Movenpick franchisees file 2nd suit against parent

North American franchisees of Movenpick have filed a second lawsuit against the Swiss restaurant and hotel giant, seeking close to US$700-million in damages for alleged breaches of contract and fiduciary duty.

The Financial Post
November 17, 2001

Movenpick franchisees file 2nd suit against parent
US$700-million sought
Hollie Shaw

North American franchisees of Movenpick have filed a second lawsuit against the Swiss restaurant and hotel giant, seeking close to US$700-million in damages for alleged breaches of contract and fiduciary duty.

Toronto-based Richtree Inc. and its U.S. subsidiary, Richtree U.S. Inc., allege master franchisor, Movenpick unit Movel Restaurant Holding AG, neglected the North American units and prevented
Richtree from expanding in the United States.

In a lawsuit filed last week in New York state's Supreme Court, Richtree asks for US$173.3-million for breach of contract and for punitive damages at least three times that amount. Also named in the suit is Baron August von Finck, whose family is principal shareholder of Movenpick Holding and Movel Restaurant Holding AG.

Richtree vice-president Colin West says the Swiss company's lack of support prevented the Toronto company from closing an exclusive deal for its Marché restaurants with Universal Studios in 1998, and quashed discussions with Federated Department Stores to put cafés in its Macy's department store chain.

Richtree, which operates 15 restaurants in Toronto, Montreal, Ottawa and Boston and 18 Marché kiosks inside Loblaws supermarkets, says Movenpick has always refused to supply the paperwork which would allow Richtree to enter into agreements to attain extra financing, or secure business deals with U.S. developers, suppliers and landlords.

In fiscal 1999, Richtree took a writedown of $9.9-million after it abandoned plans to open Marché restaurants in New York and San Diego, restaurants that Mr. West said Movenpick initially intended to help finance. Further attempts to expand into the U.S. this year were similarly thwarted.

"If you licence and franchise somebody, you would expect that they be doing everything and anything to help you," Mr. West said yesterday. He alleged Movenpick acted to stop Richtree succeeding.

Executives believe that Movenpick, which is used more widely as a brand for consumer products in Europe than a restaurateur, is trying to take back the rights Richtree acquired in 1996.

"We would like punitive damages for all the years of suffering that this company's employees, management and shareholders have endured," Mr. West said.

A year ago, Richtree filed a suit in Ontario Superior Court of Justice, seeking to have all existing franchise agreements with Movenpick amended to licence agreements, and to recoup $1.8-million in franchise fee payments.

That action is still pending.

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