The Franchise Memorandum

A federal court in New Jersey recently entered a $357,917.22 default judgment in favor of a franchisor. Americinn Int'l, LLC v. Mataj12 Corp., 2022 WL 1773779 (D.N.J. June 1, 2022). Franchisee Mataj12 repeatedly failed to pay franchisor Americinn various recurring fees required under the franchise agreement, and entered into a settlement agreement to address the arrears by making installment payments. Mataj12 also executed a consent to the entry of judgment in the amount of $202,555.54 should it fail to make the settlement payments. Americinn sued for breach of contract when Mataj12 failed to make the installment payments and failed to pay additional recurring fees due under the franchise agreement. Neither Mataj12 nor its guarantors responded to the complaint.

Following entry of default, the court granted Americinn’s request for $357,917.22 in damages pursuant to the franchise agreement, which included the amount payable for the recurring fees plus interest of 1.5% per month for past due payments. After concluding that it could exercise jurisdiction over the case, the court found default judgment to be proper, as the defendants’ failure to respond indicated that they had no meritorious defense, determined that Americinn would suffer prejudice by not being able to collect for the damages caused by Mataj12, and decided that defendants were culpable due to their not participating in the litigation.

*Andy Ranc is a Summer Associate for Lathrop GPM who contributed to the writing of this post.