Commitments and Contingencies |
3 Months Ended |
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Apr. 01, 2024 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Commitments and Contingencies | Commitments and Contingencies Litigation
Lion Point Capital, L.P.(“Lion Point”) v. BurgerFi International, Inc. (Supreme Court of the State of New York County of New York, Index No. 653099/2022, filed August 26, 2022. A lawsuit filed by Lion Point against the Company, alleging that the Company failed to timely register Lion Point’s shares in violation of the registration rights agreement to which Lion Point is a party, which allegedly resulted in losses in excess of $26.0 million. In November 2022, as amended in February 2023, the Company filed its answer to the complaint. On April 13, 2023, Lion Point filed a Motion for Summary Judgment, and the Company responded with its reply on June 22, 2023. On October 12, 2023, the Court granted Lion Point’s Motion for Summary Judgment and set a status conference for November 15, 2023 to begin the damages phase of the case. At status conference on November 15, 2023, a schedule for discovery deadlines was discussed and set out by the Court. The next status conference was continued from March 13, 2024 to April 24, 2024. At the April 24, 2024 status conference a revised discovery schedule was agreed to and the case is scheduled to proceed with the discovery schedule and depositions. The Company continues to believe that all claims are meritless and plans to vigorously defend such claims. The Company is unable to determine the likelihood of a loss or range of loss, if any, which may result from the case described above, and any losses, however, may be material to the Company's financial position and results of operations.
Burger Guys of Dania Pointe, et. al. v. BFI, LLC (Circuit Court of the 15th Judicial Circuit in and for Palm Beach County, Florida, Case No. 50-2021-CA -006501-XXXX-MB filed May 21, 2021). In response to a demand letter issued by BurgerFi to Gino Gargiulo, a former franchisee, demanding that Mr. Gargiulo pay the balance owed under an asset purchase agreement wherein BurgerFi sold the Dania Beach, Florida BurgerFi location to Mr. Gargiulo, Mr. Gargiulo filed suit against BurgerFi claiming, in addition to other matters, that no further monies are owed under the asset purchase agreement and alleges that the Company is responsible for one of Mr. Gargiulo’s failed franchises in Sunny Isles, Florida, losses he has allegedly sustained at his Dania Beach location, and reimbursement of expenses in connection with his marketing company. Mr. Gargiulo seeks damages in excess of $2.0 million in the aggregate. The parties attended mediation on January 20, 2022, which ended in an impasse. Mr. Gargiulo amended his complaint in April 2022, which, among other matters, amended the defendant parties. In October 2022, the Company filed an additional motion to dismiss the amended complaint and a motion to stay discovery. In January 2023, Mr. Gargiulo filed a third amended complaint. In March 2023, the Company filed an answer to Mr. Gargiulo’s complaint and a counterclaim against Mr. Gargiulo relating to the breach of the asset purchase agreement discussed above. On November 5, 2023, the parties attended mediation, which ended in an impasse. Depositions are ongoing and a trial was set for the 5 week docket beginning the week of April 15, 2024. On April 28, 2024, the parties executed a settlement term sheet to continue the trial. The parties are in the process of drafting a
formal settlement agreement for Court ratification. On May 1, 2024, a joint stipulation to stay the case for 90 days was filed with the Court to allow for completion of the settlement agreement. On May 12, 2024, the Court entered an order staying the case for 90 days.
The settlement term sheet provides for $2.0 million in payments for purchase of the two franchised locations in Aventura and Dania Pointe. Transfer of ownership to the Company is intended to occur upon the completion of the settlement payment requirements or earlier buyout. The settlement payments consist of an initial payment of $0.3 million due on August 1, 2024 and additional payments of $1.7 million in royalty relief for the Aventura and Dania Pointe locations.
Employment Related Claims.
In July 2021, the Company received a demand letter from the attorney of one of its now former hourly restaurant employees. The letter alleges that the former employee was sexually harassed by one of her co-workers. The demand letter claims that the Company discriminated and retaliated against the former employee based on her gender and age and also alleged intentional infliction of emotional distress, negligent hiring, negligent training, and negligent supervision. While the Company entered into a partial settlement with the former employee in December 2022 for a de minimis cash amount relating solely to the discrimination claim, the other claims remain.
In March 2020, the Company received notification of a U.S. Equal Employment Opportunity Commission (the “EEOC”) complaint claiming sexual harassment and assault. On July 5, 2023, the EEOC issued a determination letter declining to investigate the matter further and issued a right to sue letter. On September 29, 2023, the claimant filed a lawsuit. The suit is in the early stages and the Company is currently working through initial responses.
On or about April 4, 2024, the Company received a demand letter regarding a former employee’s claims of a racially and sexually abusive, discriminatory, hostile and retaliatory work environment. The demand letter is in the early stages and the Company is currently working through the allegations.
On or about April 15, 2024, the Company was served with a lawsuit alleging wrongful termination of a store manager that is seeking damages for among other items, back pay, emotional distress and front pay. The suit is in the early stages and the Company is currently working through initial responses.
While the Company believes that all claims of the above mentioned Employment Related Claims, which are covered under the Company’s insurance policies, are meritless, and it plans to defend these allegations, it is reasonably possible that the Company may ultimately be required to pay damages to the claimants, which could be up to $0.5 million or more in aggregate compensatory damages, attorneys’ fees and costs. Management believes that any liability, in excess of applicable insurance coverages or accruals, which may result from these claims, would not be significant to the Company’s financial position or results of operations.
General Liability and Other Claims.
The Company is subject to other legal proceedings and claims that arise during the normal course of business, including landlord disputes, slip and fall cases, and various food related matters. While it intends to vigorously defend these matters, it is reasonably possible that the Company may be required to pay substantial damages to the claimants. Management believes that any liability, in excess of applicable insurance coverages or accruals, which may result from these claims, would not be significant to the Company’s financial position or results of operations.
Purchase Commitments
From time to time, we enter into purchase commitments for certain food commodities in the normal course of business. As of April 1, 2024, we entered into approximately $5.7 million in unconditional purchase obligations over the next twelve months.
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