The Franchise Memorandum

In Dickey’s Barbecue Restaurants, Inc. v. Mathieu, 2013 U.S. Dist. LEXIS 133204 (N.D. Tex. Sept. 18, 2013), a dispute arose when Mathieu failed to comply with various terms of his franchise agreement, including failure to (1) operate the franchised restaurant, (2) make payments, (3) meet food safety standards, and (4) purchase and sell approved products. After Mathieu advised Dickey’s Barbeque that he was ceasing operations of his franchised business, Dickey’s commenced a lawsuit to seek, among other things, a declaration that Mathieu violated the material terms of the franchise agreement and an injunction preventing him from displaying or using Dickey’s Barbecue’s name or trademarks. In response, Mathieu moved to dismiss Dickey’s claims or, alternatively, to stay litigation and compel mediation/arbitration pursuant to the parties’ franchise agreement.

Relying on the franchise agreement’s broad arbitration provision requiring submission of any claim, controversy, or dispute arising out of or relating to the franchise agreement first to nonbinding mediation and next to binding arbitration if necessary, the court held that the franchisor’s claims for declaratory relief, breach of contract, and fraudulent inducement were subject to mediation and/or arbitration. Because the franchise agreement included a “carve out” provision for claims for injunctive relief, however, the court denied Mathieu’s motion to stay Dickey’s claim for an injunction. As part of its holding, the court rejected the argument by Dickey’s that its claim for declaratory relief is really a claim for “monies owed” and, therefore, specifically “excepted” from the franchise agreement’s arbitration provision.