MEMPHIS Tenn. Back Yard Burgers Inc. said its pending $38 million buyout has been delayed by a lawsuit accusing the franchisor of violating regulations that prohibit customers' credit-card numbers from being shown in their entirety on receipts.
A complaint filed in federal district court alleges that Back Yard Burgers Inc. violated the federal Fair and Accurate Credit Transactions Act and the Tennessee Consumer Protection Act, both of which require that all but a few digits of a customer's credit card number be masked on the patron's receipt. The TCPA also requires that the full number not be shown on the retailer's copy of the receipt.
The suit, Plank v. Back Yard Burgers Inc., does not allege that the plaintiff suffered any actual damages or that she was the victim of identity theft related to transactions at a Back Yard outlet.
The class action was filed on Aug. 3, the same day Back Yard Burgers announced that shareholders had approved its buyout by an investor group led by Steve Lynn, a former chairman and chief executive of both Shoney's Inc. and Sonic Corp. The other members of the buying group, BBAC LLC, include Reid M. Zeising, managing partner of Cherokee Advisors LLC, the investment company that manages the consortium, and Pharos Capital Group LLC, a financial advisory concern. The buyer's board of managers includes J. Michael McCarthy, a former executive vice president and chief financial officer of the Waffle House chain.
Back Yard Burgers said in a release that it has not determined the ultimate impact of the lawsuit on consummation of the merger, but that it needs more time to evaluate the suit.
Calls to the company were not returned.
Back Yard Burgers operates or franchises roughly 181 restaurants in 20 states, primarily in the Southeast. It reported net income of $876,000 for 2006 on revenue of $44.7 million.