Financing

Jury awards $31M in lawsuit against a Popeyes franchisee

A former employee of Sun Holdings had accused the 150-unit Popeyes operator of reneging on a promise of 5% of the annual operating profits.
Popeyes
A jury sided with a former worker in a lawsuit against Popeyes operator Sun Holdings. | Photo: Shutterstock.

A jury this week awarded a former employee of Dallas-based Sun Holdings nearly $31 million in damages to a former employee who said the Popeyes operator owed him a share of the restaurants’ profits.

The jury initially awarded $15.6 million in compensatory damages to Jerry Stockton, who had sued Sun Holdings and its owner, Guillermo Perales. The jury then awarded Stockton another $15.1 million in punitive damages.

“The jury correctly concluded that Mr. Stockton had been defrauded by Mr. Perales,” Daniel Charest, an attorney with Burns Charest, the law firm that represented Stockton at trial.

Perales said in an interview that he would appeal.

Sun Holdings is a massive franchisee of multiple brands, including Burger King, Arby’s, Applebee’s, IHOP, Papa John’s and Popeyes.

Stockton had been director of operations and then vice president of operations for the Perales’ 150 Popeyes locations before he retired in 2018.

Stockton sued one year after his retirement, alleging that as the “key operator” for the restaurants, he was entitled to 5% of their operating profits.

He alleged in his lawsuit that he was encouraged to delay taking his share of the operating profits until his retirement. Stockton also alleged that Perales denied his request for those operating profits on multiple occasions.

Perales said in an interview that he hadn’t promised Stockton 5% of the operating profits of the Popeyes units, and that he had been paid a salary and a bonus. He said the issue is rooted in a confusing section of the Popeyes franchise agreement, which says that a “key operator” of the locations is entitled to 5% of the restaurants’ operating profits.

But Perales said that the provision is targeted at investor-owned franchises. Sun Holdings is owned solely by Perales himself. He also argued that the $31 million award was derived from a 38% profit margin for the restaurants, which didn’t factor in costs such as interest and rent.

“It gets so technical that it gets confusing, especially for a jury,” Perales said.

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