A federal court in Tennessee held a Gus’s World Famous Fried Chicken former franchisee in contempt for failure to deidentify its restaurant after entry of a temporary restraining order and consent to a permanent...more
11/2/2020
/ Contempt ,
Coronavirus/COVID-19 ,
Franchise Agreements ,
Franchise Termination ,
Franchisee ,
Franchises ,
Franchisors ,
Permanent Injunctions ,
Proprietary Information ,
Restaurant Industry ,
Sanctions ,
Trade Dress ,
Trademarks ,
TRO
Download PDF Assembly Bill 5 took effect in California on January 1, 2020 and governs when a business can treat a worker as an employee as opposed to an independent contractor. Under AB5 and its “ABC” test, a hiring entity...more
10/28/2020
/ ABC Test ,
Classification ,
Department of Labor (DOL) ,
Employer Liability Issues ,
Fair Labor Standards Act (FLSA) ,
Franchises ,
Franchisors ,
Independent Contractors ,
International Franchise Association (IFA) ,
Misclassification ,
State Labor Laws
On September 16, 2020, Rohit Chopra, one of the five commissioners on the Federal Trade Commission (FTC), declared on Twitter that “[franchise] regulators must stop unfair, deceptive, and discriminatory practices that target...more
Franchisors and franchisees in California have long conducted themselves based on precedent that voids post-termination covenants against competition in a franchise agreement in California. Recently, a franchisor’s ability to...more
8/31/2020
/ Anti-Competitive ,
Business & Professions Code ,
Exclusive Dealing Agreements ,
Franchise Agreements ,
Franchises ,
Franchisors ,
Non-Compete Agreements ,
Pharmaceutical Industry ,
Restrictive Covenants ,
Rule-of-Reason Analysis ,
Scope and Duration of Restrictive Covenant ,
Void and Unenforceable
A Massachusetts state court ruled that real estate franchisor, Re/Max of New England (Franchisor), breached its franchise agreements, the implied covenant of good faith and fair dealing and violated Massachusetts’ consumer...more
Item 19 of the Franchise Disclosure Document (FDD) can provide information on how a prospective franchisee may perform financially. Historical financial performance representations (FPRs) may be made if the franchisor has a...more
A federal court in Missouri ruled that a franchisee’s fraud claim cannot be based on the franchisor’s prediction at a franchise expo of future success in the franchised business....more
5/29/2020
/ Burden of Proof ,
Dismissals ,
Due Diligence ,
Franchise Agreements ,
Franchisee ,
Franchises ,
Fraud ,
Misrepresentation ,
Negotiations ,
Puffery ,
Reasonable Reliance Claims ,
Trade Shows
A federal appeals court reversed dismissal of a claim against a barbeque restaurant franchisor. The court found that, despite having signed releases in favor of the franchisor, a former franchisee had valid claims for...more
5/5/2020
/ Actual Malice ,
Appeals ,
Breach of Contract ,
Business Partners ,
Buyouts ,
Covenant of Good Faith and Fair Dealing ,
Dismissals ,
Franchise Agreements ,
Franchisee ,
Franchises ,
Franchisors ,
Fraud ,
Restaurant Industry ,
Reversal ,
Tortious Interference ,
Unfair or Deceptive Trade Practices ,
Waivers
A federal district court in Michigan granted a preliminary injunction in favor of tax preparation franchisor, Liberty Tax Service (JTH Tax, Inc. v. Magnotte, E.D. Mich., ¶16,575), finding it was likely to succeed on its...more
5/1/2020
/ Anti-Competitive ,
Breach of Contract ,
Contract Termination ,
Customer Lists ,
Franchise Agreements ,
Franchisee ,
Franchises ,
Franchisors ,
Irreparable Harm ,
Loss of Goodwill ,
Lost Profits ,
Non-Compete Agreements ,
Preliminary Injunctions ,
Tax Preparers
Under California law, a business relationship is a “franchise” if: (1) the business will be substantially associated with the franchisor’s trademark; (2) the franchisee will directly or indirectly pay a fee to the franchisor...more
California Governor Gavin Newsom signed into law Assembly Bill 5 (“AB-5”). AB-5 codifies into California’s Labor Code the “ABC test” for determining employee or independent contractor status, as adopted by the California...more
11/1/2019
/ ABC Test ,
CA Supreme Court ,
Dynamex ,
Employer Liability Issues ,
Franchisee ,
Franchises ,
Franchisors ,
Gig Economy ,
Governor Newsom ,
Independent Contractors ,
Misclassification ,
New Legislation ,
Retroactive Application ,
State Labor Laws
Twin City Lodging LLC bought a Best Western Hotel in Mankato, Minnesota, then entered into a “Membership Agreement” with Best Western International. Best Western granted Twin City a license to operate the hotel under Best...more
10/1/2019
/ Best Western ,
Breach of Contract ,
Community of Interest ,
Counterclaims ,
Franchise Fees ,
Franchise Termination ,
Franchisee ,
Franchises ,
Franchisors ,
Hotels ,
Licenses ,
Motion to Dismiss ,
Notice Requirements ,
Trademark Infringement
The Ninth Circuit sent shockwaves through the franchise industry in ruling that last year’s California Supreme Court decision broadening who may bring wage misclassification claims (Dynamex v. Superior Court) applied...more
6/1/2019
/ ABC Test ,
Appeals ,
CA Supreme Court ,
Employer Liability Issues ,
Franchisee ,
Franchises ,
Franchisors ,
Indemnification ,
Independent Contractors ,
Joint Employers ,
Misclassification ,
Remand ,
Retroactive Application ,
Reversal ,
Statute of Limitations ,
Wage and Hour
Employees of a Merry Maids home cleaning franchise brought a class action against the franchisee, the franchisor, its owner and affiliated entities claiming they were joint employers. A California federal district court...more
3/2/2019
/ Agency Relationship ,
Class Action ,
Employee Handbooks ,
Franchise Agreements ,
Franchisee ,
Franchises ,
Franchisors ,
Genuine Issue of Material Fact ,
Joint Employers ,
Labor Law Violations ,
Minimum Wage ,
Reasonable Belief Test ,
Right to Control ,
State Labor Laws ,
Summary Judgment ,
Unpaid Overtime ,
Unpaid Wages ,
Wage and Hour
A Wisconsin federal judge granted summary judgment in favor of a food service and cleaning equipment maker (“Stoelting”), ruling that minimum purchase requirements under two dealer agreements were not a franchise fee under...more
1/31/2019
/ Contract Termination ,
Dealerships ,
Franchise Agreements ,
Franchise Fees ,
Franchise Termination ,
Franchises ,
Good Cause ,
Manufacturers ,
Minimum Purchase Requirements ,
Purchase Agreement ,
Summary Judgment ,
Wholesale ,
Written Notice
A bankruptcy court has found that Applebee’s failed to properly terminate its franchise agreements prior to the franchisee petitioning for bankruptcy. Therefore, the franchise agreements remained in effect and were property...more
12/28/2018
/ Applebee's ,
Commercial Bankruptcy ,
Contract Termination ,
Contract Terms ,
Franchise Agreements ,
Franchisee ,
Franchises ,
Franchisors ,
Notice of Default ,
Right To Cure ,
Royalties
Most franchisors’ annual franchise registration renewal deadlines are a few months away. Nevertheless, franchisors should contact their accountants now regarding a new revenue recognition rule issued by the Financial...more
11/30/2018
/ Accountants ,
FASB ,
Financial Reporting ,
Franchise Agreements ,
Franchise Fees ,
Franchisee ,
Franchises ,
Franchisors ,
IP License ,
Registration Requirement ,
Training
Jimmy John’s will face antitrust claims, after an Illinois federal judge declined to dismiss allegations in a class action.
Plaintiffs claim the chain’s franchise agreement harmed competition by preventing franchisee...more
9/28/2018
/ Anti-Competitive ,
Antitrust Violations ,
Class Action ,
Enforcement Actions ,
Franchisee ,
Franchises ,
Franchisors ,
Motion to Dismiss ,
No-Hire/No-Solicitation Agreements ,
No-Poaching ,
Non-Compete Agreements ,
Restaurant Industry ,
State Attorneys General
The Ninth Circuit Court of Appeals upheld summary judgment in favor of Taco Bell on class claims that employees should be paid under California law for time spent on company premises eating employer-discounted meals during...more
8/24/2018
/ Appeals ,
Class Action ,
Employment Policies ,
Franchisee ,
Franchises ,
Reaffirmation ,
Rest and Meal Break ,
State Labor Laws ,
Summary Judgment ,
Taco Bell ,
Wage and Hour
Franchise agreements commonly prohibit the franchisee from soliciting or hiring workers employed by the franchisor or other franchisees. This may take the form of “no-hire” or “no-switching” clauses that prohibit hiring each...more
8/1/2018
/ Antitrust Violations ,
Enforcement Actions ,
Federal Trade Commission (FTC) ,
Franchisee ,
Franchises ,
Hiring & Firing ,
No-Hire/No-Solicitation Agreements ,
No-Poaching ,
Non-Solicitation Agreements ,
Restraint of Trade ,
State Attorneys General
On June 21 the U.S. Supreme Court reversed prior case law and let states tax online retailers that do not have physical presence in the state. The ruling also has significant implications for franchise systems that sell...more
6/28/2018
/ Appeals ,
Commerce Clause ,
Constitutional Challenges ,
Franchise Agreements ,
Franchises ,
Franchisors ,
Internet Retailers ,
Interstate Commerce ,
Out-of-State Companies ,
Physical Presence Test ,
Quill ,
Reversal ,
Royalties ,
Sales & Use Tax ,
SCOTUS ,
South Dakota v. Wayfair ,
Substantial Nexus
A Florida federal court refused to dismiss a franchisor's claim for past due royalties and lost future profits.
The case concerned an Interim Healthcare staffing franchise in Arizona. The franchisor issued a default notice...more
4/30/2018
/ Breach of Contract ,
Contract Termination ,
Contract Terms ,
Failure To Pay ,
Franchises ,
Franchisors ,
Future Royalties ,
Lost Profits ,
Motion to Dismiss ,
Notice of Default ,
Pleadings ,
Royalties
A Florida federal court held that the non-compete provision in a chocolate shop franchise agreement was enforceable against an ex-franchisee operating a competing chocolate store at the former franchised location....more
Franchise agreements give franchisors nearly absolute, unfettered discretion to control advertising of their brands. Franchisors need not regard prior course of dealings with franchisees. An Illinois federal court dismissed a...more
2/28/2018
/ Advertising ,
Attorney's Fees ,
Breach of Contract ,
Contract Terms ,
Corporate Branding ,
Dietary Guidelines ,
Dismissals ,
Fee-Shifting ,
Franchise Agreements ,
Franchisee ,
Franchises ,
Franchisors ,
Islamic-Compliant ,
Kentucky Fried Chicken ,
Prior Express Consent ,
Promissory Estoppel ,
Revocation
A registered trademark is a valuable corporate asset and can be a significant part of a company's worth. A franchisor has an affirmative legal duty to police use of its mark by licensed franchisees and also third-party...more
2/2/2018
/ Cease and Desist ,
Duty to Monitor ,
Franchisee ,
Franchises ,
Franchisors ,
Injunctions ,
Likelihood of Confusion ,
Restaurant Industry ,
Trademark Infringement ,
Trademark Registration ,
Trademarks