A quick search of the internet revels that this rumour is well spread.
The Red Barn restaurant was a fast-food restaurant chain that was founded in 1961 in Springfield, OH by Don Six, Martin Levine and Jim Kirsch. In 1963, the small chain was purchased by Richard O. Kearns, and the offices moved briefly to Dayton, OH, followed by a move in August 1964 to Fort Lauderdale, FL. In the late 1960s Servomation bought the company followed by Motel 6 in the late 1970s. The new owners ceased advertising for the chain and the franchise leases were allowed to expire with the last of the leases expiring around 1986. At its peak, Red Barn had 300-400 restaurants in 19 states as well as outlets in Southern Ontario, elsewhere in Canada, and in Australia.
Following the shutdown of operations, most of the Red Barn buildings were converted for other uses. A few of the chain restaurants were renamed "The Farm" in various states and continued serving the same menu items that were available when they were under their Red Barn franchise.
A vintage television commercial:
There is some discussion that these puppets were created by Jim Henson but I've found nothing to substantiate this claim.