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The Franchise Memorandum

Florida Federal Court Agrees that Tim Hortons Properly Terminated Franchisee for Defaulting on Rent Obligation and Grants Permanent Injunction
Posted in Terminations

A federal court in Florida has held that Tim Hortons had properly terminated a franchise agreement with its former franchisee and was entitled to summary judgment and a permanent injunction against the former franchisee. Tim Hortons USA, Inc. v. Tims Milner LLC, No. 18-cv-24152-DPG (S.D. Fla. Jan. 7, 2020). As previously reported in Issue 243 of The GPMemorandum, Tims Milner entered into franchise and lease agreements with Tim Hortons and its affiliates in 2016 to own and operate seven locations in Michigan. The franchise agreements provided that, if Milner defaulted under a lease or failed to pay Tim Hortons any amounts within three days of written notice, Milner would be in default of the agreements. Additionally, Tim Hortons could terminate the franchise agreements if the leases were terminated for any reason. On October 10, 2018, Tim Hortons issued a notice of default to Milner demanding payment for a total of $523,189, which included $292,747 in past due rent. Milner never paid Tim Hortons, so on November 13, 2018, Tim Hortons terminated the franchise agreements and lease agreements. Tim Hortons filed suit and moved for summary judgment on its breach of contract claim, arguing it had properly terminated the franchise agreements. Tim Hortons also sought a permanent injunction against Milner because, despite a June 2019 preliminary injunction it issued against Milner, Milner was still operating six of the seven locations in October 2019.

The court found the following facts were undisputed: (1) Milner owed Tim Hortons and its affiliates past due amounts for royalties and rent, (2) Milner was provided notice of the past due amounts, (3) Milner failed to pay any past due amounts, and (4) Tim Hortons terminated Milner for failure to pay those past due amounts on November 13, 2018. Milner argued, however, that it did not owe any money to Tim Hortons because there was a prior, verbal agreement regarding rent between Milner and a few Tim Hortons employees. Milner also argued that Tim Hortons failed to provide sufficient documentation that Milner owed the amounts Tim Hortons claimed, and Milner argued that it had actually overpaid Tim Hortons. The court held that Milner failed to produce any evidence to support its arguments, and therefore failed to create a question of material fact. The court granted summary judgment on Tim Hortons’ breach of contract and Lanham Act claims, and entered a permanent injunction.

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The Franchise Memorandum is a collection of postings on summaries of recent legal developments of interest to franchisors brought to you by Lathrop GPM LLP. 

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