Business

Court fight over Hot-N-Ready prices adds intrigue to mystery of Little Caesars closings

The owners of area Little Caesars pizza shops are in a courthouse battle over the price of Hot-N-Ready pizzas as several of their stores are reported as closed.
The owners of area Little Caesars pizza shops are in a courthouse battle over the price of Hot-N-Ready pizzas as several of their stores are reported as closed. MCT

Scores of Kansas City area Little Caesars pizza employees reportedly have lost their jobs as their Utah-based employer and the chain’s Detroit headquarters battle over 99 cents per pizza.

Fox4 News reported that as many as 100 employees were put out of work when six area Little Caesars stores closed unexpectedly and without explanation last week. Store closings could not be confirmed, though messages recorded for four Little Caesars listed in the report say “we’re temporarily closed at this location.”

Missing from the messages and the Fox4 News report are the courtroom battles between the area stores’ owners and Little Caesars with the owners’ franchises on the line. No ruling has been made in the court case, leaving the cause of the closings unclear.

The stores are part of a group of 21 area Little Caesars franchises owned by Utah residents R. Alan and Beverly S. Knox, who run Little Caesars ASF Corp., Little Caesars ASF Inc. and Southern Utah Pizza Service Inc. They’ve run Little Caesars franchises for 30 years but not always in the good graces of Little Caesars Enterprises whose brand operates nationwide.

Attorneys for each side did not return requests for comment.

The Knoxes purchased 16 Kansas City area Little Caesars stores in October 2010 for $5 million, having operated stores in other markets since 1987, according to the couple’s filing in U.S. District Court in Eastern Michigan. They’ve since expanded to 21 area stores.

Little Caesars sued the Knoxes in 2013 claiming they’d failed to make royalty and other payments due under their franchise agreements. The two sides settled that dispute in 2014.

Their current battle erupted in July, with Little Caesars again claimed in court that the Knoxes and their businesses had become late payers.

Little Caesars wants the court to declare the couple’s franchises terminated.

In one filing, Little Caesars said it “admits that it had given counterclaimants (the Knoxes) additional time to make payments on occasion in the past” but also had notified them in the 2013 settlement “that no similar accommodations would be made in the future.”

In October, the Knoxes fired back. They’ve been good franchise operators, paying $1.4 million a year to the Detroit franchisor. The real rub, according to their filings, is over the price of Little Caesars Hot-N-Ready pizzas.

The Knox-owned stores were charging $5.99, even back in 2013 when the first courtroom fight happened. Detroit, however, wanted franchisees to charge $5 — and included that price in its national advertising. According to the Knoxes’ filing, prices are left up to the franchisees.

When Kansas City area customers saw the $5 ads, they complained to the Kansas attorney general’s office and the area stores went back to $5 for Hot-N-Ready pizzas. It cost the couple hundreds of thousands of dollars in revenues, the Knoxes’ court filing said, making them late on payments to Detroit the first time.

According to their recent court filing, Little Caesars has begun to pressure franchise operators to open new stores, remodel existing stores and update to new point-of-sales systems that are costly to install.

To cover those costs, the Knoxes sold the five stores they owned in Utah, the filing said, and had a deal to sell three in the Kansas City area. Detroit, however, balked at the Kansas City area sales though it originally approved them, the couple’s filings said. The couple needed the money from the sales to open four new area stores, an office and other things Detroit demanded, it said.

The filing added one more fact – the Knoxes’ stores had gone back to charging $5.99 for Hot-N-Ready pizza though national ads continued to promote the $5 price tag.

“After 30 years of doing business together, LCE (Little Caesars Enterprises) is attempting to terminate the Knoxes as franchisees and subvert their $5.99 business model by openly seeking new store locations in Kansas City for new franchisees to open and take their franchises and stores,” the couple’s court filing said.

Notices from Detroit that the couple had defaulted on payments “were pretextual and were disguised to conceal their intent to take from the Knoxes their franchises and stores for Knoxes’ failure to conform to the $5 price,” it said.

Meanwhile, answering machines at four area Little Caesars stores tell callers, “We’re temporarily closed at this location,” and invite them to visit the next nearest Little Caesars. In the case of a Grandview store, the invitation is to visit pizza shops in Blue Springs or Lee’s Summit.

The man who recorded each of the messages apologized for the inconvenience and added, “We will be reopening soon in a location nearby.”

The phone at a Little Caesars on Blue Ridge Boulevard in Kansas City did not answer. Fox4 News’ initial report had focused on this store’s closing and quoted employees there. The number listed for a store in Excelsior Springs was not a working number.

Mark Davis: 816-234-4372, @mdkcstar

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