The Franchise Memorandum

Franchisor American Dairy Queen Corporation and its corporate parent, International Dairy Queen, Inc., prevailed this month against the most recent challenges by a franchisee association and cooperative that represents some of its franchisees. An arbitration panel held that the franchisor and its parent’s supply entity have not violated antitrust law or a prior settlement agreement with respect to the approval and distribution of products for use in franchisees’ locations. Dairy Queen Operators Association and Dairy Queen Operators Cooperative v. International Dairy ...

This month the United States District Court for the Western District of Michigan refused to grant a hotel franchisee’s request for a preliminary injunction ordering its franchisor to take reservations for hotel stays occurring after June 30, 2009, the date that the parties agreed the franchise agreement between them would expire. Lake Country Corp. v. Sheraton LLC, 2008 WL 4534419 (W.D. Mich. Oct. 6, 2008).

Relations between the franchisee and Sheraton had begun to deteriorate after the franchisee refused to make required improvements to the hotel property. The franchisee ...

In Luv2bfit, Inc. v. Curves International, Inc., 2008 WL 4443961 (S.D.N.Y. Sept. 29, 2008), a federal court in New York enforced the Texas choice of venue clause in the franchise contracts of a Texas-based franchisor. Several New York franchisees alleged claims related to the purchase of their franchises and the franchisor’s compliance with its franchise agreements. They filed the case in New York, despite a Texas venue provision. The franchisor moved to dismiss for lack of venue or to transfer to Texas.

In granting the franchisor’s motion to transfer, the court first addressed ...

In Fazoli’s Franchising Systems, LLC v. JBB Investments, LLC, 2008 WL 4525433 (E.D.Ky. Sept. 30, 2008), the United States District Court for the Eastern District of Kentucky addressed issues arising from the choice of law and venue provisions contained in the terms of several Fazoli’s franchise agreements. Fazoli’s claimed that the defendants, who were guarantors of the franchise agreements, were subject to personal jurisdiction in Kentucky by virtue of having signed their personal guaranty agreements in Kentucky.

In finding that no personal jurisdiction over the ...

The United States Court of Appeals for the Fifth Circuit recently concluded that a prospective purchaser of a vehicle dealership is not a third-party beneficiary of the seller’s dealership agreement. In K.P.’s Auto Sales, Inc. v. General Motors Corp., 2008 WL 4580087 (5th Cir. Oct. 15, 2008), K.P. offered to buy an existing Cadillac dealership, which submitted the proposed sale to GM for approval.  K.P.’s lawsuit alleged that GM then improperly shared confidential information about K.P. and its principal with another dealer, who used that information to outbid K.P. In its ...

In Dudley v. HealthSource Chiropractic, Inc., 2008 WL 4507714 (W.D.N.Y. Sept. 30, 2008), the owner of a chiropractic practice brought claims against a franchisor and local franchisee alleging trademark infringement and cybersquatting. The plaintiff had used the trademark HEALTHSOURCE in connection with a chiropractic practice in the Rochester, New York area prior to the defendant franchisor’s adoption of the same mark. The franchisor’s system expanded to over 170 franchisees, including one in the Rochester area. The plaintiff brought suit alleging that links to that ...