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The Franchise Memorandum

Posts from October 2013 - Issue 172.

In an apparent response to increased competition within certain segments of the restaurant and bakery industries, the Korean National Assembly recently passed an Amendment to the Fair Transactions in Franchise Business Act creating unique franchise relationship and disclosure requirements. The new law addresses unit remodeling requirements, business (protected) territories, sales revenue projections, business hours, franchisee “trade unions” and refunds. The Amendment will become effective February 14, 2014, except for requirements involving the business ...

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Franchisors interested in selling a franchise system—whether in the near future or longer term—should take steps now to maximize its value. In the April 2013 issue of Franchising World magazine, Gray Plant Mooty attorneys Gaylen Knack, Sandy Bodeau, and John Brower highlighted key legal issues for franchisors to consider in preparing a franchise system for a sale. They examined proactive steps the selling franchisor can take that can improve the purchase price paid for the system. These include, among other actions, ensuring the franchise agreements give the franchisor ...

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The United States District Court for the Eastern District of Pennsylvania held last month that the amount at stake in an underlying arbitration should be used to determine the amount in controversy in a related federal court action for injunctive relief. Soft Pretzel Franchise Systems Inc. v. Taralli, Inc., 2013 U.S. Dist. LEXIS 127242 (E.D. Pa. Sept. 5, 2013). This dispute involved the termination of a franchise agreement for failure to report sales and to pay royalty, advertising, and legal fees. Soft Pretzel initiated an arbitration action to recover the fees owed and to obtain a ...

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Posted in Contracts

In Lenexa Hotel, LP v. Holiday Hospitality Franchising, Inc., 2013 U.S. Dist. LEXIS 125240 (D. Kan. Sept. 3, 2013), a federal district court in Kansas denied a hotel franchisor’s motion to dismiss a franchisee’s claims for breach of contract and breach of the implied duty of good faith and fair dealing, and for a declaratory judgment regarding the parties’ obligations under their license agreement. The plaintiff’s allegation was that Holiday Hospitality Franchising, the franchisor of the Holiday Inn, Crowne Plaza, and InterContinental brands, repeatedly represented ...

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Posted in Contracts

The United Stated District Court for the District of Minnesota recently dismissed several claims by a Party City franchisee premised on the franchisor’s operation of an online store. Newpaper, LLC v. Party City Corp., 2013 U.S. Dist. LEXIS 137396 (D. Minn. Sept. 25, 2013). Gray Plant Mooty represents Party City in this matter. The franchisee’s complaint alleged that the operation of an online store by the franchisor breached the franchisee’s contractual right to an exclusive territory. It also alleged that certain aspects of Party City’s online store, including its ...

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Posted in Arbitration

In Dickey’s Barbecue Restaurants, Inc. v. Mathieu, 2013 U.S. Dist. LEXIS 133204 (N.D. Tex. Sept. 18, 2013), a dispute arose when Mathieu failed to comply with various terms of his franchise agreement, including failure to (1) operate the franchised restaurant, (2) make payments, (3) meet food safety standards, and (4) purchase and sell approved products. After Mathieu advised Dickey’s Barbeque that he was ceasing operations of his franchised business, Dickey’s commenced a lawsuit to seek, among other things, a declaration that Mathieu violated the material terms of the ...

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About this Publication

The Franchise Memorandum is a collection of postings on summaries of recent legal developments of interest to franchisors brought to you by Lathrop GPM LLP. 

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