The Franchise Memorandum

In Curves International, Inc. v. St. Paul Ungewitter, Inc., No. 62-cv-12-6568 (Minn. Dist. Ct. Oct. 17, 2012), Curves successfully enforced a one-year, ten-mile post-term noncompete agreement against a former franchisee whose franchise agreement had expired. (Gray Plant Mooty represented Curves.) The court found that Curves had met its burden of demonstrating that it would be irreparably harmed absent injunctive relief because the former franchisee had converted her Curves operation into a new women’s exercise/fitness facility using Curves equipment and serving Curves’ customers. The court noted that the former franchisee failed to cease using the Curves equipment, failed to return Curves’ operation manual, and continued to use the phone number associated with the Curves franchise. These facts created a reasonable inference that Curves faced a threat of irreparable harm. With respect to the balancing of the harms, the court found that Curves’ damages would not be susceptible to a calculation of monetary compensation, and the former franchisee’s continued use of techniques and systems associated with Curves would reduce the potential for introducing a successful new franchise in the territory. Finally, the court found that Curves was likely to succeed on the merits of its breach of contract claim against the former franchisee under either Texas law, as chosen by the parties in their franchise agreement, or Minnesota law, where the franchisee and the court were located.