Hurricane Grill & Wings franchisees sue parent company for misappropriating fundsHurricane Grill & Wings franchisees sue parent company for misappropriating funds

A group of Hurricane Grill & Wings franchisees that represents half of the remaining 38 restaurants in the Fat Brands-owned company’s portfolio have filed a lawsuit against its parent company. The lawsuit, filed in the 15th Judicial Circuit in Palm Beach County, Fla., accuses Hurricane AMT LLC of mismanagement of funds.

According to the lawsuit, Hurricane AMT violated a previous settlement agreement and is accused of “widespread mismanagement, deceptive practices, and financial misconduct.” 

“Hurricane AMT collected mandatory marketing contributions totaling 3% of weekly gross sales but failed to use these funds for their intended purposes,” the lawsuit states. “Instead, funds were allegedly diverted for unrelated expenses and personal enrichment of executives.”

The franchisor is also accused of “failing to provide critical marketing services,” which allegedly were a direct cause of the company’s restaurant portfolio dwindling from 58 to 38 locations, which has “severely impacted franchisee profitability.”

The lawsuit also alleges this issue had been previously addressed by franchisees, resulting in a settlement agreement, which the group claims Hurricane AMT violated.

Hurricane AMT's parent company, Fat Brands, called the lawsuit “meritless” and “filled with false accusations.”

Related:Krispy Kreme reports 10.4% revenue declines following cybersecurity attack

“Since purchasing Hurricane Grill & Wings in 2018, Fat Brands has invested significant time and resources to strategically grow the brand through marketing initiatives — from menu development to modernizing the guest experience,” a Fat Brands spokesperson said in a statement. “We look forward to disproving these ridiculous claims and fighting this lawsuit in court.”

This is not the first time Fat Brands has been in legal hot water. CEO Andy Wiederhorn previously served time in prison for tax fraud from 2005-2006. Afterward, he was accused by the U.S. Securities and Exchange Commission of misappropriating $27 million of company money and using it to “fund his lavish lifestyle.”

The complaint filed by Hurricane Grill & Wings franchisees alleges “negligent supervision,” which allowed Wiederhorn’s son, Thayer Wiederhorn, to “cover up financial misconduct.”

“The franchisees accuse Hurricane AMT of deceptive business practices that include the unauthorized use of marketing funds and false representations about the financial health and support available to [to franchisees],” the lawsuit states.

The plaintiffs are asking for full and transparent accountancy of all marketing funds, reimbursement of misappropriated funds, compensation for losses, and coverage of legal fees.

Related:The restaurant industry’s challenge this year is to win back lower-income consumers

“This lawsuit is about accountability. We believe that Hurricane AMT has failed in their obligations, and we are seeking justice for the damage caused to our businesses,” a spokesperson for the franchisee group said in a statement.

Contact Joanna at [email protected]