The former CEO of Pizza Inn’s parent company is suing the operator, saying he was promised hundreds of thousands of shares of restaurant stock but was fired without cause before he could receive them.
Scott Crane, who helmed Rave Restaurant Group from January 2017 until July 2019, said in court documents he is seeking nearly $2.4 million in damages for his charges of breach of contract, fraudulent inducement and statutory fraud. Alternatively, he is seeking 928,000 shares of Rave stock and $300,000 in severance.
Rave Restaurant Group, which also owns fast casual Pie Five, did not immediately respond to a Restaurant Business request for comment on the lawsuit. In its legal response, Rave largely denied all of Crane’s accusations or said it did not have enough information to respond.
“The Company believes that all of the claims are without merit and intends to vigorously defend the lawsuit,” Rave said in its end-of-year financial filing with the Securities and Exchange Commission, filed Thursday.
The case is currently in the discovery phase, with a trial date set for April 5.
In his filing, Crane, the former CEO of Smashburger, said he was enticed into joining Rave because of the promise of receiving hundreds of thousands of shares of the brand’s stock.
“Crane so believed in the fact that he would succeed in adding value to Rave that he personally purchased 400,000 shares in Rave, thereby becoming the third- or fourth-largest shareholder,” the filing states. “As of the filing of this Complaint, Crane maintains his ownership of approximately 400,000 shares.”
In his complaint, Crane said he met and exceeded all the performance benchmarks set by Rave. His firing, he asserted, was done to “deprive him of what he earned—his shares in Rave,” the complaint alleges.
Just before Crane was hired, Rave’s stock was at $2.22 a share. The day before he was fired, Rave’s stock had climbed to $3.08. On Thursday morning, Rave’s stock was trading at $1.30 per share.
Crane also alleges that Rave “has a pattern” of promising employees stock, bonuses and other compensation but then terminating them just before those obligations were to be fulfilled.
“His is not the first or only time Rave has pulled the same bait-and-switch,” the court filing said. “To borrow a phrase from Rave’s website, ‘any way you slice it,’ what happened to Crane and other employees was wrong, and Crane files suit to bring accountability and ensure that it does not happen again.”
Following Crane’s firing, Rave hired Brandon Solano, formerly CMO of Pei Wei Asian Diner, as chief executive.
Pie Five and buffet chain Pizza Inn have floundered during Solano’s tenure. Earlier this year, Rave received notice that it was in danger of being removed from Nasdaq’s listings—its second such delisting notice in six months.
Rave reported $2.1 million in revenue for the quarter ended Dec. 27, down about 25% from the same period the prior year, according to financial documents filed Thursday. Rave ended 2020 with 142 Pizza Inn locations and 37 Pie Five restaurants.
Pizza Inn sales declined $5.1 million, or 24.6%, for the period ended Dec. 27.
Pie Five systemwide sales fell $3.2 million, or 42.1%, for the quarter ended Dec. 27. During the same period last year, it had 54 open locations.
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