Bankrupt Popeyes franchisee sues firm after deal collapse

A bankrupt Popeyes franchisee is fighting to keep $2.5 million from an investment firm that abandoned a deal to buy nearly two dozen of its restaurants. Miami-based Sailormen Inc., which filed for Chapter 11 bankruptcy in January, has sued RFI Ventures in U.S. bankruptcy court, arguing the firm improperly backed out of its agreement to purchase 23 Orlando-area locations and should forfeit its deposit as liquidated damages.

Sailormen, which operated over 136 locations in Florida and Georgia, was attempting to sell its restaurants to various buyers as part of its bankruptcy proceedings. RFI agreed to purchase the nearly two dozen restaurants for about $2.5 million as part of a larger auction where 97 of the franchisee’s locations were being sold.

Following RFI’s withdrawal from the agreement, Sailormen sought court approval to continue operating the restaurants while searching for a new buyer.

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In July, a replacement buyer, SBH Foods PLK, agreed to acquire the locations for $2.7 million — or about $200,000 more than the original offer. The deal allowed the bankruptcy sale process to move forward for the locations. SBH, an existing Popeyes franchisee, had already agreed to buy five locations in the Savannah, Georgia, market.

Now, Sailormen is asking the U.S. bankruptcy court for the Southern District of Florida to let it keep RFI’s $2.5 million deposit as a forfeiture payment. RFI put that $2.5 million into escrow as part of the proposed transaction earlier this year.

In court filings, Sailormen argues that the $2.5 million constitutes the “deposit” under the parties’ initial agreements and is therefore property of the bankruptcy estate.

“Because RFI tendered the purchase price as a deposit in consideration for Sailormen’s extension of the closing date and attempted to justify its nonperformance through newly asserted and contractually unsupported grounds for termination, Sailormen is entitled to retain those funds,” the franchisee argues.

This lawsuit is the latest in an ongoing effort to find homes for Sailormen’s extensive Popeyes portfolio. In its Chapter 11 bankruptcy filing, the franchisee estimated that it had about $130 million in debt and “faced significant challenges” throughout the past year leading to its financial struggles, including rising operational costs and consumer behavior changes driving lower traffic.

In March, 20 of its restaurants in Florida and Georgia closed, including three in which their leases were rejected.

In June, Sailormen found buyers for 97 of its restaurants across Florida, including Pulse Restaurant Group, which was established by Sailormen CEO David Damato, as well as RFI, and 61 Biscuits LLC.

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Sailormen was founded in 1984 and previously operated restaurants across five states before consolidating its footprint in Florida and Georgia. Nation’s Restaurant News reached out to Popeyes for a statement about this latest lawsuit.

Contact Alicia Kelso at [email protected]

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