Yakima among 10 Pacific Northwest Sonic Drive-In locations closed because of financial dispute

A financial dispute between the parent company of Sonic Drive-Ins and a group of Pacific Northwest franchisees prompted a lawsuit that has closed 10 of the chain’s restaurants in the region, including the Yakima and Ellensburg locations.

The company’s allegations of missed royalty and fee payments and quality control problems such as undercooked meat and unsafe food and drinks prompted a U.S. District Court judge in Oklahoma to order the restaurants closed, court documents indicate.

Attorneys representing the franchisees dispute those claims, and the civil court case remains unresolved.

The Sonic Drive-In at 1327 S. First St., licensed in 2008 to Olympic Cascade Drive Ins LLC with guarantors Richard Ramsey and Stephen Snyder, has been closed since early September.

While plastic bags cover the entrance and exit signs at the intersection of First Street and Ranchrite Road, the large Sonic sign on the restaurant site’s northwest corner still stands, and during a brief visit to the property by a Yakima Herald-Republic reporter Monday, one vehicle drove around the building, attempting to order food.

The lawsuit, filed June 1, 2022, alleges the franchisees failed to pay nearly $2 million in royalties and fees required under their licensing agreements with Sonic Drive-Ins, a corporation based in Oklahoma.

According to documents filed in U.S. District Court, on Sept. 2, 2021, Sonic delivered a written notice of default and potential termination of license agreement for the Sonic restaurants in Yakima, Ellensburg, Kennewick, Pasco, Wenatchee, Ferndale, Poulsbo and Renton, and in Salem and Keizer, Ore.

The company states in court documents that by the end of 2021, Sonic terminated the franchisees’ licensing agreements due to the failure of payment, but offered the franchisees an opportunity to continue operation in order to sell the restaurants.

In May 2022, after the company claimed no progress had been made on selling the restaurants, Sonic terminated the license agreements, court records state. This required the 10 Washington and Oregon restaurants to cease operations under the Sonic brand, remove all Sonic signage and pay the outstanding royalties and fees.

When the restaurant closures failed to occur, a lawsuit was filed in federal court.

Plastic bags cover the entrance signs (seen on right side of photo) at the Yakima Sonic Drive-In restaurant near South First Street and Nob Hill Boulevard on Monday, Oct. 3, 2022.

In a July 5 response to the company’s lawsuit, attorneys representing Olympic Cascade and Ramsey disputed the company’s claim that continued operation of the restaurants would result in any damage to the Sonic brand or reputation.

“The dispute between (Olympic Cascade) and Sonic is purely financial in nature,” the defendants’ response stated. “Sonic has not asserted that (Olympic Cascade) has violated any system standards or that Sonic cannot visit the locations and monitor exactly how they are operated.”

The response also stated that closing the businesses, with a combined worth of approximately $12 million, would prevent any chance of selling them and would cause 220 employees to lose their jobs.

U.S. District Judge Patrick Wyrick issued a temporary restraining order Aug. 24, requiring the 10 Washington and Oregon restaurants to close within the next 10 days.

“Since Sonic terminated the (licensing) agreements and lost the ability to monitor and control the restaurants, there have been reports of serious quality control problems, including: multiple reports of serving raw or undercooked chicken or beef; rancid drinks and shakes; hair and gnats in food; and mildew in food,” Wyrick wrote.

“Further, since the restaurants have lost access to Sonic’s suppliers, they have started selling non-Sonic products under the Sonic mark,” he added. “It is clear that Sonic has lost control over (the) defendants’ restaurants, that Sonic can no longer monitor the use of the mark to ensure quality control, and that customers will almost certainly attribute the poor service to Sonic.”

Ramsey replied Sept. 6 that all 10 restaurants were closed and would not be re-opened as Sonic Restaurants by Olympic Cascade.