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The Franchise Memorandum

Posts from August 2019 - Issue 244.
Posted in Terminations

A federal court in Illinois denied a temporary restraining order to a terminated franchisee that sought to resume operations of its business after its franchise agreement was terminated because it repeatedly failed health audits. H Guys LLC v. The Hallal Guys Franchise, Inc., 2019 WL 3337116 (N.D. Ill. July 25, 2019). The franchisor, The Hallal Guys, conducted several health inspections of Steven Chong’s restaurants in May and July 2019. After finding persistent and worsening food safety and sanitary deficiencies, The Hallal Guys terminated Chong’s franchise agreement ...

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In another case involving Little Caesar, a federal district court in Michigan granted the franchisor a preliminary injunction against a former multi-unit franchisee. Little Caesar Enters., Inc. v. Miramar Quick Serv. Rest. Corp., 2019 WL 3219844 (E.D. Mich. July 16, 2019). Gray Plant Mooty also represented Little Caesar in this case. Miramar was a franchisee of four Little Caesars franchises in Connecticut and Massachusetts. The franchise agreements required Miramar to purchase all products and supplies from Little Caesar’s affiliate, Blue Line Foodservice Distribution ...

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On the other hand, a federal court in Illinois has allowed a franchisor to continue pursuing its breach of noncompete claims against a former franchisee. Auto Driveaway Franchise Sys., LLC v. Auto Driveaway Richmond, LLC, 2019 WL 3302223 (N.D. Ill. July 23, 2019). Defendant Jeffrey Corbett was an Auto Driveaway franchisee until his three franchise agreements were terminated in September 2018. The agreements had two-year post-termination covenants against competition. Following the termination, however, Corbett and his wife allegedly set up and operated a competing business ...

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A federal district court has granted summary judgment in favor of franchisor CK Franchising, Inc. (Comfort Keepers) enforcing the forum-selection clause in the parties’ arbitration agreement. CK Franchising, Inc. v. SAS Servs. Inc., 2019 WL 3006546 (E.D. Ky. July 10, 2019). SAS Services had been a Comfort Keepers franchisee in the Somerset, Kentucky area since 2007. In April 2017, SAS signed a renewal franchise agreement containing forum-selection clauses that closely resembled the ADR provisions in the parties’ 2007 agreement. Specifically, the agreement required ...

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Posted in Antitrust

In a precedent-setting departure from decisions in other courts, the Eastern District of Michigan has become the first court to dismiss a putative antitrust class action challenging an anti-poaching provision in a franchise agreement under Section 1 of the Sherman Act. Ogden v. Little Caesar Enters., Inc., 2019 WL 3425266 (E.D. Mich. July 29, 2019). According to the complaint, plaintiff Christopher Ogden was employed by a Little Caesar franchisee in Tennessee. The Little Caesar franchise agreement prohibited the hiring of managerial employees of other franchisees without the ...

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A federal court in North Carolina granted in part and denied in part the injunctive relief sought by the franchisor, Madvapes, against its former franchisee. AMV Holdings, LLC v. Am. Vapes, Inc., 2019 WL 3406315 (W.D.N.C. July 25, 2019). Madvapes sold a vaping business franchise to American Vapes in 2015. The franchise agreement contained a post-termination noncompete provision that precluded American Vapes, for a period of two years, from entering into a business that would compete anywhere in the same state as the former franchisee or in any state or territory with an existing ...

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Posted in Arbitration

A federal court in Washington recently granted a motion to compel arbitration pursuant to a forum selection clause in a Party Princess franchise agreement. Taylor v. Rothschild, 2019 WL 3067255 (W.D. Wash. July 12, 2019). The agreement included a broadly worded arbitration clause requiring the parties to submit all disputes arising therefrom to binding arbitration in Denver, Colorado. Party Princess, the franchisor, commenced an arbitration alleging breaches of the franchise agreement. Instead of asserting counterclaims in the arbitration, however, the franchisee ...

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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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