What is the name of the principal of Klayrock, LLC involved in the litigation with Golden Krust Caribbean Restaurant?
Golden_Krust_Caribbean_Restaurant Franchise · 2024 FDDAnswer from 2024 FDD Document
s, and $12,459.05 in arbitration costs.
Auctus Restaurant Group, Inc. and Klayrock, LLC v. Golden Krust Franchising Inc., Golden Krust Franchising Inc. v. Klayrock, LLC and Kishon Clayborne, Case No. 01-19-0002-5197 (American Arbitration Association ("AAA")). On August 12, 2019, Auctus Restaurant Group, Inc. ("Auctus") and Klayrock, LLC ("Klayrock" and together with Auctus, "Franchisees") filed a demand for arbitration against us alleging breach of their franchise agreements, breach of the implied covenant of good faith and fair dealing, tortious interference, and violations of the Florida Franchise Act, the Florida Deceptive and Unfair Trade Practice Act ("FDUTPA"), and federal antitrust laws. Franchisees' claims arose out of allegedly unfair and discriminatory practices concerning our charges for royalties and advertising fees, our pricing and the quality of products we sold to Franchisees, and our credit terms, as well as out of our alleged interference with Auctus's sale of its franchised restaurant and our oversaturation of the South Florida market. We filed a counterclaim against Klayrock for breach of its franchise agreement and against Klayrock's principal, Clayborne, for indemnification.
After a hearing in May and June 2020, on July 23, 2020, the arbitrator issued a preliminary ruling finding that we had breached the franchise agreements and violated the FDUTPA by charging lower royalty and advertising fund fees to certain of our franchisees and had violated FDUTPA by charging lower prices for goods sold to certain franchisees than Franchisees were charged by our approved distributor. The arbitrator dismissed all of Franchisee's remaining claims and dismissed our claims against Klayrock and Clayborne.
In the preliminary ruling, the arbitrator awarded Franchisees $623,090 in lost profits as damages. We moved to correct the award as computed improperly; the arbitrator denied that motion. On September 1, 2020, the arbitrator issued a final award, awarding Franchisees $666,617.16 in damages and interest, $899,184.17 in attorneys' fees and costs, and $35,600 to cover amounts Franchisee's had paid to AAA in connection with the arbitration. On September 8, 2020, we filed an action in the Southern District of New York (Golden Krust Franchising, Inc. v. Actus Restaurant Group, Inc. and Klayrock, LLC, Case No. 20- CV-7321 (KMK)) to vacate the award; Franchisees counter-petitioned to have the award confirmed. On October 26, 2021, the court denied our petition to vacate the award and entered an order confirming the award. Subsequent to the court's order, we entered into a settlement agreement dated November 24, 2021, pursuant to which we paid Klayrock and Clayborne $1,950,000 in installments as payment in full for the award and the parties exchanged mutual releases. On April 28, 202
Source: Item 3 — LITIGATION (FDD pages 9–10)
What This Means (2024 FDD)
According to Golden Krust Caribbean Restaurant's 2024 Franchise Disclosure Document, Kishon Clayborne is the principal of Klayrock, LLC involved in litigation with the company. In 2019, Auctus Restaurant Group, Inc. and Klayrock, LLC filed a demand for arbitration against Golden Krust Franchising Inc., alleging several breaches and violations. Golden Krust Franchising Inc. then filed a counterclaim against Klayrock for breach of its franchise agreement and against Klayrock's principal, Kishon Clayborne, for indemnification. Although the arbitrator initially dismissed the claims against Klayrock and Clayborne, the litigation continued, eventually leading to a settlement where Golden Krust paid Klayrock and Clayborne $1,950,000.
This litigation history indicates potential risks for franchisees, particularly concerning royalty and advertising fees, product pricing, and credit terms. The fact that Golden Krust Caribbean Restaurant faced claims of unfair and discriminatory practices and ultimately settled for a significant amount suggests that prospective franchisees should carefully evaluate the franchise agreement and business practices. It also highlights the importance of understanding the legal and financial implications of disputes with the franchisor.
Furthermore, the involvement of Kishon Clayborne in multiple legal actions against Golden Krust Caribbean Restaurant, including a separate arbitration and lawsuit initiated by Clayborne after his franchise agreements were terminated, suggests a pattern of disputes. This could be a red flag for potential franchisees, indicating a potentially adversarial relationship between the franchisor and some franchisees. Therefore, it is crucial for prospective franchisees to conduct thorough due diligence, including consulting with current and former franchisees, to assess the potential risks and benefits of investing in a Golden Krust Caribbean Restaurant franchise.