The Franchise Memorandum

In Smoothie King Franchises, Inc. v. Southside Smoothie & Nutrition Center, Inc., 2012 U.S. Dist. LEXIS 24436 (E.D. La. Feb. 27, 2012), the franchisor of the Smoothie King system brought an action to enforce post-termination noncompetition clauses. The defendant-former franchisees filed various counterclaims based on allegations that they were required to engage in false and deceptive advertising by selling their products as “real whole fruit” smoothies, when the product allegedly contained other ingredients. After the court granted Smoothie King’s request to enjoin the former franchisees from operating a competing business, the former franchisees amended their counterclaims.

On Smoothie King’s motion to dismiss the amended claims, the court rejected the franchisees’ breach of contract claim after determining that the franchise agreement did not obligate Smoothie King to comply with federal, local, or state laws. While the former franchisees were obligated to comply with all laws in operating their business, absent such an obligation on Smoothie King, no breach by the franchisor could occur. Similarly, the claimed breach of the implied covenant of good faith and fair dealing was dismissed on the ground that the court could not include or imply obligations that would alter the express terms of the contract.

The court also dismissed the franchisees’ breach of express warranty, fraud, and Florida Franchise Act allegations, each of which was based on the claim that Smoothie King’s advertising practices violate the Florida Deceptive and Unfair Trade Practices Act (“FDUTPA”). The court noted that, although each of these claims was premised upon the allegation that the advertising practices violated the FDUTPA, the franchisees failed to bring a specific claim under that statute. In large part, this was because they lacked standing to do so and because the claim would have been time barred. The court noted that without an independent substantive right under the FDUTPA, the franchisee could not use an alleged violation of that statute as an element of various other common law or statutory claims. To do so would allow the franchisees to create a right to relief not allowed by the Florida legislature.