The Franchise Memorandum

A federal court in New Jersey has denied a franchisor’s motion for summary judgment on its claim for breach of contract by its franchisee, finding that the franchisee raised issues of material fact regarding whether it had been fraudulently induced to sign its franchise agreement based on an oral promise. Travelodge Hotels, Inc. v. Durga, LLC, 2023 WL 314313 (D.N.J. Jan. 19, 2023). Travelodge alleged that Durga breached the franchise agreement by failing to pay required liquidated damages, outstanding recurring fees, and costs. Durga argued in response to Travelodge’s summary judgment motion that its failure to pay the amounts alleged did not constitute a breach of contract because Travelodge had fraudulently induced Durga to enter into the franchise agreement and delayed its access to the Travelodge reservation system.

The court denied the summary judgment motion, holding that the integration clause contained in the franchise agreement did not bar the franchisee’s claim of fraudulent inducement. The court concluded that documentary evidence and deposition testimony from one of Durga’s corporate representatives raised a material question as to the validity of the franchise agreement. The testimony asserted that Durga signed the franchise agreement based on an oral promise that its Travelodge hotel would be converted into a different Wyndham Hotel Group brand. Further testimony asserted that Durga was denied access to the Travelodge reservation system, either completely or due to technical issues inhibiting its use.