BurgerFi International Inc. has settled a legal dispute with one of its shareholders, a move that will allow it to move forward with plans to explore strategic alternatives.
The parent of the Florida-based burger chain, which also includes sister brand Anthony’s Coal Fired Pizza & Wings, was sued in 2022 by New York investment firm Lion Point Capital L.P. in a New York state court. Lion Point alleged it lost more than $26 million because BurgerFi failed to timely register its shares when it was taken public in 2020 in a merger with a special purpose acquisition company, or SPAC. Lion Point had agreed to purchase $20 million in stock when the SPAC found an acquisition target, according to court documents.
With the settlement, which was signed by both parties on July 23, BurgerFi agreed to pay Lion Point $1.35 million in installments and issue 300,000 shares of Series A Preferred Stock.
“We are pleased to be putting this litigation matter with Lion Point firmly behind us,” said David Heidecorn, chairman of BurgerFi’s board, in a statement. “Our intention is to continue to explore strategic alternatives that we believe would be in the best interests of the company and its stakeholders, as previously disclosed.”
BurgerFi was acquired for $100 million in cash and stock in 2020 by Opes Acquisition Corp., a special purpose acquisition company, or SPAC, in a deal that took the burger chain public.
Since then, however, BurgerFi has struggled to turnaround sinking sales as it “right sizes” its restaurant portfolio. Last year, 14 underperforming units were closed, and another eight were shuttered in the April-ended first quarter this year. BurgerFi International ended the quarter with 102 BurgerFi units, of which 27 were company-owned and the other 75 franchised, as well as 60 Anthony’s locations.
In April, the company said it had defaulted on its credit agreement.
In May, BurgerFi said it is exploring strategic alternatives as it attempts to address its financial issues. The company hired Kroll Securities to evaluate strategic alternatives, and debt holder TREW Capital Management and private equity investor L Catterton agreed to loan BurgerFi up to $4 million to support the chain during the review process.
TREW, led by former Famous Dave’s parent CEO Jeff Crivello, acquired the debt of both BurgerFi and Rubio’s Coastal Grill, which filed for Chapter 11 bankruptcy protection in June and is seeking a buyer.
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