Nathan’s Famous Inc. is not entitled to prematurely terminate its license agreement with SMG Inc., a circuit court in Cook County, Illinois ruled on Friday.
The quick-service chain has been engaged in litigation with SMG regarding their license agreement, which is scheduled to end on March 1, 2014. Nathan’s had requested, and was denied, early termination of the agreement.
The two companies were also tangled up in litigation relating to claims made by SMG that Nathan’s inappropriately profited from the sale of its proprietary seasonings to SMG. The court granted SMG’s motion for summary judgment in October.
At that time, Nathan’s estimated the damages relating to the seasoning claim to be between $2.9 and $6 million. Because the chain was unable to determine the specific amount of damages until the hearing occurred, Nathan’s recorded an accrual of $2.9 million before tax as part of its results for its second quarter ended Sept. 26.
However, after Friday’s ruling, Nathan’s now estimates the amount of the seasoning damages will be about $4.9 million before tax. Consequently, Nathan’s will likely record additional litigation accrual of $2 million in its third quarter results, ending Dec. 26.
The final judgment is expected to be entered on Jan. 19. Nathan’s is currently evaluating an appeal.
