The Franchise Memorandum

In Elbanna v. Captain D’s, LLC, 2009 WL 435051 (M.D. Fla. Feb. 17, 2009), a prospective franchisee brought suit against a franchisor, alleging he was rejected from the system because he was Arab, and also claiming Captain D’s defamed him throughout the application process. Elbanna had been operating several Shoney’s franchises when he approached Captain D’s about opening one of its restaurants. Although his application was initially approved, the parties were unable to agree on a location. Two years later, Elbanna again approached Captain D’s about buying several franchises from an existing franchisee. After reviewing his updated application and financial capital, as well as visiting his Shoney’s restaurants (which Captain D’s judged to be unclean and empty over the lunch hour), Captain D’s rejected the proposed transfer. Elbanna alleged the reasons set forth in the rejection letter were pretextual, and that it actually denied his application because of his Middle Eastern descent. 

The court rejected Elbanna’s arguments and granted summary judgment to Captain D’s, pointing out that “[t]his is not the forum to litigate whether or not Elbanna was in fact a good restaurateur. Where pretext is an issue, the question the factfinder must answer is whether defendant’s proffered reasons were a cover-up for a discriminatory decision.” The court found they were not. The court also noted that Elbanna did not produce any evidence that statements made by Captain D’s were, in fact, false, and therefore he could not sustain a claim for defamation either.