The Franchise Memorandum

A federal court in Oklahoma preliminarily enjoined a former franchisee from using the franchisor’s marks and from violating its post-term noncompete following termination. Sonic Indus. LLC v. Olympia Cascade Drive Ins LLC, 2022 WL 3654748 (W.D. Okla. Aug. 24, 2022). Sonic terminated Olympia’s ten restaurant franchises after Olympia ceased paying royalty fees. Olympia continued to operate despite the terminations, and Sonic sued to enforce them. Sonic also moved for a preliminary injunction to enjoin Olympia from continuing to use its trademarks and violating the terms of the noncompete provisions contained in the franchise agreements.

The court granted the motion. The court first noted that Sonic was likely to succeed on the merits because Olympia’s failure to pay amounts owed constituted good cause to terminate the franchise agreements. The court next held that Sonic’s default notices complied with the requirements of the franchise agreements and Washington state law. The court observed that, as is usually the case when there is unauthorized use of a mark by a former franchisee, Sonic was likely to suffer irreparable harm due to Olympia’s use of its marks and the balance of harms favored Sonic, as the trademark holder. Finally, the court concluded that there is a public interest in enforcing contractual obligations. As a result, the court granted Sonic’s motion for a preliminary injunction.