Raving Brands faces litigation from Doc Green's franchisees: plaintiffs allege fraud, misrepresentation

Nation's Restaurant News,  March 3, 2008  by Catherine R. Cobb

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ATLANTA -- Raving Brands, the multiconcept franchisor based here, is again locked in a legal battle with the franchisees of one of its fast-casual brands.

In January two franchisee groups involved in the company's Doc Green's Salads & Grill concept since 2005 filed suit in federal court in Atlanta alleging fraud, breach of contract and misrepresentation of the potential of the Doc Green's franchise and the system for developing and supporting it.

The lawsuit is similar to several other suits brought against Raving Brands in the past two years by franchisees involved in other Raving concepts. Along with Doc Green's, Raving Brands' portfolio includes Mama Fu's Asian House, Planet Smoothie, Shane's Rib Shack, PJ's Coffee and Flying Biscuit. Raving's lone nonfoodservice operation is Monkey Joe's, a chain of 12 indoor play areas.

Last summer the company sold its flagship franchise brand, the 360-unit Moe's Southwest Grill, to multiconcept franchisor Focus Brands Inc. in Atlanta for an undisclosed amount. Just months before in March 2007, three former franchisees of the Moe's brand in Southern California sought $3.9 million in damages in a lawsuit filed in Los Angeles charging Raving Brands with fraud, unlawful trade practices and violating state franchise investment laws. The operators at one point had four restaurants, all of which are now closed.

In another lawsuit filed in Fulton County, Georgia, in November 2006, Raving Brands was charged with fraud, misrepresentation and breach of contract in litigation involving more than 40 franchisees of the Mama Fu's Noodle House brand in six states. Mama Fu's, which was created in 2003, at its peak had 40 stores. Today the website lists 16 in operation.

As of press time, Raving Brands had not responded to the lawsuit brought by the Doc Green's franchisees. Meanwhile, Raving Brands' founder, Martin Sprock, and the company's president and chief operating officer, Steve LeMastra, have refused to comment, citing a company policy regarding pending litigation.

Bob Casey, an attorney with Atlanta-based Casey Gilson Leibel PC, has worked with the plaintiffs involved in all of the cases, including the most recent concerning Doc Green's, a concept founded in 2003. He noted that, as with the other suits, the two sides of the Doc Green's case tried to avert litigation through negotiation but couldn't reach a middle ground.

Named in the Doc Green's lawsuit are Raving Brands, its founder Sprock and at least two executives associated with the company's franchise system, including Daryl Dollinger and Carl Griffenkranz. Filed Jan. 17, the suit asks for an accounting to determine damages and requests the court to award damages for financial losses and antitrust violations as well as to cover all attorney fees.

Trent and Richard Schofield, owners of the Tampa, Fla.-based Schofield Restaurant Group, which once owned three Doc Green's locations in the Florida cities of Tampa, Naples and Estero, are among those involved in the lawsuit. The Schofields continue to operate 10 Shane's Rib Shack units in Florida. They converted one of the three Doc Green's units to a Shane's.

Another plaintiff is Charles Feehan, an Atlanta-area franchisee who, along with a partner, has five Shane's Rib Shacks, with another in development, as well as three Doc Green's units, all in metro Atlanta.

"They sold us the franchise under the guise that Doc Green's was an established brand, but that just wasn't the case," said Feehan, who left corporate America to join the Raving Brands' system as a franchisee.

Although Raving Brands promoted the salad-themed restaurant as a solid franchise, saying it "had established a system of developing, opening, operating and promoting fast-casual restaurants offering gourmet salads and soups," it was a mirage, Feehan said.

"We filed the suit because we fundamentally believe that Raving Brands never had a comprehensive business model and system in place to support a franchise system," said Feehan, who shared that in addition to the $20,000 licensing fee and royalties for each unit, he has spent a great deal of money opening and running the units. "We are trying to recoup our losses and want to keep them operating."

Feehan said that while he is not privy to other franchisees' financial statements, he hears the "scuttlebutt" is that other Doc Green's franchisees might file suit as well. According to Doc Green's website, there are only 13 stores in operation, with the majority in Georgia.

The Doc Green's lawsuit alleges that Raving Brands also created a "fraudulent scheme" to make the one company-owned restaurant appear successful when potential franchisees came to observe the concept.

To that end, the lawsuit claims, the company gave out coupons for free food, known as "Doc's Dollars" to lure customers. The suit says: "The Doe's Dollars campaign was distributed particularly aggressively on dates that potential franchisees were visiting in order to make the store appear busier than it was."