Callender closes Newport Beach test kitchen: rejects court order to turn unit over to Ramada

Nation's Restaurant News, May 15, 1989 by Richard Martin

Callender closes Newport Beach test kitchen

NEWPORT BEACH, Calif. -- Marie Callender's founder, Don Callender, an eight-unit franchisee of the chain he sold in 1986, has closed his Newport Beach test-kitchen restaurant rather than comply with a court order to surrender the unit to franchisor Ramada Corp.

The closure was the latest round in a protracted legal squabble between Callender and Phoenix, Ariz.-based Ramada, whose recent sale of the 154-unit chain to Wilshire Financial Group of New York is scheduled to close this month.

In March Callender paid Ramada $440,000 in back royalties his other seven restaurants had withheld since August because of his claims against the company. However, he persisted in refusing to pay royalties on the Newport Beach unit's average $140,000 in monthly sales because of Ramada's alleged breaches of the terms under which it bought Marie Callender's from him for $57 million and 2.5 million Ramada shares.

Callender, Ramada's second-largest shareholder and a party to several lawsuits against the company, said Ramada rejected his offer to assume the Newport Beach lease and reopen as a California cuisine restaurant called Garlic Rose. Ramada, which has countersued Callender, said it might reopen the place as a franchised or company-owned Marie Callender's and rehire some of its 100 former employees.

A Ramada spokesman said the complex legal dispute with Callender was a factor in the company's decision to sell the full-service Marie Callender's chain, which specializes in fresh-baked pies and home-style food.

The undisclosed proceeds of the sale to Wilshire and those from the pending $540 million sale of Ramada's 825-unit hotel division to Fairfield, N.J.-based Prime Motor Inns and a Hong Kong real-estate firm have been earmarked by Ramada to fund a dividend of at least $7 a share. Ramada offered its shareholders the dividend to defuse a takeover bid by Chicago's Pritzker family, owners of Hyatt Hotels Corp.

Under the Ramada board's restructuring plan, current management loses the Ramada brand but retains the company's lucrative gaming division.