The Franchise Memorandum

A three-judge panel of the Eighth Circuit Court of Appeals has ruled that Domino’s Pizza may specify a particular new computer system developed by Domino’s for system-wide use under the terms of its franchise agreement. Bores, et al. v. Domino’s Pizza, LLC, 2008 WL 2467983 (8th Cir. June 20, 2008). By reversing and instructing the district court to enter judgment in favor of Domino’s, the appellate court decided the last remaining claim in the case. A Domino’s motion for summary judgment dismissing all of the franchisees’ other claims had been granted in May of 2007.

The Eighth Circuit ruling turned on its interpretation of the language in the Domino’s standard franchise agreement, which states that the franchisor “will provide … specifications for … computer hardware and software.… You may purchase items meeting our specifications from any source.” The Eighth Circuit held that this language gives Domino’s the right to “specify” a single computer system called “Domino’s PULSE,” which was developed by Domino’s and is available only from Domino’s and IBM. Rejecting the arguments made by the franchisees, the court held that the language in the franchise agreement does not obligate Domino’s to reveal the detailed inner workings of its proprietary PULSE software so franchisees can attempt to locate a different system with the same or similar capabilities. Instead, the court interpreted the franchise agreement to allow Domino’s to specify a particular system, in this case Domino’s PULSE. The franchisees’ petition for re-hearing en banc is pending.