Burger King sues Texas firm, seeks to force store sale
By RICK KELLEY
HARLINGEN — Burger King Inc. has taken the extraordinary step of suing one of its biggest franchisees to force the sale of its 37 South Texas restaurants.
The Valley Morning Star was unable to obtain a list of those restaurants. It is likely there are Burger King restaurants in the Valley owned by other franchisees.
The lawsuit follows media reports surrounding an employee video which was broadcast on Telemundo 40 in February showing rats and baby mice in a restaurant in Harlingen at 1902 S. 77 Sunshine Strip. The location closed temporarily for fumigation and cleaning and reopened last week.
Restaurant Brands International Inc., Burger King’s parent company, filed suit Friday in federal court in Florida against Irving, Texas-based Fritz Management LLC and Guillermo Perales, CEO and president of Dallas-based Sun Holdings Inc.
The suit says the sanitary practices of its franchisee resulted in “conduct which is deleterious to and reflects unfavorably on them and the Burger King restaurant system by exhibiting a reckless disregard for the physical and mental well-being of employees, customers, BKC representatives or the public at large.”
But yesterday, a lawyer for Perales said the recently remodeled restaurant has passed two subsequent health inspections within the past 45 days and meets all state and local standards. He said the problem was created by improper sealing of walls and duct work during the remodeling, allowing rodents access to the restaurant.
“It’s unfortunate that Burger King chose to target my client to eliminate him from being a franchisee of 37 stores in a particular market,” said Robert Zarco, a principal at one of nation’s top law firms in the field of franchising, Zarco, Einhorn, Salkowski and Brito of Miami. “For some reason Burger King has a desire to take over as a result of there being some rodents or pests in a restaurant, which is common in the restaurant industry.”
Emails to Burger King for comment yesterday went unreturned.
Burger King wants Fritz Management and Perales to remove all Burger King signs and trademarked items from restaurants in Harlingen, Brownsville, McAllen, Pharr, Weslaco and several other South Texas cities.
Sun Holdings is a multi-brand company with nearly 900 franchises including Burger King, Krispy Kreme, Arby’s, Cici’s Pizza, Popeyes, Golden Corral, T-Mobile and GNC. The company recently acquired Taco Bueno, which had filed for bankruptcy.
Zarco said his client invited Burger King to do its own inspection of the Harlingen facility, and said to his knowledge the parent company did not pursue the offer. He blamed an “ulterior motive” for Burger King’s attempting to force his client to divest himself of his 37 South Texas locations.
“Just think about it,” Zarco said. “One restaurant has an issue and you’re going to force them to get out of 37 restaurants? You’re talking about a franchisee who owns franchises from many other brands.”
Zarco alleges Burger King is moving against Pareles to force him out of the South Texas market completely in order to shift the franchises to other owners of its choosing.
“I don’t want to be speculating at the highest level of speculation, but in our view, for some reason the restaurants my client is being asked to sell are restaurants that we believe Burger King is looking to give to other franchisees in that market, or other people that Burger King has a special relationship with,” he said.
Zarco said Burger King is pressuring franchise owners to open more restaurants.
“Burger King has requested, almost required, the buyers of these restaurants to commit that they will develop either 30 or 50 or 70 additional units as a condition,” he said. “That leads me to believe they want my client to expand more aggressively than my client believes the market can support. And because my client does not believe it is commercially reasonable to over-expand.”
What does Burger King want?
Burger King wants the franchisee to remove all Burger King signs and trademarked items from restaurants in Harlingen, Brownsville, McAllen, Pharr, Weslaco and several other South Texas cities.
Free Whopper Jr. on offer
“The owner of the Burger King in Harlingen (1902 S. 77 Sunshine Strip), as an act of good faith and to reflect his apology for any inconvenience that the temporary store closing has had on the community, is offering free Whopper Jr.’s to each in-store customer of the Harlingen restaurant only from this coming Sunday through Thursday after 3 p.m.”
— Attorney Robert Zarco