Vitarich scores in legal tiff versus US franchisor

Pending a ruling on a case of breach of contract, the Regional Trial Court of Pasig has ordered the US-based AFC Enterprises to stop any negotiations with any other parties aside from the Vitarich group regarding the franchise of their fastfood chain.

Last week, the same court issued a writ of preliminary injunction on AFC and its officials to "cease and desist from licensing or entering into any development/franchise agreement or any contract of similar import with any person or entity to Texas Chicken, Popeye’s Chicken, Church’s and/or similar restaurants in the Philippines effective during the pendency of the action and until further orders of the Court."

In August last year, the fastfood units of the publicly-listed Vitarich Corp. (Texas Manok ATBP Inc., Popeyes Manok ATBP Inc. and Philippines’ Favorite Chicken Inc.) filed a case against AFC and four of its officers for breach of contract, seeking total damages of about P463 million.

AFC is the American franchisor which granted the Vitarich group the right to develop and operate the chain of Texas Chicken and Popeye’s Chicken restaurants in the country.

Vitarich said the case stemmed from AFC’s attempt to terminate both the franchise and development agreements, which was clearly in bad faith. Vitarich has been operating the Texas Chicken chain at a loss while the Popeye’s Chicken network has not been established yet.

The Sarmiento-controlled poultry and feed milling firm pointed out that despite a prior deal in February last year, AFC and its officers reversed their position and attempted to terminate the Texas Chicken development and franchise agreement, the Popeye’s development agreement, as well as the PFCI distributor agreement.

Vitarich said aside from its investments of at least P700 million in putting up the Texas Chicken chain, it has paid $2.19 million in royalty fees for Texas and $160,000 in initial payment for Popeye’s. Both of which are being claimed back in the damages. – Conrado Diaz Jr.