The Franchise Memorandum

The United States District Court for the Eastern District of California recently denied a franchisee's request to stay the franchisor's motion for a preliminary injunction so the franchisee could take expedited discovery. TGI Friday's Inc. v. Stripes Rests., Inc., 2015 U.S. Dist. LEXIS 62885 (E.D. Cal. May 13, 2015). TGI Friday's had terminated the franchise agreements after Stripes failed to pay amounts owed. TGI Friday's sued and moved for a preliminary injunction after Stripes continued to operate the TGI Friday's restaurants using TGI Friday's trademarks. Stripes filed an ex parte request to stay the injunction hearing to take expedited discovery. The court denied the request.

The franchisee sought certain documents and to take several depositions of TGI Friday's employees and corporate representatives to show that TGI Friday's had breached its duties under the franchise agreements and had caused Stripes to breach its agreements. It contended that TGI Friday's had interfered with its attempt to sell the franchises. The court found that there was no good cause to take expedited discovery and the request was overbroad and not sufficiently related to the preliminary injunction motion. Stripes offered vague defenses to the complaint and injunction motion, and did not make it clear how the alleged interference excused Stripes' payment of the fees owed under the franchise agreements. The court therefore denied Stripes' request.