Lefty's Cheesesteaks, founders sued by relative

The founders of Lefty's Famous Cheesesteaks Hoagies & Grill, which started in metro Detroit, decided to bring a relative with franchising experience into the business to help expand.

Now, almost three years later, the restaurant chain has nearly tripled the number of locations but the relative is suing the founders, saying they are squeezing him out of the company.

The relative, Allie Mallad, who lives in Florida, filed a lawsuit last week in Wayne County Circuit Court against Lefty's founders Hussein (Sam) Berry, of Canton, and Nayfe Berry, of Dearborn Heights, as well as the company itself — Lefty's Holdings — and a company officer. Nayfe Berry is Mallad's cousin and Sam Berry is Nayfe Berry's son.

In the lawsuit, Mallad accuses the founders and others of:

• Not properly sharing all of the money Mallad was entitled to as a minority owner.

• Halting all future franchising, which Mallad says the founders are not allowed to do unilaterally.

The halting of franchising was particularly upsetting because that was the reason the Berrys reached out to Mallad, the lawsuit says.

Lefty's had 11 corporate-owned locations in spring 2020, when the Berrys reached out to Mallad for help converting Lefty's to a franchise business model and expanding on a national scale, according to the lawsuit.

The suit noted that Mallad had decades of experience as a franchisee with multiple chains, including Little Caesars, Bruegger's Bagels and Golden Corral, and had founded two chains of his own — Red Effect Infrared Fitness and Massage Green Spa.

More recently, Mallad started a divorce-themed restaurant, Ex-Wife's Famous Chicken, with locations in Dearborn Heights, Warren and Battle Creek.

The original agreement

Sam Berry started Lefty's in 2012 at its original location in Livonia. His mother, Nayfe Berry, also is an owner.

Sam Berry reportedly survived a battle with cancer in his 30s while growing the business.

The lawsuit says the trio 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.

With Mallad's help, the suit says, Lefty's had grown to 52 locations in Michigan, Ohio, California, Florida and Texas by 2022. Mallad had invested about $4 million of his own money to open restaurants and grow the brand.

An attorney for the Berrys issued the following statement Monday in response to the lawsuit:

"This litigation, between relatives who are members of an LLC, is very unfortunate and not in anyone's interest. Mr. Mallad continues to own his interest in Lefty's and to operate his own franchised stores independently. The facts will establish that he has not been denied anything he is entitled to and that, unlike Mr. Mallad, our clients have fully complied with the agreement between the parties. We will aggressively fight this frivolous litigation while continuing to build our brand and provide an outstanding experience to franchisees and, most importantly, their customers."

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'Protecting his interests'

Mallad's attorney, Bernard Fuhs, spoke to the Free Press this week. He said it was unfortunate that his client had to file a lawsuit.

"My client really had no choice and had to take these steps to protect his interests, and more importantly, help the company to succeed going forward," Fuhs said.

But the lawsuit claims Mallad was growing concerned about Sam Berry's "unprofessional behavior" that he believed imperiled the brand's growth prospects.

The lawsuit blames Sam Berry for losing franchisee prospects and accuses him of insulting a real estate broker and the company's credit card processor. It also claims that Sam Berry's brash boasts on social media damaged the Lefty's brand and may have contributed to the closing of a Lefty's location in Dearborn.

The lawsuit highlights a video that Sam Berry allegedly posted in September 2021 on social media that showed Berry in a Ferrari and wearing a shirt with a Lefty's logo and saying: "You know what the best part of being rich and powerful is? Aside from buying anything you want in life, is the fact that you get to watch everybody try to (expletive) on your dreams. And you want to know why they try to (expletive) on your dreams? It's because you made your dreams come true. And that's something they can never do."

The lawsuit didn't identify the social media platform.

The lawsuit claims Mallad went on to discover the Berrys weren't properly sharing all of the money he was entitled to as a minority owner, such as revenue from DoorDash and Uber Eats.

And it says Mallad was shocked when Sam Berry told him in December 2021 that Lefty's would halt all future franchising.

Mallad responded that Berry didn't have the unilateral authority to make that decision, the lawsuit says, to which Berry replied, "In today's economy, and help shortages, I feel we can't franchise right now! It's my decision ... we also have internal problems with this relationship! Also your stores aren't being run correctly!! And that's putting it nicely!!"

That abrupt halt to franchising "squeezed Mallad out of the financial benefits owed to him," the lawsuit said.

By June of last year, the Berrys had stopped sharing with Mallad full financial information about the company, the lawsuit said. Undeterred, Mallad did some investigating, the lawsuit said, and found unapproved expenses like $50,000 paid to the Detroit Pistons for advertising and "improper" distributions that were not made to minority owners, like himself. There are other minority owners.

The lawsuit seeks an unspecified amount of damages and the right for Mallad to purchase, at fair value, the Berrys' ownership interest in the company.

Some Lefty's restaurants have closed and the chain now has 33 locations.

"He's always wanted Lefty's to succeed and continues to have that vision," Fuhs said of Mallad.

Contact JC Reindl: 313-378-5460 or jcreindl@freepress.com. Follow him on Twitter @jcreindl.

This article originally appeared on Detroit Free Press: Lefty's Cheesesteaks, founders sued by relative