If you think the food is spicy at Cafe Rio and Costa Azul Fresh Mexican Grill, wait ’til you see the lawsuit.

Theft of recipes, menus, kitchen layout and even the concept of a frequent diner card were among the allegations of unfair competition made by Cafe Rio Inc., a Provo-based Mexican and Tex-Mex restaurant chain, in a lawsuit filed Monday against Salt Lake City rival Costa Azul Holdings LLC in 3rd District Court.

The company is now in the process of changing its Provo and Layton restaurants’ Costa Azul name to Costa Vida because it discovered, while expanding out of state, the Costa Azul name already was registered as a trademark.

“Costa Vida has not copied one or two items from the Cafe Rio concept, but rather has systematically copied the operational innovations, procedures, methods, models, recipes, procedures and processes,” Cafe Rio said in the suit, which alleges violations of the Utah Uniform Trade Secrets Act and Utah Unfair Trade Practices Act.

These include Cafe Rio’s food preparation methods and recipes, menu offerings and pricing, and kitchen, check-out and dining room layouts. Even Costa Azul’s frequent diner cards is of the same size as Cafe Rio’s, the suit alleged.

Cafe Rio further identified several parties it claims is responsible for the alleged misappropriation of its trade secrets. They include Kenny Prestwich, a former general manager at Cafe Rio’s Fort Union restaurant who was terminated on Nov. 19, 2001, and who now “holds himself out as the president of Costa Azul,” the suit said. Prestwich is accused of disclosing Cafe Rio’s trade secrets to Costa Azul when he left in November 2001 having signed confidentiality agreements in January and February 2001.

But Nate Gibby, director of marketing and corporate communications with Costa Azul Management Inc., said it “categorically denies all of Cafe Rio’s claims.”

“Kenny Prestwich helped us to select locations and open stores. He is not the president of Costa Azul, nor is he a shareholder or owner,” Gibby said.

Other defendants in Cafe Rio’s suit include Jerrold D. and Sarah Gardner, founders of Costa Azul; Ryan and Brett Burkinshaw and Rustin Randall, owners of a franchise, Costa Vida Fresh Mexican Grill, in Mesa, Ariz.

The suit seeks an injunction requiring the defendants to return Cafe Rio’s recipes, trade secrets, intellectual property, as well as an accounting of all proprietary data used to develop Costa Azul’s business model and restaurants.

“It’s gotten to a point where we have to take action because the confusion is increasing, and both Cafe Rio and Costa Azul are planning to expand,” said Perrin Love, a Cafe Rio attorney. “The people who go to Costa Azul’s restaurants are confused. They think they’re in Cafe Rio, or they think they’re eating Cafe Rio’s food.”

For example, Cafe Rio customers routinely ask its workers for the address and phone number of the “Cafe Rio in Layton,” and indicate they have “been to the Cafe Rio in Layton,” the suit said. Cafe Rio, which has seven restaurants in Utah including restaurants in Provo and American Fork, currently doesn’t have any locations in Layton. But it plans to open a new restaurant in Layton in June and one more in Bountiful in July, as well as other new locations in Utah, Nevada and Arizona.

Even the obvious similarities between the two restaurant chains have been “perceived by customers and others,” the suit said, citing two Daily Herald reports on Sept. 9, 2004, and Sept. 23, 2004.

In the Sept. 23 review, the two restaurants were described as “eerily familiar” in terms of the similarity between its food and even its long lines. “Costa Azul does such a dead-on rendering of these dishes that it’s tempting to wonder who copied whose recipes — and when,” the suit said, citing the Herald’s Sept. 9 review.

Last month, Cafe Rio said it began receiving inquiries from customers on its Web site on whether the two restaurants are affiliated.

Bob Nilsen, one of several partners of Cafe Rio, said he found it “deeply disturbing to have customers call and complain about Costa Azul, which they describe as a ‘knockoff’ or ‘copycat’ of Cafe Rio.”

“Our concept has been eight years in the making. We can’t sit by when people are trading on the good will and proprietary trade secrets developed and owned by Cafe Rio,” Nilsen said. “We want them to stop using our recipes and concepts, which includes the way we serve and prepare meals, and our concept of the food line, menus and displays in the restaurants.” Nilsen declined to comment on why Prestwich was terminated and the amount of business lost to Costa Azul.

Nilsen, a former chief operating officer of Taco Bell and a former president of Burger King worldwide, partnered with a private equity group, Apex Partners, to acquire Cafe Rio from its founders, the Stanleys, in January. The new entity opened Cafe Rio’s seventh location in American Fork recently.

But Costa Azul’s Gibby disputed Cafe Rio’s allegations, questioning if the lawsuit was “an attempt to snuff out competition.”

“We are completely surprised by this complaint and its timing given that we have been operating for nearly two years and have heard nothing of these allegations since we opened for business,” he said. “We’re currently investigating whether this has anything to do with Cafe Rio’s recent purchase by Apex.”

Founded in May 2003 by the Gardners, Costa Azul owns four restaurants including one company-owned location in Layton and three franchise stores in Provo, the Gateway in Salt Lake City and Mesa, Ariz.

Costa Azul plans to expand to other areas in Utah and Idaho. “We’re still planning to expand, and we think we can still grow and succeed despite the lawsuit,” Gibby said.

This story appeared in The Daily Herald on page A1.

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