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Court documents show former restaurant owner is also a defendant in a lawsuit against Popeyes, its parent company Restaurant Brands International Inc. and others over ‘unsafe’ chicken.Galit Rodan/The Globe and Mail
A Popeyes Louisiana Kitchen franchisee whose restaurants were shut down last month after employees raised allegations of unpaid wages has had his companies placed into receivership, with debts totalling roughly $10.8-million.
Court documents filed in the case and corporate record searches show that the former restaurant owner, Irfan Memon, is also a major defendant in a lawsuit filed in May against Popeyes, its parent company Restaurant Brands International Inc. QSR-T and Toronto-area franchisees.
Companies controlled by Mr. Memon operated seven out of 27 locations listed in that lawsuit, in which a former poultry supplier to Popeyes, ADP Direct Poultry Ltd., accused the restaurants of buying “unsafe” meat from an unauthorized supplier. The allegations have not been tested in court, and Restaurant Brands has said, most recently in July, that it found no evidence of those claims.
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The seven restaurants named in the lawsuit are included in a total of 14 companies, each operating a Popeyes location, that have now been placed in receivership – a process that allows for assets to be liquidated to pay back a company’s debts.
Documents filed in the receivership show that shortly after ADP’s lawsuit was filed, Restaurant Brands raised questions with Mr. Memon’s companies about where his restaurants were buying their meat.
In a notice of termination of their franchise agreement, sent on Sept. 18, Popeyes stated that it had advised Mr. Memon’s companies in June of “significant discrepancies” between the quantity of chicken the restaurants were buying from approved suppliers and the quantity of chicken that they sold. The notice said the franchisee had not provided “sufficient or satisfactory” explanation of those discrepancies.
While Restaurant Brands maintains that the claims in ADP’s lawsuit “are examples of them lashing out after losing our business for legitimate reasons,” spokesperson Emily Ciantra wrote in an e-mailed statement to The Globe and Mail, the company nevertheless decided to examine the records of all the chicken purchases and sales by franchisees over a six-month period.
The same termination document reveals there were also concerns about food safety related to one of Mr. Memon’s locations, a Popeyes at 3591 Sheppard Ave. E. in Toronto, which was the subject of a default notice that the company sent in May related to “the presence of rodent activity” in the restaurant.
“In the rare circumstance where something like this happens, the restaurant is immediately closed for deep cleaning and not reopened until we are satisfied that measures have been taken to avoid a repeat,” Ms. Ciantra wrote.
When the parent company sends default notices to franchisees, it typically allows them a small window of time to fix the issue, she added.
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Popeyes’ lender filed a receivership application on Oct. 8, and it was granted on Oct. 10.Galit Rodan/The Globe and Mail
The termination document indicates that Popeyes was aware of the unpaid wages months before employees held protests over the issue at multiple locations owned by Mr. Memon in September. Popeyes sent notices of default to Mr. Memon’s companies in January, related to “repeated failures to pay their employees amounts owing when due for a period of more than two months.”
After Restaurant Brands sent the notice in January, Mr. Memon advised them he had paid his staff and would commit to resolving the issue, Ms. Ciantra wrote. The repeat of the issue in the fall was another reason for the termination.
The companies’ lender, Meridian Credit Union Ltd., filed the receivership application on Oct. 8, and it was granted on Oct. 10. A lawyer representing Mr. Memon’s companies did not respond to a request for comment.
Meridian has been working with the franchisee and with Restaurant Brands to sell the restaurant locations to new operators.
Several of Mr. Memon’s companies had previously attempted to sell the restaurants, and had entered into purchase agreements in May of this year. Those deals fell through “for various reasons,” according to an affidavit sworn by Ramune Beattie, a commercial credit specialist with Meridian, on Oct. 9.
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In September, Mr. Memon and his companies struck an agreement with Meridian, acknowledging they had defaulted on their loans, and asking for time to sell the restaurants in order to pay back their debts by Oct. 31. But then in late September, Popeyes terminated 13 of the franchisee agreements and landlords began to take steps to terminate the leases.
One location, at 85 Ellesmere Rd. in Toronto’s east end, remains open. The franchisee at that location is Mr. Memon’s wife, and Mr. Memon is not listed as a franchisee, Ms. Ciantra wrote. However, in corporate documents, Mr. Memon is listed as a director of the company that operates that location, and it is among the 14 locations now in receivership. Because of that, the company expects that restaurant also to be closed in the near future and sold to a new owner, she wrote.
The receivership process was necessary to preserve the value of the assets, after the restaurants stopped operating and were “abandoned,” according to the application, with perishable items left behind and at risk of spoiling, which put the prospect of a sale to new franchisees at risk.
Landlords have advised Meridian that the companies are in default of their leases, and expressed concern about food left in freezers and coolers that have been without power. Mr. Memon’s companies have “failed to keep the collateral in good condition and repair,” Ms. Beattie’s affidavit stated.
The termination notice stipulated that the franchisee locations had no further right to use the Popeyes trademarks. It instructed them to immediately cease operation of the restaurants, to pay all outstanding sums owing to Popeyes, return restaurant manuals and other material containing trade secrets, and to “de-identify” the restaurants so that they were no longer associated with Popeyes.
With a report from Stephanie Chambers
