Franchisee files discrimination suit against Denny’s

Denny’s Inc., a family restaurant chain, is being charged with racial discrimination by Detroit, Mich.-based YPSI Corp., a minority-owned and –operated company run by former franchisee Andre Snyder.

YPSI filed for relief against Denny’s, alleging breach of contract, racial discrimination and multiple violations of Michigan’s Franchise Investment Law. YPSI was a participant of Denny’s Fast-Track minority development program and entered into a 15-year agreement with Denny’s for the lease and operation of a Denny’s restaurant located in Allen Park, Mich.

“Denny’s and YPSI negotiated the agreement and it now appears that Denny’s is going back on its offer to guarantee financing and ensure the success of its minority franchisees,” said Norman Yatooma, a principal of Norman Yatooma & Associates, and lead attorney for the case.

In the complaint, YPSI alleges that Denny’s induced YPSI Corporation into signing a franchise agreement by misrepresenting financing terms and obligations, and terminated YPSI’s agreement in bad faith and in violation of Michigan’s Franchise Investment Law. The complaint also alleges that Denny’s routinely placed minority franchisees in underperforming locations while placing non-minority franchisees in more desirable and profitable locations.

In response, a Denny’s spokeswoman said in a statement: “We intend to defend ourselves vigorously in this case, and are confident that when all the facts are presented, the allegations will be found to be baseless.”

She added: “Mr. Snyder’s franchise relationship with Denny’s ended only after he failed to fulfill his financial obligations. By failing to fulfill these obligations, Mr. Snyder effectively terminated his agreement with the company.” The case currently is in the discovery phase.