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Lawsuit: Sizzler Restaurants Trying To Oust Major Franchisee

March 2, 1990

CHICAGO (AP) _ One of the nation’s largest Sizzler restaurant franchisees said Thursday the Sizzler company is trying to ruin his business so it can take over his restaurants and control the Chicago market.

Anthony Basile, president of FBN Food Services Inc. and Midwest Restaurant Concepts Inc., is suing Sizzler Restaurants International Inc. in federal court for $15 million in real damages and $10 million in punitive damages, alleging fraud and breach of covenant of good faith.

Mark Weisberger, general counsel for Los Angeles-based Sizzler, declined comment on the lawsuit, citing a company policy.

Basile said his 21 Sizzler steakhouse restaurants in the Chicago area and three in southwestern Michigan make him the third-largest Sizzler franchisee in the country.

He contends that Sizzler’s inconsistent advertising policies contributed to a decline in his stores’ sales and a $3.5 million loss for him and his partners. Basile said Sizzler has offered to buy back his restaurants for about half their asset value of $15 million.

″They just did not want to see us succeed because they wanted the market back,″ Basile said in a telephone interview. ″They want to come back into Chicago because Chicago represents an excellent opportunity for future growth.″

Basile, who said he worked as a national food-industry consultant before buying his first eight Sizzler restaurants from the company in 1987, contended the Chicago market could support 50 to 60 Sizzler stores.

Franchisers sometimes buy back stores from franchisees so they can shrink the contractual territory boundaries of those stores and put more stores into the same market, said Don Boroian, chairman of Francorp, a franchising consulting firm outside Chicago.

Basile said the contract he signed in 1987 required him to contribute money to a local Sizzler advertising cooperative that was controlled by another, larger Sizzler franchisee. The cooperative bought advertising for all Sizzler restaurants in the area.

Basile said that in 1988, the other franchisee was in financial trouble and told him to buy its 12 restaurants or it would withhold advertising dollars.

Basile said he subsequently learned from the company that the other franchisee was not required, as Basile was, to contribute to the advertising fund. So Basile said he agreed to buy out his competitor - giving Basile a monopoly in the Chicago market.

He said he then sought help from Sizzler in reviving the troubled stores, only to be refused.

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