A federal lawsuit says the chain violated an agreement to fork over a percentage of its gross sales. The company says, "This is news to us."
By GRAHAM BRINK
Published January 13, 2004
TAMPA - In 1983, Lynn "L.D." Stewart helped found Hooters, the restaurant chain known for its chicken wings and busty servers.
Now, he's suing.
Stewart claims in a federal lawsuit filed Friday that Hooters of America Inc., which runs much of the Hooters empire from Atlanta, breached a 1995 agreement to pay him a percentage of annual gross sales.
Stewart was in line for about $2.2-million of the company's first $300-million in annual gross sales and a larger percentage of the annual gross sales in excess of $300-million, the lawsuit states. The five-year agreement expired in November 2000.
The lawsuit does not say specifically how much Stewart thinks he is owed, except that it's more than $75,000.
Mike McNeil, vice president of marketing for Hooters of America, said Monday that company officials had not received a copy of the lawsuit and had not heard anything from Stewart about a problem.
"We haven't received any previous communication from him that says, "You guys owe me money,"' McNeil said. "This is news to us."
Stewart and his attorney could not be reached for comment.
The dispute, at least according to the lawsuit, could hinge on the definition of gross sales. The suit states that the agreement defines gross sales as the entire sales price of all sale of merchandise and services by Hooters of America and its related entities.
Hooters of America, a private company, doesn't divulge its earnings. In 2002, Nation's Restaurant News estimated Hooters had $560-million in food sales alone.
The suit describes the gross sales calculation as "complex and disputed." Stewart asks for an accounting "to determine the precise amount owed."
Stewart and five other men opened the first Hooters in Clearwater in 1983. The chain now boasts 356 restaurants in 12 countries and 44 states, McNeil said.
The six founders sold franchise and licensing rights to Hooters of America years ago but kept about 20 restaurants in Florida, Chicago and Manhattan. They also claim rights to sell a calendar and food products under the Hooters name.
Hooters of America owns 117 Hooters restaurants and oversees the franchises, worldwide expansion and the Hooters airline.
Stewart, the onetime majority owner of the chain, sold his stock in the mid 1990s and entered into the agreement with Hooters of America. He is not suing any of the original Hooters founders.
When Hooters was founded in 1983, virtually all of the recipes came from Lynn "L.D." Stewart's test kitchen. He owned 51 percent of the business when he sold his shares in 1995. Now 60, he lives in Oldsmar.