Movenpick operator in turmoil

Mr. West said he was fired after raising concerns with directors about the Reicherts' plan to buy some of the company's restaurants. Richtree is considering selling some restaurants to franchisees who would operate them under a franchise agreement with the firm. The Reicherts "have been involved in that process from the point of view of being interested parties," said Mr. West, who has been with the firm for nine years. "Their positions as senior managers created some difficulty in that relationship."

The Globe and Mail
October 30, 2003

Movenpick operator in turmoil
Richtree caught in bizarre set of executive changes
Paul Waldie

The company that runs the Movenpick restaurant chain is in turmoil after a bizarre series of executive changes this week that included firing and rehiring the chief financial officer and then suspending the chief executive officer and his wife, a vice-president.

"It has been a stressful week in many respects," said Colin West, who is now running the company, Toronto-based Richtree Inc.

It operates 13 restaurants in Canada and the United States, as well as kiosks in Loblaw stores, under a licencing agreement with Zurich-based Movenpick Holdings.

The company announced yesterday that Mr. West's employment as CFO had been "unilaterally terminated" on Monday by Hans-Joerg Reichert, Richtree's president, CEO, founder and controlling shareholder.

In the same announcement, the board said it had rehired Mr. West and suspended Mr. Reichert and his wife, Marianne, an executive vice-president. They have been suspended with pay pending a review of their activities by the board. They remain Richtree directors.

Mr. West said he was fired after raising concerns with directors about the Reicherts' plan to buy some of the company's restaurants. Richtree is considering selling some restaurants to franchisees who would operate them under a franchise agreement with the firm.

The Reicherts "have been involved in that process from the point of view of being interested parties," said Mr. West, who has been with the firm for nine years. "Their positions as senior managers created some difficulty in that relationship."

Mr. Reichert said he's shocked by the suspension and is considering legal action.

"It is a very shocking thing to come to your office and it's closed and you don't know why," he said from his home. "The restaurants are our life for 20 years."

He declined to discuss what happened but said the issues are more complicated than what the company has said.

Robert Francis, chairman of Richtree's board, said the directors didn't know Mr. West had been fired on Monday. "Obviously there is a difference of opinion at the board level as to what transpired there and I'm not really clear myself. So we are taking a look at that."

He said an independent committee is studying the franchising issue. The Reicherts "have a submission and we are obviously going to take a serious look at that and we really want to be able to create an arm's-length relationship."

Dr. Francis praised the Reicherts but did not say how long the suspensions would last or whether Mr. Reichert would return as CEO.

Mr. West said he is trying to focus on operations and not the return of the Reicherts. When asked if he is still friendly with the couple, he replied: "I would like to think so. I don't end those relationships very easily in my way of doing things. But at this moment I have to focus on my job and my responsibilities here and not be too concerned about those things."

Mr. Reichert, who is from Germany, worked at Movenpick in Europe before coming to Canada in 1982 to build the company's North American operations. He created Richtree in 1996 after acquiring the North American rights to Movenpick and took the company public on the Toronto Stock Exchange a year later at $6 a share.

The company was a big success at first and opened market-style restaurants in Toronto, Ottawa, Montreal and Boston, and planned expansions to New York, San Diego and Chicago. But Richtree has run into problems in recent years. The U.S. expansion was confined to Boston, and two Toronto restaurants have been closed or sold.

Richtree is also embroiled in a lawsuit with Movenpick Switzerland over the licencing agreement. Last April, Richtree sued Movenpick for $337-million and alleged it had reneged on the deal. Movenpick responded with a lawsuit claiming $100-million in damages and alleging that Richtree has no rights to the brand. The case is still before the courts.

Richtree lost $9.7-millon in 2002, up from a loss of $2.4-million the year before. Sales also fell to $58.4-million from $64-million. The share price has also sunk from a high of $6.30 in 1997 to around 12 cents.

The shares closed up 2 cents to 12 cents yesterday on the TSX.


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