The principal owners and operators of The Palm high-end steakhouse chain have been directed by a New York court to compensate their cousins $120 million for allegedly paying less than market value for use of The Palm name and format.
The family members ordered to pay the amount, Bruce Bozzi Sr., and Walter Ganzi Jr., were not accused by their relatives of violating a contract or other agreement. Rather, their cousins alleged in a lawsuit that the grandsons of the concept’s founders were paying a royalty that had fallen far below market value for use of intellectual capital still owned by the whole family. New York State Supreme Court Judge Andrea Masley agreed, and ordered Bozzi and Ganzi to pay their cousins $73 million in restitution, or what the operating pair would have paid at an updated royalty rate of 5% of sales. With interest and the compensation of the plaintiffs’ attorneys, the total directed payment amounts to $120 million.
Attorneys for the cousins say the decision sets a precedent of using a percentage of sales to determine what should be a fair royalty for use of intellectual property. “This is the first time a trial court has fully resolved that important question,” said Fred Newman, a principal of Hoguet Newman Regal & Kenney, LLP and co-lead counsel for the plaintiffs, in a statement.
Those plaintiffs were Gary Ganzi, Claire Breen and the estate of the late Charles Cook, who collectively hold a 20% stake in Just One More Restaurant Corp., the holder of rights to The Palm name. The other 80% is owned by Bozzi and Walter Ganzi. All are the grandchildren of The Palm’s founders, Pio Bozzi and John Ganzi, an immigrant duo who opened the original The Palm in 1926. The restaurant would become a New York City landmark before closing in mid-2017. The Palm and its first spinoff, The Palm Too, were known for thick, simply grilled steaks served by archetypal New York waiters in a boisterous setting decorated with customer caricatures drawn by cartoonists who traded their work for free meals. Having your caricature on the wall of The Palm was a sign of achieving A-list celebrity status.
Bruce Bozzi Sr. and Walter Ganzi had worked in the business and become the hands-on operators and developers of restaurants sporting The Palm name. That group has grown to some 20 locations, including multiple outlets in New York City.
They paid Just One More Restaurant a flat fee set in the 1970s for use of the name and other intellectual property. The rate was never updated. The minority stakeholders of Just One More Restaurant sued because they felt that amount was no longer fair and realistic, according to their attorneys.
Most restaurant chains charge franchisees a royalty fee falling within a range of 3% to 7% as part of the arrangement. The amount set by Masley falls within that range.
The next generation of the founders’ families, including Bruce Bozzi Jr., are also currently involved in the business.