Two Clinton County residents claim they lost substantial amounts of money while running a restaurant after they were provided with false financial statements regarding the franchise.
Michael and Karen Kaufman and NSTAAFL filed a lawsuit April 24 in Madison County Circuit Court against Eric Wortham, Michelle Wortham, Pizza World USA Franchise and Wortham Development.
In their complaint, the Kaufmans allege they purchased the Pizza World USA Franchise from the defendants on Jan. 31, 2010, for $28,000. They paid an additional $3,000 for the new franchise agreement, according to the complaint.
When the Kaufmans purchased the Collinsville store, they were led to believe that the business was operating profitably and that they would be earning about $50,000 per year, the suit states. They also assumed the equipment was worth $51,000 and was in good working order, that the Collinsville location would have priority over other Pizza World USA Franchise locations and that the Collinsville location would become more profitable with better advertising, the complaint says.
The defendants told the Kaufmans that the prior owner of the store had been stealing from it, which affected probability figures set forth, the suit says.
In actuality, the Kaufmans claim they discovered that the defendants had not been fully compensating their employees for hours worked, had failed to pay state and federal withholding taxes and had failed to properly report labor expenses.
These actions affected the Kaufmans' profits, causing them to operate at a loss when they took over management of the restaurant, according to the complaint.
"Plaintiffs had sustained more than $89,000 in operating losses from the operation of the pizza store by the end of 2010, merely 10 months after purchase from Defendants," the suit states.
In their two-count complaint, the Kaufmans seek compensatory damages of more than $550,000, plus an additional sum of $500,000 against each defendant, $50,000 in attorney's fees, punitive damages and other relief the court deems just.
Todd W. Sivia of Sivia Business and Legal Service in Edwardsville will be representing them.
Madison County Circuit Court case number: 12-L-541.