2015 sale of Buffalo Wild Wings restaurants for $160M leads to suit against San Antonio-area partners
It’s been nearly six years since San Antonio partnerships sold 41 Buffalo Wild Wings restaurants to their then-franchisor for $ 160 million.
Now, three limited partners have sued for nearly $ 6 million back, which they say should have been distributed to them as part of the sale. They also demand unspecified punitive damages.
The plaintiffs accuse other partners of “keeping the money and using it for their personal gain”.
Rioco Partners, a McAllen-based private equity and real estate investment firm, is the lead plaintiff in the lawsuit filed in Hidalgo County on June 24.
Rioco’s general partner is James W. Collins, whose family owns Vantage Bank Texas, based in San Antonio, the 49th largest bank in the state.
Defendants include Lawrence F. Harris, Allen J. Jones, and Jason R. Kemp, all of Bexar County.
Elisamar Soto, a Laredo attorney representing the defendants, believes the allegations “will be found unfounded” and the lawsuit will be dismissed.
“The accounting firm recommended by the plaintiffs reviewed all of the information they requested during the due diligence phase,” Soto said in a statement emailed. “Unfortunately, plaintiffs later dismissed the accounting firm’s findings, made allegations that were unsupported by the facts, and prematurely filed this lawsuit.”
Harris, Jones and Kemp are also “executives” of various restaurant chains that went into Chapter 11 bankruptcy in Dallas in April. Chains include Furr’s Fresh Buffet, Old Country Buffet, HomeTown Buffet, Ryan’s, and Tahoe Joe’s Famous Steakhouse. Most of these restaurants closed in 2020 amid the pandemic.
The trio are also managers of VitaNova Brands, based in San Antonio, who managed the chains and provided back office services.
VitaNova has made an offer to acquire the debtors’ assets, including six Tahoe Joe’s in California, the only restaurants – out of all chains – still operating. Before the pandemic, the chains combined had 90 locations in 27 states. All other bidders have until 4 p.m. today. An auction is scheduled for Tuesday when other bidders show up.
Rioco filed the lawsuit as an derivative action on behalf of partnerships that owned the 41 Buffalo Wild Wings restaurants in Texas, New Mexico and Hawaii.
Buffalo Wild Wings International Inc., based in Minneapolis, the then franchisor, bought the restaurants in August 2015 for $ 160 million. It paid $ 150 million shortly before closing, with $ 10 million held in trust until certain terms of the contract were met.
Later on, there were disagreements between the seller’s agent, FMP SA Management Group, and Buffalo Wild Wings International over the disbursement of the $ 10 million, according to Rioco’s lawsuit. Harris, Jones and Kemp co-founded FMP.
Buffalo Wild Wings International eventually paid the sellers $ 7.2 million. Rioco says it owes nearly $ 3.4 million out of those funds, while the other two plaintiffs in the lawsuit together owed $ 2.6 million. The defendants refuse to pay, the lawsuit says.
The three plaintiffs state that defendants have used, spent, lent, or transferred “all funds for their benefit or for the benefit of other companies they own or control”.
Fast food giant Arby’s acquired Buffalo Wild Wings and its 1,200 restaurants for $ 2.9 billion in 2018.
In the Dallas bankruptcy, the official Unsecured Creditors Committee earlier this month raised concerns about “intertwined relationships and questionable payments to insiders.” Some of the bankrupt restaurants paid about $ 3.4 million last year to a company owned by Harris, Jones and Kemp, the committee said in a court filing.
The committee also raised concerns about how two companies in bankruptcy spent $ 13 received from the Small Business Administration’s paycheck protection program, which was created to help small businesses during the pandemic.
In a filing on another case cited in the unsecured committee of creditors’ complaint, a former FMP vice president said a portion of the PPP proceeds were used to settle a federal lawsuit in San Antonio last year.
The lawsuit was filed by River North Furr’s, a Chicago group that invested more than $ 1.7 million in a company that bought various Furr’s Fresh Buffet restaurants. RNF accused Harris, Jones and Kemp of distributing $ 12 million to themselves to pay for “exotic cars, boats, homes and international travel.”
The defendants denied the RNF’s allegations. Both sides agreed to the dismissal of the lawsuit in May 2020.
PPP funds could be used to pay wages, rents and ancillary costs, among other things, but not for litigation-related costs.
The lawsuit on behalf of the Chicago investor was filed by San Antonio attorney Jason Davis, who is representing Rioco in his lawsuit regarding the proceeds of the Buffalo Wild Wings deal.
A lawyer representing Harris, Jones and Kemp in bankruptcy proceedings did not comment.
pdanner@express-news.net
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