The Franchise Memorandum

In a recent award, a panel of three arbitrators in Canada concluded that H & R Block Canada was entitled to require franchisee Gerger Enterprises to use computer tax preparation software provided by Block. Gerger Enters. Ltd. v. H & R Block Canada, Inc., Private Arbitration Award (Aug. 1, 2013). The dispute arose when Block decided that it was desirable to have uniform tax preparation software used by all of its franchisees, which would, among other things, enable expanded communication between the company and its many franchised offices. Block therefore amended its operations manual to require use of its software by all of its franchisees. Gerger objected on the grounds that its franchise agreements could not be amended through changes or additions to the manual, which Gerger argued was intended to deal only with less substantive matters. Although the franchise agreements did not contain a specific provision obligating Gerger to use software designated by Block, the panel agreed with Block that the obligation arose from the meaning of the “H & R Block System,” which the franchise agreements required Gerger to follow in providing services. Thus, the panel concluded that the obligation to use the H & R Block System included the obligation to use Block’s software once that software was required by the manual.