• October 19, 2007

Wendy's largest franchisee claims the chain improperly inflated the cost of soda syrup and diverted the extra money to national advertising.

Maryland-based DavCo Restaurants Inc. says Wendy's violated its contract with DavCo by diverting the extra money and not crediting it back to DavCo, which operates 159 Wendy's restaurants in Maryland, the District of Columbia and northern Virginia. This violated an agreement under which DavCo contributes 3% of gross sales to the advertising fund. DavCo alleges that Wendy's actions caused the franchisee to pay more into the advertising fund than required dating back to 1998.

DavCo filed a lawsuit earlier this week in U.S. District Court, claiming $2 million in damages. DavCo also claims in the suit that Wendy's is improperly keeping the company from buying soda products from the Pepsi Cola Co. under an agreement worked out with franchisees when Wendy's chose the Coca-Cola company as its source for soft drinks in 1998.

--Tanya Irwin