A federal court in Missouri granted franchisor’s motion for preliminary injunction against its former franchisee, enjoining the former franchisee from operating a competing business from the former franchised location.
Three Dog Bakery, LLC is the franchisor of Three Dog Bakery stores that sell fresh baked goods for pets. Franchisor entered into a franchise agreement with franchisee for the operation of a Three Dog Bakery in Arkansas. The franchise agreement provided that franchisee was prohibited from operating a competing business within 50 miles of the franchise or any other franchised bakery for a period of two years from termination of the franchise agreement.
Franchisee stopped buying products from franchisor and began withholding royalty and marketing fee payments. Franchisor learned that franchisee ceased operating the Three Dog Bakery franchise and was operating a competing business from the same location, serving the same customers. Franchisor’s trademarked logo still appeared above the storefront and on its door and franchisee was using franchisor’s proprietary information, including recipes and designs.
Franchisor filed a motion for preliminary injunction to stop franchisee from violating the franchise agreement's noncompete provision and using franchisor’s confidential information, marks, equipment, and processes.
The court determined that a preliminary injunction was appropriate. The court weighed four factors: (i) the threat of irreparable harm; (ii) whether the balance of harms favored issuing a preliminary injunction; (iii) a likelihood of franchisor’s success on the merits; and (iv) the public interest. The court found the second and fourth factors carried little weight in its analysis and, instead, focused on the first and third factors.
The court found that franchisor would suffer irreparable harm in the form of lost customers and goodwill if the franchisee continued operating a competing business out of the same location as the franchise. The court also noted that there was evidence franchisee used franchisor’s confidential information, including its signage, licensed marks, recipes, and product designs, which posed a threat of irreparable harm.
The court further found that franchisor was likely to succeed on the merits of its breach of contract and misappropriation of trade secret claims, noting there was ample evidence suggesting franchisee violated one or more provisions of the franchise agreement. The evidence presented showed that franchisee stopped paying the required royalty and marketing fees, used franchisor’s confidential information and operated a competing business in violation of the franchise agreement. As such, the court concluded franchisor has at least a fair chance of prevailing on some of its claims.
Franchisees should be cautious and consult franchise counsel prior to operating a competing business from a former franchised location to evaluate any post-termination and noncompete provisions to ensure they are in compliance.
Three Dog Bakery, LLC v. Crit, Inc., No. 4:25-cv-00217-DGK (W.D. Mo. June 4, 2025)
