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The Franchise Memorandum

New York Franchise Sales Act Claims Withstand Summary Judgment

In Solanki v. 7-Eleven, Inc., 2014 U.S. Dist. LEXIS 11183 (S.D.N.Y. Jan. 29, 2014), a franchisee’s claims under the New York Franchise Sales Act have survived a franchisor’s motion for summary judgment. Solanski alleged that 7-Eleven’s presale revenue estimates should have been included in the FDD, and that its earnings estimates were false. At or shortly after the parties’ initial meeting to discuss the store, 7-Eleven provided Solanski with an FDD and a business plan outline to complete. At a subsequent meeting, Solanski presented his completed business plan, which was approved by 7-Eleven. 7-Eleven never provided Solanski with any sales projections that it had created, and no projections prepared by either party ever were included in the FDD. During its first year of operation, the third store failed to achieve the business plan’s projected sales levels, and 7-Eleven terminated the related franchise agreement at Solanski’s request. Solanski filed suit.

In its motion for summary judgment, 7-Eleven argued that Solanski had admitted to making up his mind that he wanted to buy the specific store at issue before he ever received the FDD. Therefore, according to 7-Eleven, Solanski could not have relied on any alleged financial representations by 7-Eleven. The court held, however, that the distinction between wanting to buy a franchise and conclusively deciding to do so based on information received was a disputed issue of material fact for trial. 7-Eleven further argued that even if Solanski could be found to have relied on any such representations in making his decision, he had disclaimed such reliance. In response, the court noted that a disclaimer can only be upheld as to common law fraud claims. In this case, Solanski’s claims were made under the Franchise Sales Act, which prohibits the waiver of any duty or liability imposed by the Act. Therefore, the court dismissed 7-Eleven’s motion for summary judgment, holding that disputed issues of material fact remained.

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The Franchise Memorandum is a collection of postings on summaries of recent legal developments of interest to franchisors brought to you by Lathrop GPM LLP. 

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