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O'Charley's settles lawsuit with first franchisee

GRAND RAPIDS Mich. Meritage Hospitality Group Inc., operator of about 50 franchised Wendy's quick-service restaurants and five O'Charley's casual-dining units, said Friday it settled a lawsuit filed last year against franchisor O'Charley's Inc. that alleged fraud and breach of contract.

Terms of the settlement were not disclosed.

Meritage, based here, filed the lawsuit against Nashville, Tenn.-based O'Charley's in May 2006, alleging various violations of the Michigan Franchise Investment Law and against good faith and fair dealing, according to company filings with federal securities regulators. Meritage, as O'Charley's first franchisee, was contracted to develop a minimum of 10 additional O'Charley's units by 2010. At the same time that financial results of both Meritage and O'Charley's began to weaken in 2006, Meritage sued its franchisor for monetary damages and cancellation of both the development and franchise agreements.

Under terms of the current settlement, according to the statement from Meritage, the franchisee will continue to operate its O'Charley's restaurants throughout Michigan and will also "continue to evaluate expansion of the brand at new locations that have solid demographic profiles and population growth."

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