The Mississippi-based franchisee that owns the Smashburger location in the Mall of Louisiana is suing the mall and its owners for fraud and damages for misrepresenting the amount of business other restaurant tenants in the mall were doing at the time Smashburger was negotiating its lease in early 2017.
In a lawsuit filed July 23 in U.S. District Court for the Middle District of Louisiana, the franchisee, Midsouth SB III, claims a senior leasing agent representing the mall “grossly inflated” 2016 annual sales figures for several food court tenants, particularly, Villa Pizza, which leases space adjacent to Smashburger’s location.
The suit says Midsouth officials entered into the lease based on those revenue comps, which were “inaccurate, inflated or improper,” and would not have done so had it known the actual revenue figures.
An attorney for Midsouth says her client declines to comment. Officials with General Growth Properties and Brookfield Properties Retail, the mall’s owner and former owner, both named defendants in the suit, did not return messages seeking comment.
According to the suit, the mall’s leasing agent provided revenue figures to Midsouth suggesting 2016 restaurant sales at the mall were strong, averaging $620 per square foot.
Top earner Chick-fil-A was said to have done $2.4 million worth of business that year, while Raising Cane’s did $2 million, Mandarin Express did $1.6 million and Villa Pizza—Smashburger’s neighbor—did $940,000, the lawsuit says.
Midsouth decided to enter into the lease “based upon defendants’ average overall sales per square foot figures, approximate sales volume amount (especially as they related to Villa pizza) and the average utility costs per square foot for food vendor tenants,” the suit says. The restaurant opened in 2017.
In April or May 2018, Midsouth executives began to suspect they had been misled after a conversation with a Villa Pizza representative. They later obtained 2017 revenue figures which were nearly 50% below what had been represented for 2016, the suit says. When they tried to obtain actual 2016 figures, mall representatives refused.
The suit seeks rescission of the Smashburger lease and damages in the amount of the restaurant’s operating losses since June 29, 2017, though the suit does not say how much money the location has lost.
Smashburger is a Denver-based chain known for its preparation technique using a special tool to smash balls of raw meat into the grill. Another local Smashburger location on Corporate Boulevard closed last December, after more than three years in operation.