The Franchise Memorandum

In Robinson v. Wingate Inns International, the United States District Court for the District of New Jersey granted in part and denied in part the hotel franchisors' motion to dismiss a former franchisee's claims relating to two failed hotel franchises. 2014 U.S. Dist. LEXIS 139758 (D.N.J. Sept. 24, 2014). Robinson, the franchisee, brought claims against Wingate for breach of contract, breach of the covenant of good faith and fair dealing, and fraud, all based on his inability to obtain financing described in the FDD. Robinson also brought good faith and fair dealing and fraud claims against Wyndham, alleging that it sold him a franchise that it knew would fail.

The court dismissed the good faith and fair dealing claim against Wyndham because Robinson alleged the breach occurred to entice plaintiff to form the contract, but the duty only extends to the performance and enforcement of the contract. The fraud claim also was dismissed because Robinson failed to specifically allege the misrepresentations made by Wyndham. Similarly, Robinson's fraud claim against Wingate was dismissed because he failed to plead that the applicable FDD misrepresented the availability of financing; instead, he pled only that he did not receive financing. The court held that Robinson had stated a breach of contract claim but ordered him to identify specifically the franchise agreement provisions allegedly breached. The court likewise held that Robinson sufficiently pled breach of the covenant of good faith and fair dealing by alleging that Wingate had represented that it would assist him in obtaining financing. The court provided Robinson with additional time to replead all of the dismissed claims.