The Franchise Memorandum

In Allegra Network LLC v. Reeder, 2009 WL 3734288 (E.D. Va. Nov. 4, 2009), the franchisor won an injunction preventing trademark infringement, but lost its request to enforce a post-termination non-compete agreement. Allegra is a franchisor of several print and imaging brands. When the franchisees moved their store to a location about 1.5 miles from another Allegra location without written consent, Allegra terminated the franchise based on a clause in the agreement that restricted the franchisees’ ability to operate a store within two miles of another Allegra franchise. The defendants continued to operate their store at this new location under a new name.

The court granted Allegra an injunction preventing trademark infringement, finding that there is a high risk of consumer confusion when a former franchisee continues to use the franchisor’s trademarks after termination. It also found that Allegra would suffer irreparable harm absent injunctive relief. The court, however, denied the injunction with respect to the non-compete claim. First, there was a factual dispute as to whether Allegra gave the defendants oral permission to move to the new location. Second, the court held that Allegra failed to demonstrate irreparable harm because it could be adequately compensated by money damages.