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Nader opened his first store in 1990 and presently owns 57 stores in the area, including those in Asbury Park and Belmar, NJ, and all but one of the 32 Dunkin' Donuts stores in Staten Island, NY, according to the complaint. In a 2008 audit, Dunkin' Donuts requested business records from 29 of Nader's stores. All the records sought were provided, and no improprieties were found, he alleges. The next audit came four years later, in 2012. The corporation demanded records going as far back as 2007 in connection with 24 stores, including three that had just been audited in 2008, Nader claims.

Nader repeatedly objected to the scope of the 2012 audit ' pointing out that his franchise agreements require retention of only three years' worth of records ' but ultimately handed over all the paperwork sought and heard nothing more after that, he claims.

Last November, Dunkin' Donuts sent the first of two termination notices, charging that Nader committed fraud by failing to advise that Leonard Tallo, a former franchisee, had a 30% ownership interest in many of Nader's stores. Dunkin' Donuts struck franchise agreements in connection with nine stores. The same day, Dunkin' Donuts filed a suit in federal court in Massachusetts, seeking a declaration that the franchises were properly terminated.

Dunkin' Donuts claimed Tallo's franchises were terminated. Nader claims Tallo sold the businesses with the corporation's consent.

Dunkin' Donuts commenced a third audit of Nader in February, again seeking records for already audited stores as well as an accounting of all parties with ownership interests. In May, the corporation sent another termination notice in connection with 24 more stores. That notice, like the one sent in November, alleged that Nader concealed Tallo's stake by stating in his franchise agreements that he was the sole shareholder. But according to Nader, Dunkin' Donuts had been aware of Tallo's ownership interests at least as far back as 2008 and never objected. He says Tallo, who served as builder and construction manager for many Dunkin' Donuts projects and attended numerous closings and business meetings with Nader, has no influence over operations.

If “the Dunkin' Defendants truly believed they were 'defrauded' by Mr. Nader,” they “had many years to take action before sending” the notice, Nader alleges. Moreover, according to the complaint, Tallo's ownership interest hasn't harmed Dunkin' Donuts. “To the contrary, the revenue generated by Mr. Nader's franchises per year has more than quadrupled” in the past decade, it says. The Tallo issue, Nader claims, is “nothing more than a pretext for the unlawful termination of Mr. Nader's franchises in furtherance of their churning scheme.”

The suit alleges that Dunkin' Donuts employed other measures to strengthen its case for franchise termination ' by delaying or refusing Nader's applications to open new stores or close unprofitable ones and by inducing him to invest large sums in store improvements, such as drive-thrus, without compensating him or honoring promises made in encouraging those investments.

Nader also claims Dunkin' Donuts executives slandered him during communications with a rival franchisee and exposed personal financial information. The corporation also arbitrarily lowered “grades” assigned to each store and informed Nader that he'd no longer be permitted to open new stores, he alleges.

The suit seeks declaratory and injunctive relief and asserts claims under the New Jersey Franchise Practices Act as well as common-law counts of breach of contract, breach of implied covenant of good faith and fair dealing, promissory estoppel, defamation and tortious interference with prospective economic advantage.

Steven Klein of Cole, Schotz, Meisel, Forman & Leonard in Hackensack, who authored the complaint, said Nader “will be resolute in his quest to vindicate his rights.”

David Worthen of Gray Plant Mooty in Washington, DC, who represents Dunkin' Donuts in both the Massachusetts and New Jersey actions, deferred comment to the corporation.

Dunkin' Donuts spokesman Justin Drake said Nader “either falsely represented at the time he executed the franchise agreement that he was 100[%] owner of the corporate franchisee, or shortly after he executed the franchise agreement ' transferred a substantial part of his interest to a third-party without Dunkin's knowledge and without seeking Dunkin' approval as required under the franchise agreement.”

' David Gialanella, New Jersey Law Journal

Franchisee Claims Dunkin' Donuts Seeks Illegal Seizure of His Stores

The owner of 57 Dunkin' Donuts franchises in and around New Jersey is suing the corporation for allegedly attempting to force him to sell out.

Anton Nader contends that Dunkin' Donuts is demanding closure of two dozen of those franchises by “churning” ' a scheme whereby the corporation terminates franchise agreements and sells the businesses to new owners at a tremendous profit. Dunkin' Donuts “has engaged in a campaign of self-help and bullying to force Mr. Nader out of business in a variety of ways, such as defaming [him], attempting to interfere with his contractual relationships and prospective business opportunities, and selectively enforcing their policies against him,” according to the suit, filed June 5 in Middlesex County Superior Court.

Nader opened his first store in 1990 and presently owns 57 stores in the area, including those in Asbury Park and Belmar, NJ, and all but one of the 32 Dunkin' Donuts stores in Staten Island, NY, according to the complaint. In a 2008 audit, Dunkin' Donuts requested business records from 29 of Nader's stores. All the records sought were provided, and no improprieties were found, he alleges. The next audit came four years later, in 2012. The corporation demanded records going as far back as 2007 in connection with 24 stores, including three that had just been audited in 2008, Nader claims.

Nader repeatedly objected to the scope of the 2012 audit ' pointing out that his franchise agreements require retention of only three years' worth of records ' but ultimately handed over all the paperwork sought and heard nothing more after that, he claims.

Last November, Dunkin' Donuts sent the first of two termination notices, charging that Nader committed fraud by failing to advise that Leonard Tallo, a former franchisee, had a 30% ownership interest in many of Nader's stores. Dunkin' Donuts struck franchise agreements in connection with nine stores. The same day, Dunkin' Donuts filed a suit in federal court in Massachusetts, seeking a declaration that the franchises were properly terminated.

Dunkin' Donuts claimed Tallo's franchises were terminated. Nader claims Tallo sold the businesses with the corporation's consent.

Dunkin' Donuts commenced a third audit of Nader in February, again seeking records for already audited stores as well as an accounting of all parties with ownership interests. In May, the corporation sent another termination notice in connection with 24 more stores. That notice, like the one sent in November, alleged that Nader concealed Tallo's stake by stating in his franchise agreements that he was the sole shareholder. But according to Nader, Dunkin' Donuts had been aware of Tallo's ownership interests at least as far back as 2008 and never objected. He says Tallo, who served as builder and construction manager for many Dunkin' Donuts projects and attended numerous closings and business meetings with Nader, has no influence over operations.

If “the Dunkin' Defendants truly believed they were 'defrauded' by Mr. Nader,” they “had many years to take action before sending” the notice, Nader alleges. Moreover, according to the complaint, Tallo's ownership interest hasn't harmed Dunkin' Donuts. “To the contrary, the revenue generated by Mr. Nader's franchises per year has more than quadrupled” in the past decade, it says. The Tallo issue, Nader claims, is “nothing more than a pretext for the unlawful termination of Mr. Nader's franchises in furtherance of their churning scheme.”

The suit alleges that Dunkin' Donuts employed other measures to strengthen its case for franchise termination ' by delaying or refusing Nader's applications to open new stores or close unprofitable ones and by inducing him to invest large sums in store improvements, such as drive-thrus, without compensating him or honoring promises made in encouraging those investments.

Nader also claims Dunkin' Donuts executives slandered him during communications with a rival franchisee and exposed personal financial information. The corporation also arbitrarily lowered “grades” assigned to each store and informed Nader that he'd no longer be permitted to open new stores, he alleges.

The suit seeks declaratory and injunctive relief and asserts claims under the New Jersey Franchise Practices Act as well as common-law counts of breach of contract, breach of implied covenant of good faith and fair dealing, promissory estoppel, defamation and tortious interference with prospective economic advantage.

Steven Klein of Cole, Schotz, Meisel, Forman & Leonard in Hackensack, who authored the complaint, said Nader “will be resolute in his quest to vindicate his rights.”

David Worthen of Gray Plant Mooty in Washington, DC, who represents Dunkin' Donuts in both the Massachusetts and New Jersey actions, deferred comment to the corporation.

Dunkin' Donuts spokesman Justin Drake said Nader “either falsely represented at the time he executed the franchise agreement that he was 100[%] owner of the corporate franchisee, or shortly after he executed the franchise agreement ' transferred a substantial part of his interest to a third-party without Dunkin's knowledge and without seeking Dunkin' approval as required under the franchise agreement.”

' David Gialanella, New Jersey Law Journal