NASHVILLE Tenn. A marketing company has sued Back Yard Burgers Inc. for allegedly failing to pay $1.1 million in fees for advertising and other services provided to the regional quick-service chain.
The suit asserts that the payment should have largely come from an advertising fund that was set up for franchisees and administered by the franchisor. But the plaintiff, Agility Marketing Inc. here, said the money was never passed along.
“This is an ordinary commercial dispute between a vendor and a client about matters related to budgets and management fees,” Backyard chief executive C. Stephen Lynn said in an e-mail to Nation’s Restaurant News. “We are very disappointed by our vendor’s action in light of our extraordinary efforts to resolve this matter in a commercially appropriate and mutually beneficial way.”
The action alleges that Back Yard “accelerated the purchasing of media and production services” from Agility starting in July. Yet, the lawsuit says, the restaurant company knew it would not be paying for the services because it was “experiencing and continues to experience, financial difficulties.”
Agility charged Back Yard on a cost-plus basis, meaning its costs plus a 15-percent markup, according to the filing.
The lawsuit was filed in the Chancery Court of Davidson County, Tenn. A copy of the filing was faxed to Nation’s Restaurant News by an unidentified source.
Back Yard Burgers consists of 171 restaurants in 20 states, according to the website of its franchisor.
An investment group led by Lynn acquired the franchisor last year in a $6.50-per-share stock buyout, or about $38 million in total.
