In a case which has been ongoing since 2013, the owners of several Colorado Steak ‘n Shake franchises lost a lawsuit filed by the compay of the restraurant. In the case, the company had alleged that the franchisees in question had intentionally violated the uniform pricing requirements in their franchise agreement.
Steak ‘n Shake launched their own investigation of the franchisees when local customers complained that they could not find the signature $4 menu at the Centennial and Sheridan locations. They found that the franchisees were intentionally hiding menus from their customers, and in many cases charging over $5 for a $4 meal. In addition to the price hikes, large cups for soft drinks were being replaced with smaller versions.
Franchisees Violated the Terms of the Agreement
Per the specifics of their franchise agreements, Steak ‘n Shake franchisees are required to maintain uniform pricing and promotions. U.S. District Judge Raymond Moore ruled that the franchisee’s actions “indisputably” violated the terms of the agreement. He also described the pricing practices as “deceptive” and ultimately ruled in favor of the company, giving them until mid-August to decide the amount of money which they feel should be awarded.
An e-mail to employees from one of the franchisees explained their attempts to hide the practice, saying that not letting Steak 'n Shake know wass in the hopes that it would take the company a month or moreto notice,during which the subsidy checks would continue to come in. The subsidy checks in question were being sent to the stores due to their remote location relative to the company’s footprint throughout the Midwest.
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If you own a franchise, you may find yourself in disagreement with the decisions made by the company. However, franchise agreements can be very restrictive, and you could potentially lose your business for violating the terms and conditions.
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