A former employee of Dallas-based Sun Holdings who said he was defrauded by the company and its owner was awarded nearly $31 million in damages this week following a civil court trial.
Guillermo Perales is the CEO of Sun Holdings, a large franchisee of several restaurant concepts including Burger King, Popeyes and Papa Johns.
The jury in Dallas County, Texas, first awarded $15.6 million in compensatory damages February 13 to Jerry Stockton, who in 2019 sued mega franchisee Sun Holdings and its CEO and owner, Guillermo Perales, alleging he was owed a share of the profits from more than 100 Popeyes restaurants. The next day, the jury awarded Stockton another $15.1 million in punitive damages, a verdict that assessed $12 million of that amount against Perales personally, according to court filings.
Perales founded Sun Holdings in 1997 and grew it into a large-scale franchisee of multiple brands, including Burger King, Papa Johns, McAlister’s Deli, Applebee’s and Popeyes, with about 1,800 locations. The company is ranked No. 4 on the Franchise Times Restaurant 200 list of the largest restaurant franchisees in the United States with $1.59 billion in revenue in 2022.
Stockton supervised operations for 23 Popeyes restaurants for AFC Enterprises before Sun Holdings acquired those units in 2001. Stockton then continued as director of operations and later vice president of operations for Perales’ 150 Popeyes units until he retired in 2018. In a lawsuit filed the following year, Stockton alleged he was the “key operator” for those restaurants and, through language in the franchise agreement and promises made by Perales, he was entitled to 5 percent of their operating profits.
“Defendants represented to Stockton that his 5% ownership interest in the operating profits of the Popeyes Restaurants for which he was Key Operator would be invested back into the Popeyes Restaurants until his retirement, when it would be disbursed to him,” according to the suit. Stockton also alleged Perales denied multiple requests and refused to pay any of the operating profits.
Stockton wasn’t expressly named as a key operator in the franchise agreement, said his attorney, Daniel Charest of Burns Charest, “but the nature of the fraud was that he wasn’t listed in the contract and he should have been.”
“It was a hard-fought, contentious litigation that I always thought would go to trial,” said Charest.
Perales in email comments said he was “shockingly surprised” by the verdict and believes the jury was confused by the definition of key operator in the franchise agreement.
Perales never promised Stockton 5 percent of the Popeyes profits, he said, and the provision in the Popeyes franchise agreement that states a “key operator” of the locations is entitled to that amount is targeted at investor-owned franchises, while Perales is the sole owner of Sun Holdings. He also said inaccurate figures were used to analyze operating profits and didn’t take into account rent, interest and other expenses.
David Coale, one of Perales’ attorneys and the leader of the appellate practice at Lynn Pinker Hurst Schwegmann, said he and his clients respect the jury’s decision “based upon what the jurors were actually allowed to see and hear.”
“Because of what we believe is a flawed claim based upon a largely one-sided narrative, we intend to challenge the verdict in the trial court,” said Coale in an email. “If a judgment is entered, we will appeal, and expect that any judgment will be reversed as to all parties.”