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Albert Buzzetti & Associates, L.L.C.

Pancake restaurant ad campaign leads to business litigation

The iconic pancake restaurant IHOP recently surprised consumers in New Jersey and across the nation by changing its name temporarily to IHOb to drum up business for its burger sales. However, not everyone was happy with the temporary change. RMH Holdings, the second-largest franchisee of the casual dining restaurant chain, Applebee's, has filed a lawsuit stating that Dine Brands, which is the parent company of both Applebee's and IHOP, put Applebee's at risk through the IHOb ad campaign.

RMH claims that the IHOb stunt diminished the Applebee's brand. However, the president of Applebee's dismissed RMH's concerns as Applebee's sales rose almost 6 percent in the quarter of the IHOb rebranding. RMH and Dine Brands have had legal disputes in the past.

Back in May, RMH filed for bankruptcy, which led to Dine Brands demanding that RMH pay it $12 million. Dine Brands then filed a legal claim that would permit it to take over RMH's Applebee's restaurants. However, RMH filed a counterclaim stating that Dine Brands mismanaged Applebee's and that the Dine Brands wrongfully permitted the IHOb ad campaign. RMH claims that 16 percent of its sales at its Applebee's restaurant are burger sales. RMH stated that Dine Brands promoted the IHOb ad campaign, overshadowing Applebee's during a time when Applebee's was trying to debut new technology that would let consumers place orders ahead of time, so their meals are waiting for them when they arrive at the restaurant.

Time will tell how the situation between RMH, Dine Brands and IHOP will unfold. However, this serves as a good reminder that business litigation matters can be very complex. Lawsuits can involve companies, parent companies, sister companies, shareholders and many other stakeholders. Disputes can arise between parent companies, sister companies and shareholders. Many business lawsuits involve tens of millions of dollars, which could significantly impact the viability of the parties involved. Therefore, it is important that businesses facing a lawsuit act in a manner that serves their best interests, including consulting an attorney if necessary.

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