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The Franchise Memorandum

Posts from October 2014 - Issue 186.

In 7-Eleven, Inc. v. George, 2014 U.S. Dist. LEXIS 124270 (M.D. Fla. Sept. 4, 2014), a federal court granted 7-Eleven's motion for summary judgment on multiple claims to recover nearly $5 million against the owners of a franchise. The defendants were a married couple, Jane George and Anthony Bailey, and several LLCs controlled by one or both of them. In 2007, George entered into a franchise agreement with 7-Eleven for the operation of a convenience store, which was later assigned to SGG, an LLC she owned and operated. The franchise agreement required the establishment of an open ...

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A trial court in the District of Columbia recently held that claims alleging a franchisor had violated the district's Consumer Protection and Procedure Act (CPPA) by misrepresenting the nutritional quality of its products were not preempted by Food and Drug Administration laws. Nat'l Consumer's League v. Doctor's Assocs., Inc., 2014 D.C. Super. LEXIS 15 (D.C. Super. Sept. 12, 2014). The plaintiff, NCL, argued that the
franchisor employed marketing tactics designed to mislead consumers about the nutritional content of certain varieties of bread offered by Subway. Subway moved ...

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A federal court in the Southern District of New York recently granted in part and denied in part a franchisor's motion to dismiss claims brought by a franchisee related to financial performance representations (FPRs) allegedly made by the franchisor. Governara v. 7-Eleven, Inc., Bus. Franchise Guide (CCH) cli 15,368 (S.D.N.Y. Aug. 20, 2014). Governara asked the court to consider whether 7-Eleven's written and oral financial performance representations complied with the required FDD disclosures under Section 683 of the New York Franchise Act (NYFA), and whether its written ...

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Posted in Terminations

The United States District Court for the Middle District of Georgia has reaffirmed the general rule that a franchisor's motive to terminate a franchise is irrelevant when there are valid grounds for the termination. ACG Pizza Partners, LLC v. Mykull Enters., Inc., 2014 U.S. Dist. LEXIS 119989 (M.D. Ga. Aug. 28, 2014). The plaintiff is the franchisor of the Stevi B's franchise system, which offers all-you-can-eat pizza and salad buffets. Defendant Mykull entered into a franchise agreement for a Stevi B's business in 2007. In April 2014, Stevi B's served Mykull a notice of termination ...

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In a franchise termination case, a federal district court recently enforced a Florida forum selection clause and denied the franchisee's motion to transfer the action to a California federal court where the franchisee had amended its complaint in a previously-filed action to add claims directly challenging the termination. The parties in Benjamin Franklin Franchising, LLC v. On Time Plumbers, Inc., 2014 U.S. Dist. LEXIS 131800 (N.D. Fla. Sept. 19, 2014), had entered into a BFF plumbing services franchise agreement that contained a Florida forum selection clause. The franchise ...

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A federal district court in Massachusetts held that a franchisor was entitled to an injunction restraining its former franchisee in Puerto Rico from using its trademarks after termination. Dunkin' Donuts Franchised Rests. LLC v. Wometco Donas Inc., 2014 U.S. Dist. LEXIS 127918 (D. Mass. Sept. 11, 2014). Gray Plant Mooty represents the franchisor in this case. Dunkin' terminated the parties' franchise agreement based on Wometco's failure to pay royalties and renewal fees and brought suit against Wometco and its affiliate, the guarantor of the agreement, to enforce the ...

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On Monday, Sept. 29, 2014, California Governor Jerry Brown vetoed Senate Bill 610, a much-debated provision that would have altered all franchise relationships subject to the state's laws. In rejecting the bill, Governor Brown wrote that the new termination requirement of "substantial and material breach" of the franchise agreement was new and untested, in contrast with the "good cause" requirement in place today. More generally, he acknowledged SB 610 "would significantly impact California's vast franchise industry that relies on the certainty of well-settled laws." The ...

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Posted in Employment

McDonald's Corporation is in the legal news again, but this time with a victory. In the midst of all the fanfare about McDonald's "joint employer" battle with the National Labor Relations Board, McDonald's successfully defeated motions for conditional certification of two companion wage and hour collective actions. Pullen v. McDonald's Corp. & Wilson v. McDonald's Corp., 2014 U.S. Dist. LEXIS 128364 (E.D. Mich. Sept. 15, 2014). In the cases, two groups of plaintiffs alleged minimum wage violations under the federal Fair Labor Standards Act (FLSA) on behalf of more than 1,000 ...

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On Sept. 16, 2014, the North American Securities Administrators Association, Inc. adopted the Multi-Unit Commentary prepared by its Franchise and Business Opportunity Project Group. You can access a copy of the Commentary at: mentary-effective-Adopted-Sept.-16-2014.pdf.

The Commentary represents the culmination of a process that took place over the past few years, and involved three separate public comment periods on various iterations of the document. The final version of the Commentary ...

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In Ocean City Express Co., Inc. v. Atlas Van Lines, Inc., 2014 U.S. Dist. LEXIS 127231 (D.N.J. Sept. 11, 2014), the United States District Court for New Jersey denied Atlas' motion to dismiss the New Jersey Franchise Practices Act (NJFPA) claim because the amended complaint adequately pled the "place of business" element. The court found the complaint sufficient to establish the agent's office constituted a "place of business" under the NJFPA because it was more than merely an office, warehouse, storage facility, residence, or distribution center. As pleaded, it was an actual sales ...

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According to public releases by Jimmy John's (the sandwich shop franchisor) and Signature Systems (the point of sale (POS) system provider for 216 Jimmy John's locations), malware was installed on those POS systems through use of a user name and password used for purposes of remote administration. This type of remote access has been an ongoing source of unauthorized access to POS systems for some time and has affected other franchised retail businesses. Here are six quick lessons franchisors should learn from these attacks:

  1. Know Your Vendor. The breach at Jimmy John's has been traced ...
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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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