The Franchise Memorandum

A federal court in Illinois has granted summary judgment in favor of a franchisor on both its claims and the franchisee’s counterclaims in Fantastic Sams Franchise Corp. v. PSTEVO, LLC, 2017 WL 1075195 (N.D. Ill. Mar. 22, 2017). Fantastic Sams brought suit after the franchisee, PSTEVO, stopped paying weekly licensing fees and national advertising fees and then abandoned its franchised salons altogether. Initially, PSTEVO actively defended the litigation, asserting counterclaims which alleged that Fantastic Sams should have let PSTEVO spend its national advertising fees on local advertising, that Fantastic Sams did not maintain the brand’s goodwill, and that Fantastic Sams was unjustly enriched. However, when Fantastic Sams moved for summary judgment, PSTEVO did not respond.

Despite PSTEVO’s failure to respond, the court examined the elements of all the claims asserted. The court found the license agreement was a valid contract, that it had been breached, and that Fantastic Sams sustained damages as a result. The court awarded Fantastic Sams all past due fees, as well as future fees for the rest of the contract term discounted to present value. The court also found that the record was devoid of evidence supporting PSTEVO’s counterclaims, as the license agreement allowed Fantastic Sams to engage in the conduct of which PSTEVO complained. The court entered judgment against both the corporate franchisee and the franchisee’s personal guarantor.