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Franchise development dispute involves CPK in Mexico

The franchisor of a pizza-and-pasta concept in Mexico is attempting to stop California Pizza Kitchen's planned expansion in that country through a legal dispute involving a franchise operator working with both companies there.

Filed in U.S. District Court in Los Angeles late last month, the lawsuit from Mexico City-based Remigio S. de R.L. de C.V., raises a potential problem for restaurant chains working with franchise operators in other countries who develop a number of different — sometimes competing — brands. The lawsuit also comes at a time when stagnant economic conditions in the U.S. are sending more restaurant chains overseas in search for growth.

In the lawsuit, Remigio is seeking a preliminary injunction that would bar California Pizza Kitchen from opening more units in Mexico, stop the recruitment of Remigio employees to CPK units, and require CPK to “divest itself of the entire interest in the CPK franchise in Mexico.”

CPK officials said the company does not comment on pending litigation. A hearing on the injunction is scheduled for Sept. 13 in Los Angeles.

The dispute involves multi-concept restaurant operator Alsea S.A.B. de C.V., which acquired CPK’s Mexico franchisee Grupo Calpik S.A. de C.V. about a year after the Los Angeles-based casual-dining company began its franchise expansion into Mexico in 2007.

At the time, Grupo Calpik planned to open 15 CPK units over 10 years. Currently CPK has seven locations in Mexico.

According to the complaint, Remigio contends that CPK interfered with a franchise agreement between Remigio and Alsea. A known multi-concept operator, Alsea is also developing the P.F. Chang’s China Bistro brand in Mexico, as well as Domino’s Pizza, Starbucks, Chili’s Grill & Bar and other brands.

Remigio owns and franchises the Italianni’s brand, a casual-dining chain offering pizzas and pastas. In 2008, Remigio entered into an agreement with Alsea to franchise the Italianni’s brand. According to the complaint, that agreement specifically barred Alsea from participating in competing businesses, including holding any interest in CPK.

After learning that Alsea was interested in acquiring CPK franchisee Grupo Calpik, Remigio filed a preliminary injunction in a Mexico City court to stop the deal. Still, the acquisition closed in December 2008.

Remigio charged CPK with aiding, encouraging and authorizing Alsea’s controlling interest in Grupo Calpik, despite the injunction. Later, the lawsuit contends, CPK refused to respond to the allegations in court in Mexico, resulting in a default judgment against CPK.

According to the filing, Remigio contends that Alsea has taken advantage of its knowledge of Italianni’s trade secrets in expanding the CPK brand in Mexico, poaching Italianni’s’ best managers and demanding the same or better lease terms and rent for its CPK locations, for example.

Contact Lisa Jennings at [email protected].

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