Why did Churchs Chicken terminate the franchise agreements of Royal Texas, LLC?
Churchs_Chicken Franchise · 2025 FDDAnswer from 2025 FDD Document
On March 21, 2022, we terminated the franchise agreements of Royal Texas, LLC ("Royal Texas"), a franchisee that operated 52 franchised restaurants in Houston, Texas for, among other things, operational defaults that we deemed to pose a threat or danger to public health and safety. On March 23, 2022, we and our affiliates filed the Texas Action against Royal Texas, asserting claims for breach of contract and to enforce the termination of the franchise agreements. We moved for an ex parte temporary restraining order, which the court granted on March 23, 2022. The court enjoined Royal Texas from operating the restaurants or using our Marks or System and requiring Royal Texas to turn over possession of the restaurants to us. We filed an Amended petition in the Texas Action adding David Davoudpour, BAH Texas, L.P., BAH Texas, LLC, BAH Texas Hospitality, Inc., Best American Hospitality Corp., Triangle Capital Properties, LLC ("Triangle"), all of whom are affiliates of Royal Texas. Triangle removed the action to Texas federal court (the "Texas Federal Action"). On removal, the Texas State Action was stayed. Several months after removal, the parties stipulated to stay the Texas Federal Action pending resolution of the Georgia Action. The Texas Federal Action currently remains stayed.
Source: Item 3 — LITIGATION (FDD pages 14–16)
What This Means (2025 FDD)
According to Churchs Chicken's 2025 Franchise Disclosure Document, the franchise agreements with Royal Texas, LLC, which operated 52 franchised restaurants in Houston, Texas, were terminated on March 21, 2022, due to operational defaults. Churchs Chicken deemed these defaults to pose a threat or danger to public health and safety. This action led Cajun Global, LLC, and its affiliates to file a lawsuit against Royal Texas, LLC, on March 23, 2022, in the Harris County, Texas District Court, asserting claims for breach of contract and to enforce the termination of the franchise agreements.
Following the termination, Churchs Chicken obtained an ex parte temporary restraining order from the court on March 23, 2022, which prevented Royal Texas from operating the restaurants or using Churchs Chicken's trademarks or system. The order also required Royal Texas to turn over possession of the restaurants to Churchs Chicken. The legal proceedings expanded with the addition of David Davoudpour and several affiliated entities as parties to the lawsuit.
The situation highlights the importance of franchisees adhering to operational standards set by Churchs Chicken to ensure public health and safety. Failure to comply with these standards can lead to termination of the franchise agreement and subsequent legal action. This case also demonstrates the potential legal and financial risks associated with franchise terminations, including court orders, turnover of restaurants, and legal fees.