Golden food hall owners, vendors tangle over claims of “self-dealing”

Denver chef Jesus Silva, who started his restaurant career at 11 in his home country of Mexico, has won respect and recognition for his work and creative food concepts from the Denver Central Market to the Stanley Marketplace and Milepost Zero in McGregor Square.

Silva, like many of his peers, struggled when COVID-19 hit. One venture closed at the height of the pandemic, but he opened stalls at the Milepost Zero food hall and helped open the Golden Mill food hall in Golden.

Then legal troubles hit. The legal dispute has spawned accusations of conflicts of interest, intimidation and bullying tactics. Silva said it has left the fate of his business and his more than 30 employees at Golden Mill up in the air.

“The worst thing we ever experienced in the industry was COVID,” Silva said. “I would think after COVID, nothing can be worse. And now I’m dealing with this. Oh my god, this is never going to end.”

By “this,” he means strife between him and his business partners, who lease three food stalls at the Golden Mill, and the property owners and operators, doing business as Golden Mill Ops. The operators sent a notice in January to Silva and his partners, whose business is called Golden Mill Food Concepts, to say their license was in default and would be terminated.

The operating group forwarded a new lease without input from Food Concepts, Silva and a partner said.

The latest development is a complaint filed Feb. 24 in Denver District Court against Food Concepts that accuses one of the partners, Mark Shaker, of conflict of interest and “self-dealing.” He was co-manager for the operating group when he signed a lease with Food Concepts without disclosing his partnership with the lessees, the complaint said.

Golden Mill Ops wants the court to declare the license with Shaker, Silva and a third partner, James Wright, void. The operating group claims Shaker took advantage of the group’s trust by failing to disclose his conflict of interest and signed contracts that were harmful to the operators.

Shaker, a co-founder of the Stanley Marketplace, said all the members of the operating group “knew unequivocally” that he was a partner in Golden Mill Food Concepts. He said the contracts for his partners’ food stalls were nearly identical to ones approved for two separate stalls and that Food Concepts has generated a lot of money for Golden Mill.

“We have a very successful food operation. We have a binding contract and we are producing at exponential numbers above projections,” Shaker said.

Food Concepts has an attorney. The Colorado Hispanic Chamber of Commerce has weighed in, saying Silva is “an esteemed Mexican American business owner.” The organization is calling on Golden Mill OPS to reach a fair resolution to the matter.

“Business is a contact sport. I think we all know that, but you can’t change the rules in the middle of the game,” said Mike Ferrufino, the chamber’s CEO and president.

Brand new food hall

The Golden Mill food hall was first a flour mill, opened in 1864, and then a livestock feed store. The property in downtown Golden was put up for sale in 2018 and a few locals believed the landmark “could find new life as a community gathering place,” members of Golden Mill Ops said in an email.

The managing members of Golden Mill Ops are Wes and Susan Ganter, Don Martin and Corby Felsher. In December 2020, Susan Ganter told BusinessDen that she and the others who bought the property “knew it was too cool of a location to let it get torn down and become another condo complex.”

The Golden Mill sits along Clear Creek and has a rooftop deck with views of North and South Table mountains and Mount Zion.

Shaker said the owners and he had a mutual acquaintance. He said the owners reached out to him about helping transform the mill because of his experience in the food and beverage industry.

Besides helping start the Stanley Marketplace in Aurora, Shaker co-founded the Broadway Market food hall where he worked with Silva. The market closed after a second wave of COVID-related restrictions.

“They basically asked, ‘Can you build a mini Stanley Marketplace?’ ” Shaker said of his discussion with the owners.

A partnership was formed. Shaker said members raised money, got a bank loan and started designing and building the project. The food hall opened in April 2021.

Shaker said he and Silva originally planned to lease one of Golden Mill’s five stalls, but Food Concepts signed on for three when other vendors couldn’t be found because of the uncertainty around COVID-19.

“We’ve been doing pretty well until recently, a month and a half ago when they sent to us a new contract and said if you don’t sign it, you need to leave,” Silva said. “And we’re like wait, we have a contract with you guys already.”

But in a Jan. 19 letter to Food Concepts, Golden Mill Ops cited a series of alleged defaults on the license. The letter said the contract was void because Shaker violated his duties to the operating group when he signed the contract with Food Concepts on behalf of Golden Mill Ops even though he was in business with Food Concepts.

The lawsuit claims Shaker, who was removed as a co-manager of Golden Mill Ops, failed to disclose the conflict of interest, “engaging in self-dealing to the detriment of GM OPS” and approving a contract that was unfavorable to the operating group.

Attorney Michael Murray, representing Food Concepts, said in a Jan. 26 letter to attorneys for the operators that there are “a number of emails and meeting minutes directly contradicting the allegation” that the operating group didn’t know about Shaker’s partnership with Silva and Wright.

Murray also disputed the contention that the contract for Food Concepts is harmful to Golden Mill Ops. Based on the contract requirements, Food Concepts has paid $1.2 million, or 20% of its gross sales, in rent, he said. The group’s sales have totaled $3.6 million, triple the original projections, according to Shaker.

If sales remained flat the next seven years, which represent the remaining time on the contract and two extensions, the three food stalls would produce roughly $24 million, Murray said. Golden Mill would get $5.2 million in rent.

Members of Golden Mill Ops declined to talk to The Post but said in an email that Shaker’s conduct “resulted in a contract that included terms that were not commercially reasonable for this type of business operation.” The legal complaint objects to the length of the contract — three years — and a provision giving lessees the option to extend the lease for two more three-year terms.

The new contract that Golden Mill Ops wants all five food stalls to sign would be for one year. The decision on one-year extensions would be up to the operating group, according to a copy of the proposal obtained by The Denver Post.

Ken Wolf, the founder of Denver Central Market in Denver’s River North neighborhood, said a one-year lease would be unfair to the vendors. Wolf, who has worked with Silva and Shaker, said the 12 food stalls at the Denver Central Market have five-year leases with another five-year option.

“How can someone have an established business knowing they have a one-year lease?” Wolf asked. “People who have these stalls, it’s their business. In some ways it’s no different than having a brick-and-mortar location. They establish a clientele.”

The new contract would change the required minimum gross sales for Food Concept’s three stalls — Sushi Sora, Tacos Al Chile and Republik of Chiken— from a combined $1 million a year to a monthly minimum based on an average of the three previous months of sales.

Wolf doesn’t think the original contract is a disadvantage for the food hall operators. “I would be ecstatic to make as much money off of one of those stalls as these landlords are. This is way more profitable than my situation, and I’m fine with my situation.”

Too much on his plate

Golden Mill Ops members said Food Concepts continues to operate at Golden Mill while they aim to amicably resolve the dispute and reach “commercially reasonable terms,” in new contracts.

However, Shaker said the operators are showing Food Concepts’ food stalls to prospective new vendors. He called the tours “disrespectful.”

“While we’ve had interest from other vendors, we continue to operate in good faith and remain hopeful that both parties can work together to resolve this contract dispute,” Golden Mill Ops said in an email. “Regarding the other two food stalls, we have negotiated a new license agreement with one and are continuing to negotiate a new license with the other.”

Food Concepts is willing to negotiate points of the existing contract, Shaker said, but Golden Mill OPS hasn’t responded. In the letter to Golden Mill Ops, Murray said rather than negotiate, the operating group sent a proposed new agreement Jan. 3, declaring it would take effect Feb. 1.

A year ago, Silva said Golden Mill OPS approached him about leaving his partners and joining them. Silva, who has a 10% stake in Food Concepts, said he declined. “I have a great relationship with my partners now. I have a contract with them. I respect that.”

Shaker said the operating group members talked to Silva behind his back.

Ferrufino of the Colorado Hispanic Chamber of Commerce said in a Feb. 17 letter to Golden Mill Ops that he’s “passionate about supporting Hispanic-owned businesses and ensuring they receive a fair and just treatment.”

“It’s not common for someone in Jesus’ position to be an owner or co-owner,” Ferrufino said in an interview. “About 70% of a kitchen’s back-house staff is Hispanic in the entire metro area yet only about 9% of Latinos and Hispanics are owners or co-owners of restaurants.”

Silva wants to find a solution. “I don’t want to be fighting. The restaurant industry is already a lot of stress. I don’t need more on my plate,” he said.

Get more business news by signing up for our Economy Now newsletter.

Source: Read Full Article