Panera Franchisee Declares Bankruptcy After Court-Ordered Closures

EYM Café, a major Panera franchisee in Texas, has filed for bankruptcy after a federal court ordered it to shut down unauthorized operations. The decision marks the latest chapter in a string of financial and legal setbacks for the multi-brand operator.

Earlier this year, Panera terminated franchise agreements with EYM Café for alleged violations. These included missed royalty payments, unpaid vendor bills, and failure to maintain food safety standards. Despite losing its rights, EYM allegedly continued operating 15 bakery-cafés in Houston under the Panera name.

In response, Panera filed a lawsuit in May. The company accused EYM of using its brand identity—logos, signage, uniforms—without permission. On June 17, a federal judge sided with Panera, issuing a permanent injunction. The ruling required EYM to cease all Panera-branded operations and remove brand elements by August 21.

Additionally, the court imposed a two-year non-compete clause on Eduardo Diaz, EYM’s owner. The ruling bars him from owning or advising any food business within five miles of an existing Panera location.

EYM’s Struggles Extend Beyond Panera

The Panera dispute is not an isolated case. Diaz’s larger franchise group, EYM Group, has experienced mounting troubles across multiple fast-food brands.

  • Pizza Hut: In July 2024, EYM Pizza—once a top U.S. Pizza Hut franchisee—filed for bankruptcy after a lengthy legal conflict. The company operated 140 locations. While 77 were sold to six buyers, the rest closed permanently.

  • KFC: EYM Chicken, responsible for KFC units, shuttered over 20 restaurants across Wisconsin, Indiana, and Illinois in 2023 due to financial strain.

  • Burger King: In 2023, EYM King of Michigan closed all 26 Burger King outlets it operated. A contract dispute with the brand led to a lawsuit over more than $75,000 in unpaid fees tied to 14 locations.

A Cautionary Tale for Franchise Operators

EYM Group’s downfall underscores the risks of overextension and brand mismanagement. From royalty disputes to food safety lapses, the company’s multi-brand operations crumbled under pressure.

With the Panera injunction now final, the bankruptcy filing is a formality in a broader collapse. EYM Café’s story also serves as a legal precedent: franchises operating outside their agreements face real consequences.