The Franchise Memorandum

A federal district court in Maryland recently enforced an arbitration provision in a rescinded franchise agreement. Burrell v. 911 Restoration Franchise Inc., 2017 WL 5517383 (D. Md. Nov. 17, 2017). The franchisor, 911 Restoration, previously offered to rescind its franchise agreement with franchisee Burrell because 911 Restoration was not authorized to sell franchises in Maryland at the time the franchise agreement was executed. Although Burrell accepted the rescission offer, it subsequently brought an action against 911 Restoration alleging damages of more than ...

A federal district court granted the motion of franchisor H&R Block Tax Services LLC (“Block”) for summary judgment, finding that the plaintiff had no right to become an H&R BLOCK franchisee under either contract or detrimental reliance theories. CG & JS Enters., LLC v. H&R Block, Inc., 2017 WL 5483763 (E.D. La. Nov. 15, 2017). CG & JS Enterprises, LLC is owned by Christopher Gibbens and Johnny Shaw, two former employees of Block. Gibbens left Block in January 2013 under amicable circumstances. In April 2013, an existing H&R BLOCK franchisee expressed interest in transferring his ...

A series of agreements between a franchisee operating in Buffalo, New York, and Dollar Rent-a-Car and Hertz included a floating forum selection clause. The clause provided that the franchisee consented to jurisdiction in the district court where the principal place of business of the franchisor is located. When the relationship between the parties soured, Dollar Rent-a-Car and Hertz filed an action in Florida against franchisee Westover Car Rental for breach of the license agreements and associated personal guarantees. Dollar Rent a Car, Inc. v. Westover Car Rental, LLC, 2017 WL ...

A federal court in Florida granted in part and denied in part a motion to dismiss a lawsuit brought by plaintiffs seeking to sell their Tim Hortons franchises to a third party. Picktown Foods, LLC v. Tim Hortons USA, Inc., 2017 U.S. Dist. LEXIS 186107 (S.D. Fla. Nov. 8, 2017). The plaintiffs, who are five different Tim Hortons franchisees, had entered into a purchase agreement with a third party to sell each restaurant for $880,000, but Tim Hortons did not consent to the sale, which was required under the franchise agreements before a sale could close. Tim Hortons indicated that it would ...

The United States Court of Appeals for the Fourth Circuit recently affirmed an arbitration award entered in favor of Wild Bird Centers of America, Inc. enforcing a covenant not to compete against a former franchisee. Frye v. Wild Bird Centers of Am., Inc., Case No. 17-1346 (4th Cir. Nov. 27, 2017). Gray Plant Mooty represented Wild Bird Centers in this case. Upon expiration of the parties’ franchise agreement, the franchisee, Frye, continued to operate the franchise without renewing the agreement. Wild Bird Centers filed an arbitration action for violation of the agreement’s ...

An Illinois state appellate court upheld the waiver of consequential damages contained in a franchise agreement, and on that basis denied the franchisee’s appeal of a trial court’s grant of summary judgment in favor of the franchisor. United Investment Grp. v. Beggars Pizza Corp., 2017 IL App (1st) 162275-U (Ill. App. Ct. Nov. 22, 2017). Franchisee United Investment Group filed suit against franchisor Beggars Pizza Franchise Corporation claiming territorial infringement by the franchisor’s affiliates, in alleged violation of the parties’ franchise agreement. In ...

A federal court in Maryland denied both parties’ cross motions for summary judgment on the issue of whether the renewal of a franchise agreement must retain unaltered the initial agreement’s renewal term, thus permitting indefinite renewals. Jos. A. Bank Clothiers, Inc. v. J.A.B.-Columbia, Inc., 2017 WL 6406805 (D. Md. Dec. 15, 2017). Bank, a clothing store with more than 500 locations, had fourteen franchises. After Bank was acquired by Men’s Wearhouse in 2014, it decided to abandon its franchising efforts. Accordingly, it sought to remove or explicitly limit the ...

As we brought to your attention last month in a special Franchise Law Alert, the National Labor Relations Board decided in Hy-Brand Industrial Contractors, Ltd., 365 NLRB No. 156 (Dec. 14, 2017), to overrule expressly the controversial joint employer standard espoused two years ago in Browning-Ferris Industries, 362 NLRB No. 186 (2015). Under the ruling in Browning-Ferris, two entities could be found to be joint employers based on the mere right to control the terms and conditions of employment, regardless of whether that right was actually exercised. The Hy-Brand Board held that ...

The United States District Court in the Northern District of Ohio recently ruled in favor of Buffalo Wild Wings (“BWW”) and against its former licensee, BW-3 of Akron, on cross motions for summary judgment. Buffalo Wild Wings, Inc. v. BW-3 of Akron, Inc., 2017 WL 5467156 (N.D. Ohio Nov. 14, 2017). The case began when BWW sent BW-3 – the only licensee in its system – a notice of termination after BW-3 did not cure its failure to comply with the remodel requirements imposed by the parties’ licensing agreement. However, the notice stated that the termination would be held in ...

In another joint-employer case, a federal court in Pennsylvania denied a franchisor’s motion to dismiss claims for sexual harassment, gender discrimination, and retaliation brought against it on a joint employer theory by a technician who worked at a franchised automotive repair facility. Harris v. Midas, 2017 WL 5177668 (W.D. Pa. Nov. 8, 2017). The court identified three factors necessary for a finding of joint employment: (1) the alleged employer’s authority to hire and fire employees, promulgate work rules, and set other conditions of employment; (2) the alleged ...

Franchisors (and franchisees) that control and/or process the data of individuals within the European Union should be aware of the General Data Protection Regulation (“GDPR”) and take affirmative steps to prepare for its imminent roll-out. The GDPR requires businesses to, among other things, implement strict measures to protect the personal data and privacy of EU residents. Failure to comply with the GDPR may result in significant fines and open noncompliant companies to class action lawsuits. Billed as a landmark global standard for data protection and privacy, the GDPR ...