Marketing Restructure May Follow Little Caesars Settlement

CHICAGO — Little Caesars franchisees Wednesday resolved a class-action settlement valued at $350 million against franchisor Little Caesar Enterprises, Detroit, the nation’s fourth-largest pizza chain, and the Little Caesar National Advertising Program, through which franchisee funds were funneled.

The settlement eliminates franchisee contributions (4% of their gross revenues) to the national advertising fund and creates marketing, operations and other committees and components common to franchise restaurant systems.

“This is nothing less than a complete restructuring of the relationship between Little Caesar and its franchisees,” said Michael Caddell of Caddell & Chapman, Houston, lead counsel for the franchisees. The settlement, originally filed Nov. 1999, was approved by Judge Janet Littlejohn in the 150th District Court for Bexar County, Texas.

A spokesman for the franchisor said the settlement would lead to a better relationship with franchisees.

Little Caesars! media outlays tell the story of a brand in retreat, shrinking from more than $60 million in its mid-1990s heyday to $5.3 million last year, and only $2.1 million in the first eight months of 2001. The company has shrunk or halted ad agency relationships over the past few years, and has been without an agency of record since June 2000. The company is in the process of selling off hundreds of units to franchisees.

The current legal settlement also requires “recognition” of the independent franchisee organization formed without official franchisor involvement, forgives $14 million in franchisee debt and mandates the creation of various food and nonfood product and price standards. Such fixes will wrestle monopoly supplier status from the franchisor and are intended to help stores be more competitive with larger pizza chains, according to Caddell.