The Franchise Memorandum

A federal court in California recently granted the franchisor of the Jan-Pro franchise system summary judgment on wage-and-hour claims asserted by unit franchisees of its regional master franchisees, concluding that Jan-Pro did not employ the unit franchisees. Roman v. Jan-Pro Franchising Int'l, Inc., 2017 WL 2265447 (N.D. Cal. May 24, 2017). In assessing the unit franchisees’ joint employer claims, the court applied the test articulated by the Supreme Court of California in Martinez v. Combs, 231 P.3d 259 (Cal. 2010), which consists of three alternative bases to find an ...

A federal district court in Alabama has granted a franchisor’s motion to dismiss for failure to state a claim, holding that the plaintiff failed to show that the franchisor was the plaintiff’s employer under the Fair Labor Standards Act (“FLSA”). Rodriguez v. America’s Favorite Chicken Co., 2017 WL 1684543 (N.D. Ala. May 3, 2017). Rodriguez was employed as a counter customer service employee at a Church’s Chicken franchise location in Alabama. She alleged three claims against the franchisor and the franchisee: (1) failure to pay overtime pay under the FLSA; (2) failure ...

The Eighth Circuit Court of Appeals recently overturned an award of monetary damages for trademark infringement under the Lanham Act and violations of the Minnesota Deceptive Trade Practices Act. Martinizing Int’l, LLC v. BC Cleaners LLC, 855 F.3d 847 (8th Cir. Apr. 28, 2017). Martinizing International entered into two franchise agreements with KM Cleaners authorizing the use of Martinizing’s trademarks and system in KM Cleaners’ two dry cleaning stores. The agreements prohibited KM Cleaners from selling the franchise locations or assigning the franchise agreements ...

A Kansas district court, applying Georgia law, recently denied a franchisor’s motion to dismiss a franchisee’s claim for breach of fiduciary duty. Lenexa Hotel, LP v. Holiday Hosp. Franchising, Inc., 2017 WL 2264358 (D. Kan. May 24, 2017). The franchisee, Lenexa, previously entered into a franchise licensing agreement with the franchisor, Holiday, to build and operate a Crowne Plaza hotel. In the agreement, Holiday represented that it would drive demand for the new hotel through its central reservation system and marketing resources. In its complaint, Lenexa alleged that ...

The United States Court of Appeals for the Second Circuit affirmed the Southern District of New York’s dismissal of a putative class action against Dunkin’ Donuts and several of its New York franchisees for allegedly improperly charging sales tax on pre-packaged coffee. Estler v. Dunkin’ Brands, Inc., 2017 WL 2258614 (2d Cir. May 23, 2017). In New York, as in many other states, pre-packaged coffee is considered a grocery item and is not subject to the sales tax charged on ready-to-eat restaurant items.

Dunkin’ contended that its franchisees determined and charged sales tax ...

A district court in Texas denied a franchisee’s motion to compel arbitration in Stockade Companies, LLC v. Kelly Restaurant Group, LLC, 2017 WL 1968328 (W.D. Tex. May 11, 2017). Although the parties’ franchise agreements contained an arbitration clause, the court held that the substance of the claims at issue had been expressly excluded from the arbitration clause. In part because the substance of the claims were excluded from arbitration, the court also held that the franchise agreements did not contain sufficient evidence that the parties had agreed to arbitrate the issue of ...

A federal court in the Western District of Washington granted a personal injury plaintiff’s motion to amend, filed in response to the franchisor’s motion to dismiss. Johnson v. Marriott Int’l Inc., 2017 WL 1957071 (W.D. Wash. May 11, 2017). After sustaining an injury in a trip-and-fall incident at a franchised Marriott hotel in Bangkok, Thailand, the plaintiff, Johnson, sued Marriott. Johnson did not sue the Thai franchisee. Marriott moved to dismiss, arguing that it did not own the Thai hotel or have responsibility for the hotel’s operation or management. In response ...