When Mary Dousette, a Toluca Lake psychologist, and her husband, Michael Marsh, a physician, agreed to invest $320,000 into a new fast-food tortilla chain, they felt they had good reason to trust the principals. James and Lynn Minidis, after all, were former franchise owners of Little Caesar’s Pizza who had experience in the restaurant business.

But the tortillas never heated up.

Instead, Dousette and Marsh, who held a 39 percent stake in the tortilla business, claim that their money was rolled into another Minidis food venture: a fast-growing gourmet pizza chain called RedBrick Pizza Worldwide Inc.

And they say they never saw a slice of those profits.

Minidis “used the doctor’s money to build the RedBrick Pizza business and, at the same time, told the doctor to his face: ‘There’s no RedBrick Pizza concept,'” said their lawyer, Thomas Brackey, in a two-week trial held after the two doctors sued the Minidises for fraud.

In April, a Los Angeles Superior Court jury sided with the two doctor investors and awarded them $6.2 million in damages.

Then, last month, four of the master developers who agreed to establish RedBrick Pizza franchises in California and North Carolina sued the Minidises for fraud, claiming, among other things, that they were unaware of the doctors’ suit, which could force RedBrick Pizza out of business.

Brackey declined to comment, as did Minidis’ lawyers. But in court transcripts, one of the Minidis’ attorneys, Gary Shoffner, pleaded with the jury to limit its damages, saying that “the value of their business is gone. They are not only burdened with an enormous monetary judgment, but the means for paying that has been taken away from them.”

The struggles of RedBrick Pizza, which still has about 40 operating stores far fewer than the thousands first promised investors is a cautionary tale in fast-food investments. Doctors, dentists and other professionals looking to invest in a fast-food chain often get lured by the high returns.

“The returns can be very favorable,” said Darlene Heskamp, a restaurant specialist at Beitler Commercial Realty Services in Brentwood. “It’s much easier to start a fast-food restaurant because you don’t have the overhead you have at a full-service sit-down restaurant. Their overall costs are much less and that makes it much more profitable.”

But like all restaurant ventures, Heskamp said investors must look closely at the concept, the financial soundness of the ventures, and especially the promoters. “You have to have the right operators,” she said.

Concept, execution


The concept behind RedBrick Pizza was a fast-casual restaurant, or a mix of fast-food and sit-down restaurants serving quickly prepared, fire-roasted gourmet pizzas, fresh salads and Italian-style gelato ice cream.

“Their claim to fame is they’ve got this three-minute pizza deal,” said Edward Kushell, president of the Franchise Consulting Group in Century City. “You have this wonderful pizza in three minutes.”

Launched in late 2000, the chain planned to have 12,000 stores over the next few years, but according to its Web site, Palmdale-based RedBrick currently has 29 stores in California, including locations in Pasadena, Culver City and Northridge. It also has 12 stores spread throughout Arizona, New Mexico, Texas and North Carolina.

Robert Leon, franchisee owner of the RedBrick Pizza store in Pasadena, said he was aware of the litigation but not worried about the survival of the business. In fact, he plans to open a store in Alhambra later this month.

“We have a good product, and whether or not it’s Mr. Minidis or some other individual who has won a judgment, both sides know we’ve got a good product. Otherwise they wouldn’t have gone to that extent to go to litigation,” Leon said.

Initially, RedBrick set up deals with master developers, who are charged with finding franchise owners to open new stores, according to court documents.

Master developers are less prevalent in the restaurant business than in other industries, but give the business owner a faster method of opening more stores, Kushell said. In most cases, restaurants prefer to work directly with the franchise operators, who often have more experience in the restaurant business.

In their lawsuits, the master developers claim that the Minidises diverted their income from franchise operations for their own benefit, rather than providing training for operators, advertising the RedBrick Pizza brand and registering franchise renewals in a timely manner.

The developers, whose lawyer, John Carpenter, declined to comment on the case, claim that “excessive and unconscionable sums of corporate funds were improperly diverted,” according to court papers.

The developers’ suits come after years of litigation between the Minidises and the original investors, who initially believed they were investing in a company called California Tortilla Fresh.

Dousette, who served on the board and as its vice president, claimed in court papers that she and her husband contributed all the financing while the Minidises gave nothing. A year later, she said the doctors signed a new agreement that gave them a 39-percent ownership in a new company called Caf & #233; Concepts Inc., but they relinquished all managerial responsibilities.

In the meantime, the doctors said they paid the Minidises $320,000 to build both the tortilla and Caf & #233; Concepts ventures. James Minidis “had no intention of opening any of the concept stores but rather intended to use the money invested by the plaintiffs to finance his own chain of restaurants, which were already in existence and in need of capital,” the doctors claim in their suit.

The Minidises, in their court papers, tell a different story.

They claim that the doctors had approached them for help while facing management and financial trouble in a separate venture, a bagel company that ultimately failed.

After that venture failed, both couples agreed to create California Tortilla Fresh and Caf & #233; Concepts, which were designed to “develop a series of fast food restaurants with different approaches,” court papers say. The Minidises also claim that the doctors “enticed” them to get involved in the venture by promising them a salary of $10,000 per month.