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The Franchise Memorandum

Posts from October 2019 - Issue 246.

Making major changes to employment law in California, AB-5 codifies the holding in Dynamex Operations West, Inc. v. Superior Court, which established the so-called “ABC test” for determining whether a worker is an “employee” or an “independent contractor” in California. The ABC test creates a rebuttable presumption that a worker who performs services for hire in exchange for remuneration is an employee, unless the hiring entity can demonstrate that: (a) the individual is free from the control and direction of the hiring entity in connection with the performance of ...

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In the continuation of a case that appeared in Issue 244 of the GPMemorandum, a federal court in Michigan denied the motion of former Little Caesar’s franchisees to stay the enforcement of a preliminary injunction order pending their appeal of the order to the United States Court of Appeals for the Sixth Circuit. Little Caesar Enters., Inc., v. Miramar Quick Serv. Rest. Corp., 2019 WL 3997161 (E.D. Mich. Aug. 23, 2019). As previously reported, in July 2019, the court granted Little Caesar’s motion for a preliminary injunction enforcing its termination of the franchisees’ ...

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Posted in Arbitration

In another appellate decision interpreting arbitration provisions, the United States Court of Appeals for the Tenth Circuit affirmed the denial of a franchisor’s motion to compel arbitration, finding that the parties had not entered into a “written” agreement to arbitrate the claims at issue as required by the Federal Arbitration Act. Campbell Invs., LLC v. Dickey's Barbecue Rests., Inc., 2019 WL 4235345 (10th Cir. Sept. 6, 2019). Campbell Investments initially signed a Dickey’s development agreement and franchise agreement for a restaurant in Ogden, Utah. Both ...

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Posted in Contracts

The United States Court of Appeals for the Eleventh Circuit has held that a franchisee is required to indemnify a franchisor for its litigation defense costs, vacating a district court’s orders of summary judgment in favor of the franchisee. Aaron’s Inc. v. MKW Invs., Inc., 2019 WL 4200260 (11th Cir. Sept. 5, 2019). Aaron’s Inc., a home furnishings retailer and franchisor, entered into a franchise agreement with MKW Investments under which MKW agreed to indemnify Aaron’s for certain expenses incurred as a result of certain conduct by MKW. After a former MKW employee sued both ...

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Burger King has prevailed on its motion for summary judgment in a lawsuit related to a slip and fall incident that occurred at a franchised restaurant. Cram v. Burger King Corp., 2019 WL 4095570 (D.N.H. Aug. 29, 2019). The incident occurred when plaintiff Elizabeth Cram’s foot got caught in a child’s highchair improperly placed next to the restroom entrance, causing her to fall and tear her Achilles tendon. Plaintiffs asserted negligence and vicarious liability claims against Burger King because it was the owner and lessor of the restaurant at issue. Burger King filed a motion for ...

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Posted in Antitrust

Since early 2018, the Washington Attorney General’s Office has been carrying out a campaign to remove antipoaching provisions from franchise agreements nationwide, reaching agreements with 93 franchisors to remove such provisions. When Jersey Mike’s was served with a Civil Investigative Demand from the Attorney General, Jersey Mike’s responded that it did not enforce the provisions and had removed the provision from its standard form franchise agreements. The primary obstacle to resolution between Jersey Mike’s and the Attorney General, however, was the ...

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Posted in Class Actions

In a closely watched case, the United States Court of Appeals for the Ninth Circuit has affirmed a ruling that McDonald’s is not a joint-employer of its California franchisee’s employees. Salazar v. McDonald’s Corp., 2019 WL 4782760 (9th Cir. Oct. 1, 2019). Guadalupe Salazar and other employees of a McDonald’s franchisee in California filed a class action suit against both the franchisee and McDonald’s alleging that defendants, as joint employers, violated various wage-and-hour statutes. After Salazar entered into a settlement agreement with the franchisee ...

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Posted in Arbitration

The United States Court of Appeals for the Second Circuit has upheld an arbitration agreement between Doctor’s Associates, Inc. (“DAI”), the franchisor of Subway restaurants, and a prospective franchisee, finding that it was supported by sufficient consideration during the application process. Doctor’s Associates, Inc. v. Alemayehu, 934 F.3d 245 (2d Cir. 2019). In 2016, Alemayehu sought to purchase an existing Subway franchise in Colorado. As part of the application process, Alemayehu checked a box on an online form agreeing to submit any claims arising from the ...

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The Washington Supreme Court has answered two certified questions from a federal district court regarding the meaning of the phrase “fair and reasonable price” under Washington’s Franchise Investment Protection Act (“FIPA”). Money Mailer, LLC v. Brewer, 2019 WL 4508353 (Wash. Sept. 19, 2019). FIPA prohibits franchisors from selling to a franchisee any product or service “for more than a fair and reasonable price.” A federal district court certified two questions regarding that prohibition: (1) whether a franchisee may rely on the price at which the franchisor is ...

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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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