Burger King sues one of its largest franchisees

The company has terminated the operator’s franchise agreements for 37 stores in Texas, one of which was the subject of a video featuring rats in the kitchen.
Photograph: Shutterstock

Burger King Corp. is suing one of its largest operators to terminate the franchise agreement for 37 locations in southern Texas, one of which was the location of a video showing rats inside the restaurant.

The Miami-based chain, a subsidiary of Toronto-based Restaurant Brands International, has sued Fritz Management and Guillermo Perales to get the operator to stop using the company’s brand name in those 37 locations.

Perales is CEO of Sun Holdings, a large multibrand franchisee that operates more than 800 locations in numerous brands including Popeyes Louisiana Kitchen, Krispy Kreme and Arby’s. The company recently acquired Taco Bueno out of bankruptcy court.

A Burger King location in Harlingen, Texas, was shut down in February after an employee took photos and videos of unsanitary conditions in the kitchen. Media reports featured videos showing rats and newborn mice next to burger buns.

According to the quick-service chain’s lawsuit, Burger King accused Fritz Management of “exhibiting reckless disregard for the physical and mental well-being” of employees, customers, the system and the public.

The company said that it had declared the Burger King location in default of its franchise agreement in February, demanding the operator fix the problems. Media attention about the location soon followed, which “generated significant negative social media comments about the Burger King restaurant system.”

The incident also hurt sales in the market, which has “worsened over time.”

In its lawsuit, the company said that the incidents “were not isolated.” The company said that it increased inspections in the market, and of Fritz Management’s restaurants there. The operator closed four locations before those inspections began and closed two additional restaurants afterward.

Burger King then terminated Fritz Management’s franchise agreement in Texas, including 34 locations in cities such as McAllen and Brownsville. 

The franchisee has continued to operate the locations.

Perales said he was "surprised" by the lawsuit but could not offer more comment as of early Monday afternoon.

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