The Franchise Memorandum

In 1-800-Radiator of Wisconsin, LLC v. 1-800-Radiator Franchise, Inc., 2008 WL 4500682 (E.D. Wis. Oct. 1, 2008), the court considered a motion for a temporary restraining order to prevent the termination of its rights. The plaintiff was a distributor that was considered to be a “franchisee” under the 1-800-Radiator system, which took orders for the purchase of radiators made through the franchisor’s proprietary network. The franchisor advised the plaintiff that it planned to acquire one of the franchisor’s competitors, which would result in a large increase in business for the plaintiff. To meet that anticipated demand, the franchisor required the plaintiff to take certain steps, including increasing the size of its inventory and hiring additional employees. The franchisor gave the plaintiff less than 24 hours to agree to those requirements or face termination. When the plaintiff did not agree, the franchisor terminated its rights.

The distributor sought an injunction from the court preventing the termination of its rights. The plaintiff argued that the franchisor had violated the Wisconsin Fair Dealership Law by failing to provide it with the notice and opportunity to cure required by the statute. The court agreed, and also found that the franchisor had breached the WFDL by demanding that the plaintiff make its required changes on very little notice. Finding that the plaintiff would suffer irreparable harm to its business if the proposed termination were permitted to stand, the court enjoined the franchisor from proceeding. The court, however, required that the plaintiff post a $25,000 bond and granted the franchisor’s request for a hearing to determine the sufficiency of the amount of this bond.