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Burger King franchisee pushes back against company’s lawsuit

Guillermo Perales’ attorney said the brand’s termination of 37 Texas restaurants was improper and that the company is trying to get the operator to sell.
Photograph: Shutterstock

The owner of 37 Burger King locations sued this week over a rodent infestation at one of them said the restaurant had been cleaned and fumigated and received perfect marks from local health inspectors.

Robert Zarco, attorney for franchisee Guillermo Perales, accused the franchisor of “bullying” his client in a bid to get him to sell restaurants in other markets to another franchisee. Perales is one of the country’s biggest franchisees. He owns about 300 Burger King locations in multiple states.

He also operates Arby’s and Krispy Kreme, and recently acquired Taco Bueno.

“This is an improper and wrong termination,” Zarco said in an interview with Restaurant Business. “Getting someone to disengage from 37 restaurants because there’s a rat and some cockroaches in one restaurant is inappropriate.”

Burger King sued Perales and one of his companies, Fritz Management, to get him to stop using the chain’s name on 37 locations in Texas.

Included in the terminations was a location in Harlingen, Texas, where media reports in February featured video of rats and mice near buns in the kitchen. The company said that publicity from the video hurt sales and argued that the incidents “were not isolated.”

But Zarco blamed the infestation on a hole in the location following a recent remodel. And he said that the location was fumigated and that city health inspectors gave the location a 100% score following an inspection.

Zarco argued that the termination is part of a growing effort on Burger King’s part to get Perales to sell his Burger King locations in other markets to operators more willing to add locations.

“In our view, in my client’s view, there is an ulterior motive,” Zarco said. “Burger King has to latch onto any opportunity they can to force the client out.”

A Burger King representative did not respond to requests for comment.

Perales has been among the most aggressive franchisees in developing, remodeling, and buying locations. He has been an operator in the system for 20 years and was among the first franchisees to buy locations when Burger King began refranchising company units after 3G Capital acquired the brand in 2010.

But Burger King has been aggressively pushing more growth and has been directing restaurants into the hands of operators more willing to build units.

Zarco said that conversations between Burger King and Perales indicated that the brand would require any buyer of his restaurants to commit to numerous additional locations.

“The reality is that some of the conversations they have had with him have indicated that if he goes to sell some restaurants, the buyer will be required to commit to 30, 50, 70 additional units,” Zarco said.

He also said that Perales’ history as an operator is a good one, as demonstrated by the number of locations he currently operates. Perales’ Sun Holdings also operates Arby’s, Krispy Kreme, and Popeyes Louisiana Kitchen locations.

“These are not the kinds of acts consistent with how Guillermo runs his business,” Zarco said. “Do you think all these major brands would be pushing him to expand and grow if they were? Not a chance.”

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