Two businessmen who allegedly were looking to purchase one or both Denver-area Steak ‘n Shake restaurants before corporate officials blocked the deal now say in court papers that they balked at a deal because of scant details about the franchise’s inner workings.
Gerald McDaniel and Joseph Fernandez said in separate affidavits filed in U.S. District Court in Denver that they never had firm plans to purchase the Steak ‘n Shakes — one in Centennial and another in Sheridan — even though they met with original owner Thomas Caruso about a potential sale in 2013.
Caruso, an attorney, set up the meeting in August that year but no longer owned the restaurants.
He had sold them to the Baerns family that eventually went awry of Steak ‘n Shake rules to stick to set menu offerings, saying they couldn’t make money that way.
Caruso had agreed to carry the bulk of the financing for the Baernses’ $3 million purchase, which included pricey land leases from the developers of shopping centers where the stores are located, court papers show.
that Steak ‘n Shake officials at its Indianapolis headquarters intentionally blocked the potential sale to McDaniel and Fernandez in order to own and operate the locations itself.
The Baernses eventually agreed to sell their stakes in the stores for $475,000 each, money that went to Caruso to satisfy part of his sale contract, but leaving him well short of the amount he is owed.
McDaniel owns the Steak ‘n Shake franchise in Colorado Springs, along with development rights for the chain in El Paso County. Fernandez is an adviser to FMK, the Steak ‘n Shake franchisee in Greeley that is part-owned by his wife, Sondra.
McDaniel said in his affidavit that he didn’t have the manager support to adequately take on one of the two stores Caruso brokered, and didn’t see enough detailed information about its financial workings to seriously consider it.
Joseph Fernandez said he thought the land leases were too difficult and costly to take on, although he did not say how much that would have been.
“I remember I was concerned about the amount of ground rent for both locations,” Fernandez said in his affidavit. “I did not believe that FMK could get the rent at each location reduced sufficiently.”
Caruso filed a motion last week asking the court to allow his “friend of the court” brief. Steak ‘n Shake filed a motion asking the court to deny the request, calling Caruso “hardly a friend of the court.”
No hearing on the motions has been scheduled.
Steak ‘n Shake is suing the Baernses for breach of contract for allegedly not strictly following franchisee rules.
Both restaurants have been operating under company ownership since late 2013.
