Franchisee, consultant question Shakey's solvency

Dec. 25, 2002

GARDEN GROVE, Calif. -- A long-term franchisee of Shakey's Pizza and a former consultant to the chain believe it may be on the brink of bankruptcy.

Nation's Restaurant News reported on April 29 that former executives and creditors of the 66-outlet company say the company's unpaid bills run into the hundreds of thousands of dollars.

Shakey's President Sean Flynn said the company's financial stresses are related to two pending lawsuits filed by franchisees. Both suits accuse Shakey's of fraud, breach of contract and misrepresentation.

"It is an unfortunate reality that because of litigation, a great amount of resources have had to be channeled toward that effort, rather than in ways that more directly benefit the business ...," Flynn told NRN.

John McNulty, president of the Shakey's Franchised Dealers Association, and one of the franchisees suing the company, said simply, "We believe Shakey's is insolvent."

As reported in April, franchisees fix the blame for the company's long-term woes on Inno-Pacific Holdings, a Singaporean firm that has owned Shakey's for 14 years.

During that term, 13 people have held the president's seat at Shakey's, and recent layoffs at its California corporate headquarters have upset franchisees who said they've lacked corporate support for years. Since January, the company's directors of training and operations were let go, and its director of marketing resigned.

Alan Siskind, an outside consultant hired a year ago to breathe new life into the concept, did not have his contract renewed for 2002. He also is a creditor of Shakey's, and told NRN he believes the only viable solution for Shakey's "from a business standpoint was to file bankruptcy."

While there, Siskind developed Shakey's Triplets menu, which centers on miniaturized versions of some of the company's best-selling items.

Flynn believes the Triplets will help operators capture incremental sales between traditional meal periods and give customers more varied menu options.

Franchisees are not as enthusiastic, however, saying the mini-portions don't fit the current Shakey's buffet format.

Introduced to franchisees last September, Triplets has yet to be market tested, but Flynn said that will happen when Shakey's opens a new store in LaHabra, Calif., in May. The store will be the company's first new franchised store in eight years.

Topics: Operations Management

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