Texas Chicken, Popeye’s file suit vs US franchisor

Texas Chicken and Popeyes Chicken, the fastfood chains of the Vitarich group, have sued their US-based franchisor for damages arising from the latter’s attempt to prematurely terminate their development and franchise agreements.

Texas Manok ATBP Inc., Popeyes Manok ATBP Inc. and Philippines Favorite Chicken Inc. jointly filed last week a complaint with the Regional Trial Court of Pasig against AFC Enterprises Inc., four of its officers and some still unidentified persons for damages amounting to P462.7 million and the refund of at least $2.2 million in alleged overpaid franchise fees.

Texas Manok and Popeyes Manok are affiliates of Vitarich while PFCI is a wholly-owned subsidiary of the listed poultry firm. AFC is the American franchisor which granted a franchise to Texas and Popeyes to develop and operate the Texas Chicken and Popeyes Chicken fastfood restaurants, respectively, in the Philippines.

Vitarich corporate secretary Tadeo Hilado said the local companies filed the complaint since AFC and its officers "reversed their position and attempted to terminate the Texas Chicken development agreement and franchise agreements, the Popeyes development agreement and the PFCI distributor agreement" for unspecified reasons despite an earlier deal to the contrary.

He said in February 2001, AFC agreed in writing to the deferment of the 2001 royalties due to AFC under the Texas Chicken franchise, the closure of the Texas Chicken chain, and the removal of certain development commitments. It also acknowledged that Texas Manok overpaid by $42,375 in royalties for 2000 and therefore AFC is holding the said amount in trust for Texas Manok.

In the case of Popeyes, which has yet to open a local restaurant, Hilado said AFC also agreed to defer the establishment of the chain and allow Popeyes Manok to look for new investors, and to return $160,000 Popeyes Manok has paid to AFC.

In the meantime, PFCI had invested at least P700 million for the infrastructure and support facilities to supply Texas Manok equipment and other goods and to provide land, mall sites, buildings and other improvements for the Texas Chicken chain.

Hilado said the respective boards of Vitarich and the three companies "believe that such attempted termination of the said agreements by AFC is clearly in bad faith and constitutes a breach of the existing agreements of Texas Manok, Popeyes and PFCI."