April 4, 2012
In 2003, restaurateur Salvatore Stellino – the namesake of Florida’s Sal’s Restaurant and Pizzeria chain – was sentenced to 33 months in federal prison and ordered to pay nearly $2 million in back taxes and fines after resentful managers turned him in to the IRS for tax evasion.
Now, Salvatore Stellino is once again being “outed” by ex-employees, who allege Stellino defrauded them out of millions of dollars.
In a lawsuit expected to be filed today in The Circuit Court of the 17th Judicial Circuit in and for Broward County, Florida, Stellino’s ex-employees claim they were sold illegal franchises that were deceptively packaged as “asset-purchase agreements” in violation of federal franchise disclosure laws.
Is Sal’s Italian Ristorante an Illegal Franchise?
The Sal’s Italian Ristorante website states “We have developed a unique way of becoming an Owner / Operator of a ‘Sal’s Italian Restaurant’ that is both innovative and cost effective to the new Owner / Operator”
“And, like the operating experiences of our ‘Sal’s Italian Restaurant’ owner/operators, we have designed a simplified qualification and buying system to make becoming a ‘Sal’s Italian Restaurant’ owner/operator as easy as 1…2…3.
“We like to call it the ‘Sal’s Way.’”
While the Sal’s website never mentions the word “franchise,” the lawsuit alleges that the Sal’s business opportunity meets the Federal Trade Commission’s definition of a “franchise opportunity,” and should therefore be sold in compliance with FTC guidelines for franchises. According to the lawsuit, Sal’s “innovative and cost effective” path to ownership does not include furnishing a pre-sale Franchise Disclosure Document (FDD) as required by the FTC.
Plaintiffs Bilked of $10,000,000+, Suit Alleges
According to the complaint (posted below), the fraudulent scheme “involves taking advantage of young, unsophisticated ‘sauce and flour’ restaurant workers by the Defendant Stellino who not only induced them to grossly overpay for the purchase of his undisclosed franchise restaurants before he went to jail for tax evasion, but also overpay to this day for restaurant food and supplies from the Designated Supplier Defendants herein and other suppliers who charge inflated prices to the Plaintiffs because these suppliers pay undisclosed rebates and other kickbacks to the Sal’s Defendants.
“The Defendant, Stellino, induced Plaintiffs N. Beira and Vingano (who were his restaurant employees at the time) and later Plaintiff Eddie Beira to believe that they were being given an “opportunity of a lifetime” because the Defendant Stellino would be providing all the financing the Plaintiffs needed to buy the restaurants. As a direct, proximate, and intended result of materially false statements and omissions of material facts made by the Sal’s Defendants regarding the true nature of the franchise and/or business opportunity offered, the Plaintiffs were fraudulently induced to collectively pay in excess of $10,000,000 to the Sal’s Defendants for these franchises and/or business opportunities.”
Sal’s Franchise Lawsuit Press Release
Restaurant buyers charge the owners of Sal’s Italian Ristaurante with receiving illegal kickbacks and franchsie fraud
Two former employees of Sal’s Italian Ristorante, who bought Sal’s restaurants in Palm Beach and Broward Counties filed suit against their former boss in Broward County District Court alleging that he took advantage of their youth and lack of business sophistication to involve them in a fraudulent price gouging scheme. A third buyer also joined them in the suit.
The lawsuit charges that Salvatore Stellino sold undisclosed franchised restaurants and received improper royalty payments and vendor kickbacks in violation of both FTC (Federal Trade Commission) regulations and Florida state law. Specifically, Stellino fraudulently styled his sale of the restaurants as “asset purchase agreements.” Unlike true asset purchases, the agreements had “strings attached” that required the payment of administrative fees, royalties and required all food and restaurant supplies to be purchased from designated suppliers, whom agreed to give Stellino secret rebates and kickbacks.
FTC franchise regulations provide important protections to individuals who invest in franchised restaurant businesses. One of the major protections is the requirement that the seller of a franchise provide a buyer with a Franchise Disclosure Document (FDD) that contain over 22 items of information, including a disclosure of all rebates that a franchisor will receive for mandated franchisee purchases so that the prospective purchaser can contact them to determine if the business investment is worthwhile. Chris Vingiano, Nuno Beira and Eddie Biera contend that they were entitled to receive, and did not receive, a franchise disclosure document (FDD) because Stellino misled them into believing they were entering into an asset purchase agreement to buy the restaurants and were unaware of the vendor rebates and kickbacks paid to Stellino by defendants Cheney Brothers Inc. and Opici Wine Distributors.
Vingiano and the Beiras are represented by Jerry Marks, Marks & Klein, LLP and Keith Kanouse, Esq. Both law firms specialize in franchise matters with Marks & Klein having obtained a $236 million dollar class action settlement on behalf of all Quiznos franchisees in 2010 and prior to that a $125 million dollar class action settlement on behalf of all Snap-on Tool franchisees nationwide.
“We are excited for the opportunity to try our claims before a Florida state jury as the practice of fraudulently selling businesses that take advantage of unsuspecting individuals by withholding the information needed to make an intelligent decision about the worth of the business they are considering buying is a practice that cannot be tolerated” stated Jerry Marks, chief litigation counsel.
Sal’s Italian Ristorante Complaint (Downloadable)
NUNO INC, 2, a Florida corporation a/k/a NUNO II, INC, NUNO IV, INC., a Florida corporation, PEMBROKE GARDENS RESTAURANT, INC., a Florida corporation, SOUTHLAND RESTAURANT, INC., a Florida corporation, WHITWORTH FARMS RESTAURANT, INC., a Florida corporation, CSV CONCEPTS V, LLC, a Florida limited liability company, VINGIANO ITALIAN RESTAURANT, INCORPORATED, a Florida corporation, EDDIE BEIRA, NUNO BEIRA, and CHRISTOPHER S. VINGIANO, Plaintiffs,
SAL’S ITALIAN RISTORANTE, INC., a Florida corporation, DIFFERENT CONCEPTS, INC., a Florida corporation, SALVATORE STELLINO, CHENEY BROS., INC, a Florida corporation, and THE OPICI COMPANY, a Florida corporation, Defendants
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