Steak 'N Shake Franchisee Claims Chain Scuttled Its Efforts To Sell

Steak 'n Shake (NYSE:BH), which is fighting in court with a Denver-area franchisee that the burger chain accuses of overcharging customers, now faces a countersuit claiming the chain interfered with the franchisees' efforts to sell its restaurants.

A federal judge last week ordered the franchisees—Kathryn, Larry and Christopher Baerns—to stop operating the two Denver-area restaurants as Steak 'n Shakes. He also ordered the Baernses to remove any identifiers of the chain from the properties. U.S District Judge Raymond Moore did allow the Baernses to run a competing restaurant, the Denver Post reported on Tuesday.

Steak 'n Shake filed a lawsuit in July to strip the Baernses of their franchises because they allegedly raised prices at their stores above the chain's standard prices, which is forbidden by the franchise agreement. The Baernses say the chain misled them about how profitable the restaurants would be, and they had to raise prices due to higher costs in the Denver area. The chain has no other Colorado franchises and its stores are mostly in the midwest.

In the countersuit filed by the Baerns family on Monday (Sept. 9), they claim they couldn't sell the franchises because Steak 'n Shake Enterprises told prospective buyers it would negate any deal to assume the franchises, and that the corporation planned to run the Colorado locations itself. Then, in a reversal this month, the chain allegedly said it wouldn't run the stores because they were too costly to operate, which the Baernses say caused would-be buyers to back out.

The countersuit also asks the judge to stop Steak 'n Shake from granting potentially profitable development rights in the Denver market, which the Baernses controlled before the judge's order, and asks for treble damages because they say the chain violated Colorado's Consumer Protection Act.

For more:

- See this Denver Post story

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