The Franchise Memorandum

The U.S. District Court for the Eastern District of Pennsylvania has dismissed a constructive termination claim against a franchisor because the franchisee was still operating the franchise location. Takiedine v. 7-Eleven, Inc., 2018 WL 3141461 (E.D. Pa. June 27, 2018). The court held that when alleging constructive termination in violation of the duty of good faith and fair dealing, the franchise relationship must actually terminate. In this case, the franchisee alleged that the franchisor tried to force the franchisee out of the relationship through defamatory comments and economic strain. However, according to the court, the franchisor’s allegedly hostile conduct did not amount to constructive termination absent an actual termination, and since the franchise relationship had not yet ceased, there was no breach of the duty of good faith and fair dealing. The court emphasized that it would not attempt to decipher whether a franchisor’s actions were meant to push a franchisee out, or simply were an uncompromising but lawful business decision. The franchisee’s complaint was dismissed with leave to amend a separate breach of contract claim.