The Franchise Memorandum

In Dunkin' Donuts Franchising LLC v. Sai Food & Hospitality, LLC, 2014 U.S. Dist. LEXIS 67512 (E.D. Mo. May 16, 2014), the United States District Court for the Eastern District of Missouri granted a franchisor's motion for attorneys' fees, costs, and expenses following a bench trial in which the court upheld the termination of a group of franchisees on the grounds that they fraudulently concealed the true ownership of their operating company prior to signing their franchise agreements. Gray Plant Mooty represents the franchisor in this matter. As reported in Issue 176 of The GPMemorandum, the franchisees in this case had entered into two franchise agreements and a related development agreement with Dunkin' for the development and operation of franchises in Missouri. The franchise agreements included provisions indicating that the franchisees would pay to Dunkin' all costs and expenses, including reasonable attorneys' fees, incurred by Dunkin' in enforcing any provisions of the contract. Each agreement also included a personal guarantee signed by the individual franchisees pursuant to which they agreed to guarantee, jointly and severally, their operating company's obligations under the franchise agreement. Following the conclusion of the trial Dunkin' filed a motion to recover its attorneys' fees and costs. 

Having previously granted Dunkin' judgment on all claims in the case, the court granted Dunkin's motion for fees and costs in full against the defendants and the guarantors. The court rejected the franchisees' argument that Dunkin' was required to prove the quantum of its attorneys' fees at trial as an element of its claims, noting that the franchisees had assented to the post-trial briefing schedule, that the procedure was commonly followed by other courts, and that they had received ample time to review and challenge the documents supporting Dunkin's fee petition. The court further concluded that the hours and rates claimed by Dunkin' were reasonable under Massachusetts law, which governed the agreements. Finally, the court determined that the language of the personal guarantees was clear and that Dunkin' was entitled to enforce them.