Clash over Lefty’s Cheesesteaks intensifies
2 additional restaurants get pulled into family legal battle
A family tug-of-war over a fast-casual restaurant chain that was once growing but is in retreat is getting more intense, and two more eateries are now part of the fight.
The battle for control of Lefty’s Famous
Cheesesteaks Hoagies & Grill began last year when businessman Allie Mallad sued his two relatives and business partners — his cousin, Nayfe Berry, and her adult son, Hussein “Sam” Berry — claiming they were attempting to squeeze him out of Lefty’s Cheesesteaks and running the business poorly.
Mallad fell short in his initial effort to have a Wayne County Circuit Court judge appoint a receiver for the business. But last week the Michigan Court of Appeals took the matter out of private arbitration — where the Berrys had wanted it — and back into the court system.
Also last week, the Berrys — through their Lefty’s Holdings corporation — filed a new and separate lawsuit against Mallad in federal court in Detroit. This lawsuit seeks to officially end their partnership with Mallad that began nearly four years ago and saw the chain reach more than 50 locations in 2022.
Today, Lefty’s has 26 locations, primarily in Michigan.
What’s more, the family legal battle now involves the iconic Miller’s Bar on Michigan Avenue in Dearborn, which Mallad purchased last month. And it coincides with the recent closure in metro Detroit of a divorce-themed restaurant chain, Ex-Wife’s Famous Chicken, which Mallad started.
The restaurants served chicken tenders and crispy sandwiches with cheeky menu names — “freedom fries,” “hot chick” sandwiches, a “child support” kid’s menu. It opened its first location in spring 2022 in Dearborn Heights, followed by additional sites in Battle Creek, Warren and Westland.
The restaurants’ interior design
featured in giant lettering: “Cluckin’ Best I Ever Had.”
But all metro Detroit Ex-Wife’s restaurants recently shut down, and according to a former worker, the Battle Creek location also closed or will close soon.
The precise reasons for the closures were unclear Monday. Mallad’s attorney said he didn’t know whether or not all the locations had closed.
However, the Ex-Wife’s closures coincided with the ongoing business and legal dispute that has pitted Mallad against his two relatives and is playing out in state and federal courts.
A legal back-and-forth
This attempted breakup of the family members’ partnership deal — which Mallad thus far has resisted — was prompted by, among other things, what the Berrys claim was Mallad’s violation of noncompete stipulations by opening Ex-Wife’s Famous Chicken and then buying Miller’s Bar. In the second suit filed last week, the Berrys’ company contends that both businesses could be considered Lefty’s competitors.
The Berrys made similar claims in the earlier circuit court case.
“The Berrys find the ‘Ex-Wife’s’ concept to be offensive and degrading to women, and that they would not have approved of such a concept,” their lawyer wrote in that suit.
Mallad’s lawyer told the Free Press that there isn’t much that is true in the new federal lawsuit.
“The allegations that are contained in the federal lawsuit are essentially a repackaging of the same claims,” attorney Kaveh Kashef, of Kashef Legal Services, in Grosse Pointe Farms said, referring to the Berrys’ earlier counterclaims in the circuit court case. “We believe that both the arbitration and the federal lawsuit are purely retaliatory, and will ultimately be proved to be frivolous and dismissed.”
1 location grows to over 50
Lefty’s Cheesesteaks was started in 2012 in Livonia by Sam Berry. Then in the wake of a cancer diagnosis, he brought his mother, Nayfe
Berry, into the growing business.
Mallad claims in court documents that he first got involved after the Berrys reached out to him in spring 2020, seeking his help in converting Lefty’s to a franchise business model and expanding on a national scale. Lefty’s at the time had 11 locations, and Mallad had decades of franchisee experience with Little Caesars, Bruegger’s Bagels and Golden Corral, among other chains.
Yet the Berrys claim that Mallad has it backward. Their lawsuits say he first approached Sam Berry’s father to seek a meeting with Sam, which ultimately took place in Mallad’s Southfield Town Center penthouse.
“There, Mallad made a pitch that Berry would self-destruct if he did not connect with
someone like him to take the concept national,” the Berrys’ lawyer says in circuit court documents.
Mallad and Sam Berry struck a deal that gave Mallad a 20% equity ownership in Lefty’s, the title of CEO and permission to build up to 20 Lefty’s restaurants without being subject to franchisee fees or royalties.
Rather than paying money for his 20% stake, Mallad convinced Sam Berry to accept a 5% stake in one of Mallad’s own companies, Red Effect Infrared Fitness, which is a gym chain where members do cardio and yoga workouts under infrared lights.
According to the Berrys’ federal lawsuit, Mallad’s pitch to Berry was grossly exaggerated and constituted fraud.
The lawsuit says Mallad claimed at the time of the 2020 deal he had 13 Red Effects already open with a dozen more “coming soon,” plus 254 franchise agreements “committed to” and over 250 more locations “in the pipeline around the country.”
Mallad told an attorney representing the Berrys that the proposed 20% Lefty’s stake for 5% of Red Effect was “a great deal for the Berry’s (sic),” according to an exhibit of the email cited in the federal lawsuit.
“Please DO NOT over negotiate this deal, I am being very fair to my cousins and I MUST feel that I am being treated the same way,” the email from Mallad to the Berrys’ attorney said.
The Berrys allege in the federal lawsuit that the franchise location figures were a complete fiction, as to date there has never appeared to be more than 20 Red Effect gyms open at one time, and they call the fiction another reason why the Berrys have the legal right to end their partnership with Mallad.
The Red Effect website on Monday showed nine total locations, with five in Michigan. One of those five is a former Ex-Wife’s Famous Chicken storefront on North Wayne Road in Westland, which also is next door to one of the five Lefty’s Cheesesteaks franchise locations that court documents say still belong to Mallad.
The infrared gym, however, is not yet open. Although some might view Miller’s Bar, which opened in 1941, as a different type of restaurant than a fast-casual Lefty’s Cheesesteak spot in a strip mall, an attorney representing the Berrys’ Lefty’s Holdings noted Monday how Lefty’s and Miller’s serve similar food — burgers, fries, chicken sandwiches — which he contended makes them competitors.
The attorney, Nathan Fink, of Fink Bressack in Bloomfield Hills, also said that the apparent closure of Mallad’s Ex-Wife’s restaurant chain doesn’t negate his alleged violation of the noncompete clause in the partnership deal.
“It doesn’t make the lawsuit moot. The damage is done,” Fink said. “They’ve been operating directly competing businesses, including Ex-Wife’s, for about a year now and because of that violation, Lefty’s decided to terminate Mr. Mallad’s Lefty’s franchises and the company decided to go to court to make sure it protects its brand.”
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