Pizza Hut Inc. sues franchisee; 44 restaurants in New Orleans, Baton Rouge areas shut down

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NEW ORLEANS - The owner of 44 Pizza Hut restaurants in the New Orleans and Baton Rouge areas said Wednesday he has shut them down because of a legal dispute with the parent company.

Dallas-based Pizza Hut Inc. filed a lawsuit in a Texas federal court earlier this week against Larry Lundy and Lundy Enterprises.

A spokesman for Pizza Hut said Wednesday that it was developing a fund to help about 1,000 employees out of work because of the shutdown, and planned to build new restaurants in the New Orleans and Baton Rouge areas.

In the lawsuit, Pizza Hut claimed that Lundy Enterprises failed to pay royalty and advertising fees on time. The lawsuit describes efforts to work out a settlement calling for Pizza Hut to purchase assets from Lundy. However, the fair market value of the assets turned out to be too little to pay off liens and other obligations faced by Lundy Enterprises, the lawsuit said.

Pizza Hut Inc. made "reasonable efforts" to help Lundy Enterprises negotiate with creditors but that Lundy failed to provide needed information, the lawsuit said.

On Jan. 2, Lundy lost the right to operate the restaurants, according to the lawsuit. It also included a request for an injunction to stop Lundy from continuing to operate the Pizza Huts. Lundy in a statement said the restaurants were closed and would remain so for the foreseeable future.

"Lundy Enterprises will protect its rights to the fullest extent possible and is optimistic that the Pizza Hut stores will become operational again with the assistance of the justice system," Lundy's statement said.

Pizza Hut Inc. said in a news release later Wednesday that Lundy would work with the company on a contract basis as it develops the new markets in the two cities.

Pizza Hut Inc. spokesman Chris Fuller said the corporation, which is owned by Yum Brands of Louisville, Ky., is working with the National Urban League and the Urban League of Greater New Orleans on a plan to invest $10 million in the two cities, including construction of new, state-of-the-art restaurants. The number of restaurants to be built had yet to be determined.

Working with the Urban League, the corporation plans to spend $1 million on training and counselling for displaced employees, a Pizza Hut statement said.

Organizations: Pizza Hut Inc., National Urban League, Lundy's Yum Brands

Geographic location: New Orleans, Baton Rouge, Texas Louisville, Ky.

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