The Franchise Memorandum

A federal court in Maryland denied both parties’ cross motions for summary judgment on the issue of whether the renewal of a franchise agreement must retain unaltered the initial agreement’s renewal term, thus permitting indefinite renewals. Jos. A. Bank Clothiers, Inc. v. J.A.B.-Columbia, Inc., 2017 WL 6406805 (D. Md. Dec. 15, 2017). Bank, a clothing store with more than 500 locations, had fourteen franchises. After Bank was acquired by Men’s Wearhouse in 2014, it decided to abandon its franchising efforts. Accordingly, it sought to remove or explicitly limit the possibility of further renewals when it renewed existing franchise agreements, while the franchisees asserted the right to preserve the renewal language unaltered.

The court attempted to interpret the renewal clause of the initial agreement to determine whether the parties had agreed to retain the renewal term in subsequent franchise agreements. First, Bank’s agreements provided for the franchisee’s right to “buy a successor franchise” at the expiration of its current agreement, using the “current form of franchise agreement,” the form Bank “customarily uses,” or the “form most recently used.” While Bank argued that this language required renewal on the terms of the most recent franchise agreement, the franchisees argued that it required renewal on the terms of the most recent renewal. Bank further argued that it could simply change the terms from initial agreement to renewal, and the franchisees objected. Finally, the court considered extrinsic evidence to attempt to resolve each of these ambiguities, to no avail. The court therefore denied the cross motions for summary judgment, holding that further development of the record would be required.