ATLANTA — AFC Enterprises Inc., operator of Popeyes Chicken & Biscuits restaurants, has filed suit against Church's Chicken and a former Popeyes franchise group over Church's purchase of 10 Popeyes' franchised units in the Rio Grande Valley in Texas. Most of the purchased restaurants were subsequently converted to the Church's Chicken brand.
AFC is seeking damages in excess of $20 million, according to a news release.
In the suit, AFC claims Church's — owned by private equity firm Arcapita Inc., a subsidiary of the First Islamic Bank of Bahrain — colluded with Popeyes' former franchise group, CVI Co. Ltd. of McAllen, Texas to breach their franchise agreements with Popeyes.
According to the complaint, Church's knew the restaurants they purchased were being operated under franchise agreements with Popeyes. Because Church's and Popeyes operate under virtually identical franchise agreements, AFC claims Church's had full knowledge of the terms of the franchise agreements prohibiting the sale.
From November 1992 to December 2004, AFC Enterprises owned both Church's and Popeyes.
AFC said in its complaint Church's knew that CVI was prohibited from selling their franchises to Church's and also knew CVI was prohibited from converting their restaurants to the Church's brand.
