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Steak 'n Shake franchisees bought out

In a prior post, we highlighted the legal battle between the franchise owners of the popular fast food chain Steak ‘n Shake, and the owners of two restaurants in the Denver metro area. While the legal wrangling between the parties is far from over, the restaurants were set to open once again in November. (A federal judge had ordered that the stores be closed amidst the legal battle).

The Denver Post recently reported that the franchise bought out the disgruntled owners, which ostensibly will pave the way for litigation to end between the parties. The two locations (one in Centennial and in Sheridan) are still expected to open later this month, but it may not resolve several issues regarding compensation.

It is important for purchase agreements for commercial real estate to be reviewed by competent legal counsel. A skilled attorney can help clients understand the provisions they are signing onto, and point out critical issues that may otherwise be overlooked. For example, the sale of the Steak ‘n Shake locations included ground leases that are linked to the value of the stores.

In the meantime, the issue of damages for the soon-to-be former owners remains unresolved, as they claim that they were fraudulently induced into purchasing the stores, based on the false promise of profitability. They claim that they were intentionally misled because they were provided with projections that did not take into account the additional costs of running a franchise in Colorado.

We will continue to provide details on the case as they become available. 

Source: DenverPost.com, “Steak ‘n Shake buys out franchisee, but court fight still lingers,” October 23, 2013

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