O’Charley’s Franchisee Wants Out Of Its Deal

Tennessean:

The first franchisee of O’Charley’s Inc. is suing the Nashville-based restaurant company, saying company executives misrepresented sales figures to get the franchisee to sign a seven-year, 15-unit development agreement.

Grand Rapids, Mich.-based Meritage Hospitality Group Inc. signed O’Charley’s first franchise agreement in December 2003 as part of new plans to develop the restaurant chain through franchising.Meritage, which also is a Wendy’s franchisee, operates the only five O’Charley’s franchised locations. All of them are in Michigan.

O’Charley’s Inc. has about 225 company-owned O’Char-
ley’s restaurants in the country. It has three franchisees; the other two haven’t yet opened restaurants.

“We are going to continue to have discussions with (Meritage),” O’Charley’s spokeswoman Melissa Thompson said. “If those discussions don’t lead to a positive outcome for both parties, and it goes to litigation, we’ll defend it from there.”

She said she hadn’t seen the lawsuit and wouldn’t be able to comment on it.

Meritage filed its lawsuit in mid-May in the U.S. District Court of western Michigan, saying it wants out of its franchise deal.

The lawsuit claims O’Charley’s was “woefully unprepared to franchise,” and gave Meritage four renditions of a preferred building model during the 15-month period when Meritage was opening five restaurants.

Personnel changes at O’Charley’s led to confusing and contradictory recommendations, the franchisee claimed in a lawsuit.