AFC Enterprises Inc. on Wednesday filed a lawsuit against Church’s Chicken and a former Popeyes franchise group in connection with Church’s recent purchase of 10 Popeyes’ franchised restaurants in the Rio Grande Valley, Texas and conversion of most of the units to the Church’s Chicken brand.
Atlanta-based AFC Enterprises (NASDAQ: AFCE), the franchisor and operator of Popeyes Chicken & Biscuits and former owner of Church’s, is seeking more than $20 million in damages.
In the suit, AFC alleges Church’s, which is owned by Atlanta private equity firm Arcapita Inc., “tortiously induced and colluded with Popeyes’ former franchise group, CVI Company Ltd. of McAllen, Texas, and its principals, to breach their binding franchise, development and guaranty agreements with Popeyes and sell their franchised restaurants to Church’s for cash with the intent to harm Popeyes.”
AFC believes Church’s had direct knowledge the restaurants they bought and have begun converting were being operated under franchise agreements with Popeyes. And because Church’s and Popeyes operate under virtually identical franchise agreements, AFC alleges Church’s had full knowledge of the terms of the franchise agreements prohibiting the sale.
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