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The Franchise Memorandum

Franchisor's Refusal to Grant Additional Franchises to an Existing Franchisee Is Not an Unfair or Deceptive Trade Practice

A Louisiana Court of Appeal recently upheld dismissal of a franchisee's complaint, which alleged that a franchisor's refusal to grant development rights and to approve the transfer of additional franchises to the existing franchisee violated the Louisiana Unfair Trade Practices Act (LUTPA). LeCompte v. AFC Enters., Inc., Bus. Franchise Guide (CCH)1 15,386 (La. Ct. App. Oct. 1, 2014). LeCompte was a franchisee for AFC Enterprises' Popeye's restaurants. He requested development rights after AFC announced its intent to expand in his local market. LeCompte's requests for development rights and to acquire additional franchises from another franchisee were rejected by AFC on the grounds that it did not want to "grow with" LeCompte. AFC responded to his lawsuit with a motion for summary judgment, which was granted by the district court.

The Louisiana Court of Appeal affirmed the lower court's ruling, finding that, absent a development agreement, AFC had no obligation to grant additional franchises to LeCompte. The appellate court unequivocally stated that the grant of a franchise is a privilege and not a right, and that franchisors have the unilateral right to select those with whom they choose to do business. AFC's motivation for rejecting LeCompte was irrelevant so long as there was also a sound business reason for the decision. Absent fraud, misrepresentation, deception, or other unethical conduct, which was wholly absent from the record, LeCompte's LUTPA claim must fail.

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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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