"Incredible Pizza" Franchisee Loses $46 Million

Lloyd Robert French invested in a new franchise concept and lost $46,995,735 in 6 years.

The franchisor principals were Richard Barsness & Cheryl Barsness. They didn't actually have an operating store, but they had a dream of opening a "family entertainment" pizza restaurant. Barsness and French met a few times, and according to French there were representations made as to the various advantages the Barsness system would have.

French was a franchisee of Mr. Gatti Pizza at the time, and one of the advantages which Barsness is alleged to have claimed is "connections to favorable companies and pricing" -- though how Barsness could get favorable pricing when he did not even have an operating pizzaria is not explained in the court pleadings.

The Barsness' claims were set forth in a "Pro and Con" list as well as during the course of meetings, and according to French:

During these conversations, Richard and Cheryl Barsness repeatedly made the following representations regarding the benefits of the Incredible Pizza Company system, including, in particular:
(a) IPC would not receive any commissions or rebates as a result of franchisees’ purchases from required suppliers;
(b) IPC would provide substantial support to its franchisees; and
(c) IPC would dramatically expand the number of Incredible Pizza Company units nationwide so as to increase visibility and brand recognition.

Warning flags appeared almost immediately. The Barsness franchise was to be called "Incredible Pizza Company" but it soon became apparent that there was a company in California doing business as "John's Incredible Pizza Company." According to the Complaint:

Richard and Cheryl Barsness had, at one time, attempted to do business with John Parlet, the founder of John’s Incredible Pizza system, and, when that business relationship fell apart, the Barsnesses attempted to develop their own “Incredible Pizza Company” system (following Mr. Parlet’s development of the John’s Incredible Pizza Company system).

In August 2002 the Barsness' opened the first Incredible Pizza Company store. In November 2003, French paid to become an area developer, and began constructing pizza restaurants. According to French, the Barsness' repeated financial performance representations were provided verbally and in writing--despite not being disclosed in the Uniform Franchise Offering Circular (UFOC).

Indeed, the franchisor is still stating on the company website;

[W]e serve up to 15,000+ customers per week at an average sale of $10-$12 per person. Additionally, our indoor locations provide a controlled setting, where we aren’t impacted by the extremes of changing seasons or adverse weather.[emphasis added]

French also says that the UFOC did not disclose the uncertainty surrounding the rights to the Incredible Pizza Company name, nor did the franchisor disclose vendor kickbacks and that Barnsness had secret ownership interests in several of the mandatory sole-source vendors.

Incredible Pizza Company denies the allegations, and has counterclaimed seeking to purchase the franchisee assets at a rate set by an appraiser. The pleadings do not disclose the amount, but it is safe to assume it is not $46,995,735.

Incredible Pizza lists 18 locations, and as of today they are still listing the French locations on the franchisor website.

The Incredible Pizza franchisor is being represented by Ric Cohen--who is also counsel to the Quizno's franchisor which just last November settled allegations of hidden vendor kickbacks.

Counsel to the franchisee is the legendary J. Michael Dady, so this should be quite a battle... stay tuned.

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FEC Holdings v. Incredible Pizza, W.D.Mo, # 10-cv-3042

For Plaintiff (Franchisee): J. Michael Dady (Minneapolis) &  Lloyd Cunningham (Houston)

For Defendant (Franchisor): Fredric Cohen (Chicago) & Joseph Sheppard III (Springfield MO)