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Hooters of America sues local restaurateur

Michael Schwartz February 6, 2013 1
Topeka's Steakhouse at 1776 Parham Road (Photo by Michael Schwartz)

The Topeka’s Steakhouse at 1776 Parham Road is closed. (Photos by Michael Schwartz)

A Richmond restaurateur has lost two more of its locations and is facing a lawsuit over its use of the Hooters brand.

Cornett Hospitality, which has been working its way through Chapter 11 bankruptcy since November, last month was forced to turn over the keys to two more of its Hooters restaurants: one in Roanoke and one in Pennsylvania. That follows its eviction in early January from three Richmond restaurant properties.

And the company, which still operates seven Hooters and Topeka’s Steakhouse restaurants, was sued in federal court by Hooters of America which is seeking to force Cornett to stop using Hooters trademarks at some of its locations.

Cornett, headquartered in Staples Mill Road, agreed to turn over possession of its Hooters restaurants in Roanoke and Mechanicsburg, Pa., to a fund controlled by Spirit Realty Capital, an Arizona REIT.

Spirit is the landlord on five of Cornett’s restaurants. It had fought in federal court for the right to evict the company from the properties. Cornett was promptly locked out of Hooters restaurants at 7912 W. Broad St. and 1211 Huguenot Road in Midlothian and a Topeka’s Steakhouse restaurant at 1776 Parham Road.

But it remained in the Roanoke and Pennsylvania properties while the landlord tried to get approval in local courts to carry out the evictions on the two sites.

Cornett ultimately left on its own as part of an agreement worked out in federal court. Cornett also agreed to pay Spirit $10,000 a month beginning this month for liens the REIT had on furniture, fixtures and equipment at some of Cornett’s other restaurants. Spirit is also one of Cornett’s lenders.

Hooters of America, meanwhile, filed a 22-page lawsuit against Cornett and an affiliate called Happy Owl Operations Corp. of Richmond, claiming trademark infringement, trademark counterfeiting and other claims related to allegedly operating with an expired franchise agreement.

Hooters is asking the court for a restraining order and injunction to prevent further use of the company’s brand and image at the Cornett properties.

The suit claims that Cornett’s franchise agreement with Hooters expired in 2010 after it allegedly fell behind on its royalty payments and other fees. Hooters then allowed Cornett to operate with limited licensing agreements, the last of which expired in July, according to the suit.

Those agreements allowed Cornett to be part of the “Hooters System,” which, according to the suit, includes the look of the restaurants, the color scheme and the restaurant’s famous “uniform standards.”

Cornett continued to use the marks, and Hooters sent a cease-and-desist letter to Cornett in December, a month after it filed for bankruptcy.

Cornett, which before its filing operated nine Hooters restaurants and three Topeka’s locations in Virginia, West Virginia and Pennsylvania, sought bankruptcy protection in late November in order to restructure its debt.

It still has seven restaurants that are open, including a Topeka’s in Midlothian and a Hooters in Chester.

Hooters of America has taken over operations of the West Broad and Huguenot Road locations. Cornett’s Topeka’s location on Parham remains closed.

Cornett Hospitality President Phil Cornett did not return a call by press time. He previously told BizSense that the company continues to work through the bankruptcy process.

LeClairRyan attorney Kirk Vogel is representing Spirit. He declined to comment.

Bruce Arkema, an attorney with DurretteCrump, is representing Cornett.

Cornett listed in its Chapter 11 filing 287 creditors that are owed a combined $14.7 million. It listed assets of $625,000.

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One Comment »

  1. mel trago May 11, 2013 at 10:00 am - Reply

    i used to be a manager for the hooters in mechanicsburg about 5 years ago. glad i bailed when i did.

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