potage or a green salad drizzled with ginger-miso dressing. Many locations evolved into informal gathering places for fans of Japanese cars, comics and culture.

Admirers of the chain include comedian Jenny Yang and streetwear designer Bobby Kim, both of whom have spoken publicly about their affection for the brand. Porridge + Puffs chef Minh Phan recently featured a dish titled “Curry House Homage” at her Historic Filipinotown restaurant.

But interviews with former workers at the chain suggest things had turned bleak.

Hotta and two other former Curry House workers in Torrance described a precarious work environment in the months before the closure, explaining that items were permanently removed from the menu, and the eatery was sometimes understaffed and under-supplied.

“We would have so many moments where we would run out of materials and one of us would have to make a run to the Smart & Final across the street to get packaging or utensils,” said Theadore John Balaschak, 22, who worked as a busser at the Torrance location.

But some ex-employees said Food Management Partners’ assertion about undocumented workers rang true.

“During the month of July, Torrance was the only store that really stayed open,” said Richard Chong, who was a server at the Torrance location. “My store manager trained staff, so they could reopen many of the other closed locations.”

However, Chong said that the chain lost “key staff at many locations,” and those workers were replaced by new under-trained ones.

“Many customers were turned off by the inconsistent quality ... and service,” he said.

Theadore John Balaschak, left, a former server; Tam Hoang; former head chef; and Richard Chong, a former server and shift leader. All three worked at the Curry House restaurant in Torrance before all locations of the popular chain were abruptly closed in late February.

(Irfan Khan / Los Angeles Times)

If the Curry House restaurants were destined to be shut down, one thing is almost assured: There were financial benefits to a sudden closure.

“If they were up front about it and ... gave everyone notice and did all those things, that would be great, but that would probably cost them more and prevent them from doing the stuff they do,” Susskind said. “They are doing this for a very specific reason: to fly under the radar.”

Harris, though, cautioned that while it is human nature to disparage unpopular decisions, Food Management Partners has “saved many jobs and restored financial viability to troubled companies.”

But that’s not true in every case, as Curry House workers learned.

Times researcher Scott Wilson contributed to this report.