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The Franchise Memorandum

Posts from September 2018 - Issue 233.
Posted in Employment

An administrative law judge has denied motions to approve proposed “informal” settlements in the National Labor Relations Board joint employer litigation against the franchisor of the McDonald’s system. McDonald’s USA, LLC & Fast Food Workers Comm., N.L.R.B. Case Nos. 02‐ CA‐093893 (July 17, 2018). The litigation arose out of alleged retaliation against franchisees’ employees who participated in Fight for $15 demonstrations demanding higher pay for fast food workers. The litigation was commenced under the Obama Administration for the stated purpose of ...

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Posted in State Taxation

The New Mexico Court of Appeals affirmed a decision by an administrative hearing officer that a franchisor’s receipt of royalty fees under a franchise agreement were subject to gross receipts tax pursuant to New Mexico’s Gross Receipts and Compensating Tax Act. A&W Rests., Inc. v. Taxation & Revenue Dep’t, 2018 WL 4024741 (N.M. Ct. App. Aug. 22, 2018). In 2007, the state legislature amended the Act so that the definition of taxable “gross receipts” included the amount of money received “from granting a right to use a franchise employed in New Mexico,” and so that the ...

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Posted in Antitrust

A federal court in Illinois has allowed a former Jimmy John’s employee to proceed with antitrust claims targeted at an anti‐poaching requirement in Jimmy John’s franchise agreements. Butler v. Jimmy John’s Franchise, LLC, 2018 WL 3631577 (S.D. Ill. July 31, 2018). Jimmy John’s had included in its franchise agreements a prohibition on franchisees recruiting or hiring any employee that has worked at another Jimmy John’s in the prior year. According to the plaintiff, this requirement was enforced by franchisees through noncompete provisions in their employment ...

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Posted in Damages

The United States Court of Appeals for the Fourth Circuit vacated part of a district court’s order that had awarded lost profits to a franchisee in connection with his attempt to repurchase his franchised businesses. JTH Tax, Inc. v. Aime, 2018 WL 3770028 (4th Cir. Aug. 8, 2018). The franchisee, Aime, operated nine tax preparation businesses pursuant to franchise agreements with JTH. When the IRS suspended Aime’s electronic filing number, JTH purchased and assumed control over the businesses. The purchase agreement included an option for Aime to buy back the franchises if he ...

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The U.S. District Court for the District of Maine recently denied a franchisor’s motion for a temporary restraining order to stop its former franchisee from operating a new business following the expiration of the parties’ franchise agreement. Toddle Inn Franchising, LLC v. KPJ Assocs. LLC, 2018 WL 3676826 (D. Me. Aug. 2, 2018). The parties had entered into a franchise agreement that permitted KPJ to open and operate a Toddle Inn childcare center. When the franchise agreement expired in July 2016, the parties did not renew the contract. Nonetheless, KPJ continued to operate as a ...

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On June 12, 2018, the Franchise Project Group of the North American Securities Administrators Association, Inc. (NASAA) sought public comments on a proposal (the “Proposal”) to revise instructions in its 2008 Franchise Registration and Disclosure Guidelines (“NASAA Guidelines”) regarding the information provided in the state cover sheets to franchise disclosure documents (FDDs). If the Proposal is adopted as currently written, three new state cover sheets titled “How to Use this Franchise Disclosure Document,” “What You Need to Know About Franchising ...

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Posted in Employment

Wendy’s could be liable as a joint employer under Title VII, a federal court recently held, allowing the plaintiff to proceed with her hostile work environment claims against Wendy’s and one of its franchisees. A.H. v. Wendy’s Co., 2018 WL 4002856 (M.D. Pa. Aug. 22, 2018). The plaintiff, a former employee of the franchisee, filed suit alleging that she was sexually harassed by a supervisor and that Wendy’s was jointly liable for the hostile work environment under either a joint employer or agency theory. Wendy’s moved to dismiss, arguing that the plaintiff failed to plead ...

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Posted in Contracts

The Wyoming Supreme Court affirmed a lower‐court decision approving the termination of two executives following their pursuit of a franchise opportunity with another system. James v. Taco John’s Int’l, Inc., 2018 WL 4011633 (Wyo. Aug. 22, 2018). In 2013, Taco John’s International (TJI) hired a new Chief Development Officer and a Vice President of Operations at the behest of its recently hired President and CEO. The pair’s employment agreements required them to “devote all of [their] time, attention, knowledge, and skills solely to the business and interest of ...

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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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